Hindustan Organic Chemicals Ltd Auditor Reports

To the Members of M/s. Hindustan Organic Chemicals Limited

Report on the Audit of the Standalone Financial Statements

Opinion

1. We have audited the accompanying Standalone Financial Statements of HINDUSTAN ORGANIC CHEMICALS LIMITED (CIN: L99999KL1960GOI082753) ("the Company") which comprises of the Balance Sheet as at 31st March, 2025, the Statement of Profit and Loss (including Other Comprehensive Income) for the year ended 31^st March 2025 the Cash Flow Statement, the Statement of Changes in Equity for the year ended and notes to the Standalone Financial Statements including material 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 (‘Ind AS?) specified under Section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015 and other accounting principles generally accepted in India, of the state of affairs of the Company as at 31 March 2025, and its profit (including other comprehensive income), its cash flows and changes in equity for the year ended on that date.

Basis for Opinion

3. We conducted our audit 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 together with the ethical requirements that are relevant to our audit of the Standalone Financial Statements under the provisions of the Companies Act, 2013 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 basis for our opinion.

Emphasis of Matters

4. Attention is drawn to note no. 30(a) and 35(vii)(viii) of the accompanying standalone financial statements regarding the waiver of principal of loan and preference shares, interest and penal interest amounting to Rs.1,35,136.71 lakhs due to Government of India as on 30.09.2024.

5. Attention is drawn to note no. 47 of the accompanying standalone financial statements regarding the registration of satisfaction of charge with the Registrar of Companies (ROC). The company is in correspondence with the Ministry regarding certain formalities in this regard.

6. Attention is drawn to note no. 32(b) of the accompanying standalone financial statements. The company has advanced loan amounting to Rs. 453.01 lakhs to its subsidiary at an interest rate ranging from 10.25 to 14.50 %. As the subsidiary has failed to pay interest, the company has stopped charging interest on the loan from the year 2023-24.

7. Attention is drawn to note no. 41 of the accompanying standalone financial statements regarding composition of the Board of Directors which is not in compliance with the provisions of the Companies Act 2013 and SEBI (LODR) Regulations, 2015.

8. Attention is drawn to note no. 56 of the accompanying standalone financial statements. The standalone financial statements approved by the Board of Directors have not been reviewed by the Audit Committee, as required under section 177 of the Companies Act, 2013 and clause A (5) of the Part C of the Schedule II of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. We are informed that the Audit Committee is not functional due to the absence of the independent directors of the company.

9. Attention is drawn to note no. 42 of the accompanying standalone financial statements detailing the status of implementation to the Government approved restructuring plan.

Our opinion is not modified in respect of the above matters.

Key Audit Matters

10. Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the Standalone Financial Statements for the financial year ended March 31, 2025. 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.

The Key Audit Matter	How the matter was addressed in our audit?
Exceptional Item and Other Equity– Waiver of GOI Loan, Interest, Preference share capital, interest thereon	Our audit procedures including and not limited to the following
(Refer note no.17 of the standalone financial statements) and the	We have examined digitally signed Govt of India Order No. 1600/9/2024-IFD dated 21.03.2025 from the ministry for waiver of the liability and interest accrued
The waiver of loan, preference shares granted by the Govt. Of India and interest thereon is considered key area during our audit.	• Examined the letter send by the Company Secretary to the BSE disclosing the waiver of liability
• The company had an outstanding loan of Rs. 43,586.46 lakhs from GOI and redeemable preference shares of Rs. 27,000.00 lakhs along with the outstanding interest thereon of Rs 47,359.79 lakhs and Rs. 7,222.50 lakhs respectively as at 30 Sep 2024, which have been waived off by Govt. Of India.

Recognition, Measurement, and Depreciation of PPE	Our audit procedures included and were not limited to the following:
The company, being an asset- based entity, the recognition, measurement and depreciation of the PPE is very significant.	Evaluating management?s processes and controls over the identification, capitalization, classification, and subsequent measurement of PPE. We assessed the company?s policies for determining the initial cost, subsequent measurement, and depreciation of PPE, including the application of appropriate depreciation methods and useful lives.
The company was shut down for over 2 months during the current financial year involving overhauling of certain machineries and plants.	• We also tested a sample of PPE additions and disposals to verify the accuracy and completeness of their recognition and measurement.
The audit was mainly focused on the compliance of the provisions of the Ind AS 16 Property, Plant and Equipment?s and the other aspects of asset accounting.	• We assessed the consistency of depreciation policies and their compliance with applicable accounting standards and the accuracy of the calculation of depreciation.
	We verified the compliance with the provisions of Ind AS 16 for adopting the Revaluation model and its impact on the asset disclosures

Valuation of Inventory	Our audit procedures included and were not limited to the following:
See Note 6 to the Standalone Financial Statements	• Obtaining an understanding of the system controls and designs for production and inventory monitoring.
The verification and valuation of semi- finished, good for captive consumption and finished goods is a meticulous manual undertaking involving various reports, parameters, estimations and judgements.	Reviewing data from software used by the company such as Distributed Control System for plant operations, independent PLC for the safety of the Plant, Tank Level Monitoring System "LMS" for the detailed statistics about stock of raw materials, finished products, and intermediate products along with various alarms, warnings and history of the tank operations etc.
• Indirect production costs are estimated and integrated into inventory costs, involving judgment and estimation.	• Testing the design, implementation and operating effectiveness of key internal financial controls, including controls over valuation of inventory.
The inventory levels of major raw materials, finished goods, semi- finished goods are monitored through meters installed in the tanks.	Testing and cross verifying on sample basis the accuracy of inventory levels in inventory valuation with BOMs issued and meter reading generated from inventory tanks by the respective departments.
• The meter readings are recorded on daily basis. Inventories are valued at lower of cost and net realizable value except by-products.	• Testing on a sample basis the accuracy of cost for inventory by verifying the actual purchase cost.
• In addition, management exercises judgment in identifying and evaluating obsolete inventories and slow- moving stock items, while also estimating the appropriateness of necessary provisions.	Testing the net realizable value by comparing actual cost with most recent selling price.
	• Being a party to the physical verification of monitoring meters installed for raw materials, finished products and semi- finished products at the end of the financial year.
	Based on the above procedures performed, we did not identify any material exceptions in the measurement of inventory.

 

Evaluation of Provisions, disclosures and analysis with respect Contingencies, including litigations and tax	Our audit procedures included and were not limited to the following:
Refer Note 2(d) and note 35 to the financial statements.	• Assessing the management?s processes and tested the internal controls implemented for the identification, recognition and measurement of legal and tax positions and its assessment of the potential impact on the Company.
The Company has various disputes/litigations related to shut-down of its operations, school and land held by the company at Rasayani.	We received a statement of all ongoing disputes/litigations along with the necessary documentation and from the company?s in-house legal team who is an advocate.
The Company also has various disputes/litigations related to direct and indirect taxes in various states and at various levels of appellate authorities.	We evaluated management?s assessments including advice/ opinion obtained from external consultants/legal advisors with respect to prospects of success of appeals and tax proceedings.
The evaluation of the Company?s position and determination of possible outcome of these disputes and provisions and related disclosures, if any, required to be made in the books involves significant management judgment.	We involved our internal experts to challenge the management?s position on the select litigations and to consider legal precedence and other rulings in evaluating management?s position on these tax positions.

Information Other than the Financial Statements and Auditor?s Report thereon:

11. The Company?s management and Board of Directors are responsible for semi-the other information. The other information comprises the information included in the Company?s annual report, but does not include the Standalone Financial Statements and our auditors? report thereon. The said other information is expected to be made available to us after the date of this audit report.

Our opinion on the Standalone Financial Statements does not cover the other information and we do not express any form of assurance controls, including conclusion thereon.

In connection with our audit of the Standalone Financial Statements, our responsibility is to read the other information when made available to us and, in doing so, consider whether the other information is materially inconsistent with the Financial Statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

Responsibility of Management and Those Charged with Governance for Standalone Financial Statements:

12. The Company?s Board of Directors are 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 and cash flows 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 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.

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.

Those Board of Directors are also responsible for overseeing the company?s financial reporting process.

Auditor?s Responsibility for the Audit of Standalone Financial Statements:

13. 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 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 management?s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related doubt on toevents or conditions that may cast significant the Company?s ability 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 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 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 achieves fair presentation.

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

15. 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.

16. 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

17. 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 a statement on the matters specified in paragraphs 3 and 4 of the Order to the extent applicable attached as Annexure 1.

18. As required by the directions and sub directions issued by the office of the Comptroller & Auditor General of India under section 143 (5) of the Act, we give in the "Annexure 2" a statement on the matters referred in those directions.

19. 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 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 including Other Comprehensive Income, the Statement of Cash Flows and Statement of Changes in Equity dealt with by this Report are in agreement with the relevant books of account.;

d) In our opinion, the aforesaid Financial Statements comply with the Indian Accounting Standards specified under Section 133 of the Act, read with Rule 7 of Companies (Accounts), Rules 2014;

e) As per Notification No. G.S.R. 463(E) dated June 5, 2015, the Government Companies are exempted from provisions of section 164(2) of the Act. Accordingly, we are not required to report whether any directors are disqualified in terms of provisions contained in the said section

f) The report on internal financial control as required under clause (i) of sub section 3 of section 143 of the Act is attached as Annexure 3;

g) 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 vide notification no. G.S.R. 463(E) dated June 5, 2015 and as amended by notification no. G.S.R. 582(E) dated June 13, 2017 issued by the Ministry of Corporate Affairs.

h) With respect to other matters to be included in the Auditors Report in accordance with Rule 11 of 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 statement.

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

(iii) The company has made provisions, as required under any law or accounting standard, for material foreseeable losses, if any, on the long-term contracts including derivative contracts;

(iv) There were no amounts which were required to be transferred to Investor Education and Protection Fund by the company.

(v) (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 persons or entities, 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") or 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 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;

(c) Based on such audit procedures 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 (v)(a) and (v)(b) contain any material mis-statement.

(vi) The company has not declared or paid dividend during the year.

(vii) Based on our examination, which included test checks, the Company has used accounting software for maintaining its books of account for the financial year ended March 31, 2025 which has a feature of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recorded in the software except that audit trail was not enabled at the database level to log direct data changes, if any. Further, during the course of our audit we did not come across any instance of the audit trail feature being tampered with.

ANNEXURE 1 TO THE INDEPENDENT AUDITOR?S REPORT Referred to in Paragraph 17 under ‘Report on Other Legal and Regulatory Requirements? section of our report to the Members of HINDUSTAN ORGANIC CHEMICALS LIMITED:

i. In respect of the Company?s Property Plant and Equipment and Intangible Assets:

(a) (A) The Company maintains proper records showing full particulars, including quantitative details and situation of Property, Plant and Equipment;

(B) The Company has maintained proper records showing full particulars of intangible assets;

(b) According to the information and explanations given to us and on the basis of our examination of the records of the Company, the Company has a regular programme of physical verification of its property, plant and equipment by which all property, plant and equipment are verified in a phased manner over a period of three years. In accordance with this programme, certain property, plant and equipment were verified during the year. In our opinion, this periodicity of physical verification is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification.

(c) We were not provided with the title deeds of immovable properties held by the Company at Rasayani- Maharashtra (closed unit) for our verification.

With respect to land in Maharashtra, we are informed that, 22.717 acres of land owned by the Company at Rasayani, Maharashtra, has been encroached. Further, 10.576 acres of land at Rasayani, Maharashtra and 0.91 acres of land at Panvel, Maharashtra, has been acquired for public road and hence could not be considered as the assets owned by the Company. Further, 32.547 acres of land at Rasayani, Maharashtra, is under the disputed possession of various other entities. The Company has not considered the above extent of lands while considering the carrying value of land disclosed in the Standalone Financial statements. 2.046 acres of land are outside the boundary walls of Ernakulam factory land and were not included in the re-survey and land tax is paid for land inside the boundary wall though the title deeds are not in the name of the company. Details are as follows:

Description of property	Extend of land (in acres)	Gross carrying value	Held in name of	Whether promoter, director or their relative or employee	Period held indicate range, where appropriate
Freehold Land	2.046	Not Available	Unascertained	No	Not ascertainable

(d) According to the information and explanations given to us and on the basis of our examination of the records of the Company, the Company has revalued its land during the year by a registered valuer. However, there is no change in the value of the property as per the valuation report.

(e) According to the information and explanations given to us and on the basis of our examination of the records of the Company, there are no proceedings initiated or pending against the Company for holding any benami property under the Prohibition of Benami Property Transactions Act, 1988 and rules made thereunder.

ii. (a) The inventory, except inward goods-in-transit, has been physically verified by the internal auditors and management during the year. For goods-in-transit, subsequent evidence of receipts has been linked with inventory records. In our opinion, the frequency of such verification is reasonable, and the procedures and coverage followed by management were appropriate. No discrepancies were noticed on verification between the physical stocks and the book records that were more than 10% in the aggregate of each class of inventory.

(b) According to the information and explanations provided to us and on the basis of our examination of the records of the Company, the Company has been sanctioned working capital limits in excess of Rs. 5 crores, in aggregate, during the year, from banks in the form of overdraft facilities secured against fixed deposits of the company. According to the terms of the working capital limit, the Company is not required to submit any quarterly returns or statements to the bank regarding this facility. Therefore, we are unable to comment on the reconciliation of quarterly returns or statements with the Company?s books of accounts.

iii. a) According to the information and explanations provided to us and on the basis of our examination of the records of the Company, during the year the Company has not provided loans, advances in the nature of loans, stood guarantee or provided security to companies, firms, Limited Liability Partnerships or any other parties. Accordingly, the requirement to report on clause 3(iii)(a) of the Order is not applicable to the Company

b) According to the information and explanations provided to us and based on the audit procedures carried on by us:

1. The Company has provided loans to its subsidiary, secured against the immovable properties of the said subsidiary, during the earlier years which is "overdue" for more than 3 years, and the balance outstanding as at the balance sheet date is Rs. 3,197.08 lakhs, out of which Rs. 2,744.07 lakhs was non-interest-bearing.

Further, we draw attention to note no. 10 and 11 to the accompanying standalone financial statements regarding the waiver of the interest chargeable on loans amounting to Rs. 453.01 lakhs advanced to its subsidiary. The Company has during the year waived interest amounting to Rs. 63.62 lakhs receivable on the above-mentioned loan.

2. The Rasayani unit of the company provided an unsecured advance of Rs. 65 lakhs to M/s. Smith Stanitstreet Pharmaceuticals Ltd during the financial year 1991-92. However, this advance has remained outstanding for more than three years, and no interest rate or repayment terms have been specified. The Company has made a 100% provision for doubtful debts for the above- mentioned advance amounting to Rs. 65 lakhs.

3. The Company has invested of Rs. 1,106 lakhs in its subsidiary during previous years, however the business of the subsidiary has been discontinued completely.

According to the information and explanations given to us, in our opinion, the repayments or returns from the above loans, advances and investments were not proper and hence the recoverability or realizability of the same depends on the realizability of the assets secured, if any.

c) According to the information and explanations provided to us and on the basis of our examination of the records of the Company, in respect of the loans and advances given to its subsidiary as specified in clause (iii)(b)(1) of this report, the Company has established repayment schedules for both principal and interest for loan with outstanding balance of Rs.453.01 lakhs. However, for the advance specified in clause (iii)(b)(2) of this report, there is no stipulated schedule for the repayment of principal and interest.

The repayment of the above is not regular.

d) According to the information and explanations provided to us and on the basis of our examination of the records of the Company, in respect of the loans and advances as specified in clause (iii) (b)(1) of this report, the total amount overdue for more than 90 days is Rs. 3,197.08 lakhs. The Company has indicated that these amounts will be recovered upon the full realization of the assets secured against the loans. In respect of the advances specified in clause (iii)(b)(2) mentioned above, the total amount overdue for more than 90 days is Rs. 65 lakhs. Despite this, the Company has not initiated any actions to recover the amount.

e) According to the information and explanations provided to us and on the basis of our examination of the records of the Company, during the year, the Company has not renewed or extended or granted fresh loans to settle the overdue of the existing loans given to any of the parties. Hence the provisions of the clause 3(iii)(e) of the order, is not applicable to the Company. f) According to the information and explanations provided to us and on the basis of our examination of the records of the Company, in respect of the advance specified in clause (iii)(b)(2) mentioned above, amounting to Rs. 65 lakhs, the Company has not specified any terms or period of repayment.

Aggregate amount outstanding	Rs. 65 Lakhs
Percentage to the total loans	2.03%
Of the above, aggregate amount of loans granted to promoters and related parties	Nil

The Company has made a 100% provision for doubtful recovery for the above-mentioned advance amounting to Rs. 65 lakhs.

iv. According to the information and explanations provided to us, and based on our examination of the Company?s records, in our opinion the Company has complied with the provisions of Sections 185 and 186 of the Companies Act, 2013 in respect of loans granted, investments made, and guarantees and securities provided made by it during the year. However, attention is drawn to note no 10 and 11 to the accompanying standalone financial statement, regarding interest free loans given to its subsidiary company amounting to Rs. 2,744.07 lakhs and advances to another company amounting to Rs.65 lakhs for which no interest has been charged. We are informed that, these loans/ advances are given before enactment of Section 186(7) and hence is not violative of the Act. Further, for the interest-bearing loan amounting to Rs. 453.01 advanced to it subsidiary during the FYs 2005-06, 2006-07, 2012-13, we are informed that the company has waived off the interest on the interest-bearing loans with effect from 01.04.2023, as per the recommendation of Inter-Ministerial Committee Meeting dated 20.12.2023 and that the Companies Act, 2013 does not restrict the company to make any change in the interest rates on the existing loans appeared in the books of the company and there is no explicit provision/ clause in the said section that restricts waiver of loan/interest thereon . Hence, the company waived off the interest on the interest-bearing loan considering the operations of subsidiary have already been closed as per CCEA approval dated 29th Jan 2020.

v. According to the information and explanations given to us in our opinion and, the Company has not accepted any deposits during the year and does not have any unclaimed deposits as at March 31, 2025 except in case of deposits given below that are outstanding for a period exceeding 365 days and might be classified as ‘deposits? by virtue of Rule 2(xii) of the Companies (Acceptance of Deposits) Rules, 2014.

Nature of Deposit	Note No. in Financial Statements	Amount (Rs. in lakhs)
Advances from customers	20(i)	4.62

We have broadly reviewed the accounts and records maintained by the Company pursuant to the Rules made by the Central Government for the maintenance of cost records under sub-section (1) of Section 148 of the Act, read with Companies (Cost Records & Audit) Rules, 2014, as amended and we are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have not, however, made detailed examination of the records with a view to determine whether they are accurate and complete.

vii. a. According to the information and explanations provided to us, and based on our examination of the Company?s records, the Company is generally regular in depositing with appropriate authorities, undisputed statutory dues including Goods and Service Tax, Provident Fund, Employees? State Insurance, Income-Tax, Sales-Tax, Service Tax, Duty of customs, Duty of Excise, Value Added Tax, Cess and any other statutory dues applicable to it.

According to the information and explanations provided to us, no undisputed amounts payable in respect of Goods and Service Tax, Provident Fund, Employees? State Insurance, Income-Tax, Sales- Tax, Service Tax, Duty of customs, Duty of Excise, Value Added Tax, Cess and any other statutory dues applicable to it, were outstanding, as on the last day of the financial year, for a period of more than six months from the date they became payable. b. According to the information and explanations provided to us, and based on our examination of the Company?s records, the dues of goods and services tax, provident fund, employees? state insurance, income-tax, sales-tax, service tax, duty of custom, value added tax, cess and other statutory dues that have not been deposited on account of any dispute, are as follows:

Sl. No. Name of the Statute	Nature of Dues	Period to which the amount related	Amount of dispute (Rs. In Lakhs)	Forum where the dispute is pending
1 Central Excise Act, 1944	Exemption not allowed	2006-07	104.63	Customs, Excise & Services Tax Appellate Tribunal
2 Income Tax Act, 1961	Penalty Dues	2001-02	70.49	High Court
3 Income Tax Act, 1961	Penalty Dues	2010-11	21.50	The Commissioner of Income Tax
4 Goods and Services Tax, 2017	Excess Credit Claimed	2017-18	41.97	The Joint Commissioner

viii. According to the information and explanations provided to us, and based on our examination of the Company?s records, there were no transactions relating to previously unrecorded income that were surrendered or disclosed as income in the tax assessments under the Income Tax Act, 1961 (43 of 1961) during the year.

ix. (a) According to the information and explanations given to us and on the basis of our examination of the records of the Company, the Company has not defaulted in the repayment of loans or borrowings or in the payment of interest thereon to any lender. Accordingly, clause 3(ix)(a) of the Order is not applicable.

(b) According to the information and explanations given to us and on the basis of our examination of the records of the Company, the Company has not been declared a willful defaulter by any bank or financial institution or government or government authority. Accordingly, clause 3(ix)(b) of the Order is not applicable.

(c) According to the information and explanations provided to us, and based on our examination of the Company?s records, during the year the Company obtained only one term loan of Rs. 299 lakhs from the Kerala State Energy Conservation Fund, managed by the Energy Management Centre ("EMC"), specifically for the purpose - efficient of retro fitting inefficient ones. The term loan was received on 20 March 2024; it has not yet been utilized. Based on the information and explanation provided to us, the installation of compressor is not completed and hence is not ready for its intended use. Consequently, the payment was not made to the supplier and the loan amount is temporarily invested in a fixed deposit.

(d) According to the information and explanations given to us and on an overall examination of the company records, funds which have been raised on short term basis by the company has not been utilized for long term purposes.

(e) According to the information and explanations given to us and on an overall examination of the Standalone Financial Statements of the Company, we report that the Company has not taken any funds from any entity or person on account of or to meet the obligations of its subsidiaries, as defined in the Act. The Company does not hold any investment in any associate or joint venture (as defined in the Act) during the year ended 31 March 2025. Accordingly, clause 3(ix)(e) of the Order is not applicable.

(f) According to the information and explanations given to us and procedures performed by us, we report that the Company has not raised loans during the year on the pledge of securities held in its subsidiaries (as defined under the Act). Accordingly, clause 3(ix)(f) of the Order is not applicable.

x. (a) The Company has not raised any moneys by way of initial public offer or further public offer Accordingly, clause 3(x)(a) of the Order is not applicable.

(b) According to the information and explanations given to us and on the basis of 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. Accordingly, clause 3(x)(b) of the Order is not applicable.

xi. (a) Based on examination of the books and records of the Company and according to the information and explanations given to us, considering the principles of materiality outlined in the Standards on Auditing, we report that no fraud by the Company or on theCompany has been noticed or reported during the course of the audit.

(b) According to the information and explanations provided to us, and based on our examination of the Company?s records, no report under sub-section (12) of Section 143 of the Companies Act, 2013 has been filed during the year by the auditors in Form ADT-4 as prescribed under Rule 13 of Companies (Audit and Auditors) Rules, 2014 with the Central Government.

(c) According to the information and explanations provided to us, and based on our examination of the Company?s records, we report that the Company has not received any whistle blower complaints during the year.

xii. According to the information and explanations given to us, the Company is not a Nidhi Company. Accordingly, provisions of clause 3(xii) of the Order are not applicable.

xiii. Attention is drawn to note no. 41 of the Standalone Financial Statements describing the casual vacancies of the independent directors since 23.12.2024. Based on the information and explanation provided to us, in our opinion all transactions with the related parties are in compliance with Section 177 and 188 of Companies Act, 2013 where applicable and the details have been disclosed in Note 36 to the standalone financial statements as required by the applicable accounting standards.

xiv. (a) Based on information and explanations provided to us and our audit procedures, in our opinion, the Company has an adequate internal audit system commensurate with the size and the nature of its business.

(b) We have considered, the internal auditor?s reports for the year under audit, issued to the Company during the year and till date, in determining the nature, timing and extent of our audit procedures.

xv. In our opinion and according to the information and explanations given to us, the Company has not entered into any non-cash transactions with its directors or persons connected to its directors and provisions of Section 192 of the Act are not applicable to the Company. Hence clause xv of the Order is not applicable.

xvi. (a) The Company is not required to be registered under Section 45-IA of the Reserve Bank of India Act, 1934. Accordingly, clauses 3(xvi)

(a) of the Order is not applicable.(including debt instruments).

(b) The Company is not required to be registered under Section 45-IA of the Reserve Bank of India Act, 1934. Accordingly, clauses 3(xvi)(b) of the Order is not applicable.

(c) The Company is not a Core Investment Company (CIC) as defined in the regulations made by the Reserve Bank of India. Accordingly, clause 3(xvi)(c) of the Order is not applicable.

(d) The Company is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934. Hence, reporting under clause (xvi)(d) of the Order are not applicable.

xvii. The Company has incurred cash losses in the current year amounting to Rs. 10,907.18 lakhs. In the immediately preceding financial year, the Company had incurred cash losses amounting to Rs. 5,470.18 lakhs.

xviii.There has been no resignation of the statutory auditors during the year.

Accordingly, clause 3(xviii) of the Order is not applicable.

xix. On the basis of financial ratios, ageing and expected dates of realization of financial assets and payment of financial liabilities, other information accompanying the Standalone Financial Statements, our knowledge of the Board of Directors and management plans and based on our examination of the evidence supporting the assumptions, nothing has come to our attention, which causes us to believe that any material uncertainty exists as on the date of the audit report that the Company is not capable of meeting its liabilities existing at the date of balance sheet as and when they fall due within a period of one year from the balance sheet date. We, however, state that this is not an assurance as to the future viability of the Company. We further state that our reporting is based on the facts up to the date of the audit report and we neither give any guarantee nor any assurance that all liabilities falling due within a period of one year from the balance sheet date, will get discharged by the Company as and when they fall due.

xx. Based on examination of the books and records of the Company and according to the information and explanations provided to us, there are no amounts which are required to be spent in accordance with the provisions of section 135 of the Act and accordingly, clause 3(xx) of the Order is not applicable

Place: Ernakulam	For Balan & Co.
Date: 16.05.2025	Chartered Accountants
	FRN 340S
	M. Venugopal
	Partner
	Membership No. 244882
	UDIN: 25244882BMKTZO9628

ANNEXURE 2 TO THE INDEPENDENT AUDITOR?S REPORT (Referred to in Paragraph 18 under ‘Report on Other Legal and Regulatory Requirements? section of our report to the Members of Hindustan Organic Chemicals Limited of even date)

Supplementary report u/s. 143(5) of the Companies Act, 2013 in "Annexure 2" referred to in our Independent Auditor?s Report to the members of HINDUSTAN ORGANIC CHEMICALS LIMITED (‘the Company?) for the year ended 31st March 2025.

A. Directions

S l. No C&AG Direction	Statement of Statutory Auditor
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.	Based on the explanations provided and our verification, we?ve identified the following systems used for processing the Company?s accounting transactions:
	a) Tally ERP Prime, an accounting ERP software, is utilized for maintaining accounting transactions.
	b) The fixed assets register is managed using an MS Office Excel utility.
	c) Payroll management is handled by a separate HRM software system.
	d) Unit trial balance consolidation is conducted through an MS Office Excel utility.
	Based on our verification, we haven?t encountered any accounting transactions being processed outside the aforementioned systems. We recommend establishing proper integration between these systems and the primary accounting software to mitigate potential risks of data loss or corruption during data migration and transfer.
2 Whether there is any restructuring of an existing loan or cases of waiver/write off of debts/loan/ interest etc. made by a lender to the Company due to the Company?s inability to repay the loan? If yes, the financial impact may be stated. Whether such cases are properly accounted for? (In case, lender is a government Company, then this direction is also applicable for statutory auditor of lender Company).	Yes, the Govt. of India vide GOI Order No. 1600/9/2024-IFD dated 21.03.2025 has waived-off the long outstanding dues as at 30 Sep 2024 to the Govt. of India consisting of loan of Rs. 43,586.46 lakhs and redeemable preference shares of Rs. 27,000 lakhs along with the outstanding interest thereon of Rs 47,359.79 lakhs and Rs. 7,222.50 lakhs respectively. Further, penal interest of Rs. 9,967.96 lakhs on the outstanding loan from GOI disclosed under contingent liability has also been waived off
	Interest waived off and loan and preference shares from Govt. of India has been correctly disclosed under "exceptional item" in statement of profit and loss and under "other equity" in balance sheet respectively, further the penal interest has been rightly removed from the list of contingent liability.
3 Whether funds (grants/ subsidy etc.) received/ receivable for specific schemes from Central/ State Government or its agencies were properly accounted for/ utilized as per its terms and conditions? List the cases of deviation.	Not applicable since the Company has not received any funds during the year from Central/State Government or its agencies for specific schemes.

B. Sub Directions

S l. No C&AG Direction	Statement of Statutory Auditor
1 State the area of land under encroachment and briefly explain the steps taken by the Company to remove encroachment	1. According to the information and explanations given by the management 22.71 acres of land at the Rasayani Unit, Maharashtra, of the Company has been identified as ‘under encroachment?. With respect to this, the following steps taken by the management to remove the encroachment,
	a) The Company is constantly communicating with the Senior Government officials of Govt. of Maharashtra for taking prompt steps for removing encroachment by the farmers at the land at Rasayani Unit.
	b) The Company is also coordinating with the Ministry of Chemicals and Petrochemicals, Government of India, for the speedy resolution in the above case.
	c) The above recommendations include various proposals including settlement arrangements with the encroachers
	d) The Company has also filed suits in some instances.
	2. According to the information and explanations given 32.574 acres of land at Rasayani Unit, Maharashtra, are under the possession of various entities such as MIDC, MSEB, HIL, MES etc. With respect to this, the following steps taken by the management to remove the encroachment,
	a) The Company is constantly following up with the concerned officials for the recovery or registration of the said land possessed by such entities
	b) In case of the land leased out to MES, the Company has issued the notice of termination of lease to the party. However, the property is still under the possession of the lessee -MES. The matter is pending before Arbitration authority and the proceedings are under progress
	c) 10.576 acres of land at the Rasayani Unit and 0.91 acres of land at Panvel Maharashtra has been acquired by Governmental authorities and public road has been constructed. Hence, the Company does not have possession as well as ownership with respect to the said land.
	3. According to the information and explanations given, 2.046 acres of land are outside the boundary walls of Ernakulam factory land and were not included in the re- survey and land tax is paid for land inside the boundary wall.
2 Whether there is any effective system for follow up of accumulated trade receivables the principal of especially which are more than three years old?	The Company has trade receivables amounting to Rs. 972.11 lakhs, which is more than three years old. The Company has assessed and provided a sum of Rs. 972.11 lakhs as provision for bad and doubtful assets.
	Based on the information provided to us, the management is following up with the above debtors for the recovery and has initiated legal proceedings against some of such cases.
3 Whether there was an adequate system for watching actual consumption against norms in case of raw materials, Intermediaries and utilities?	Based on the information given to us, the Company prepares monthly statements comparing the actual consumption of raw material, intermediaries and utilities against the established norms as MIS Report.

ANNEXURE 3 TO THE INDEPENDENT AUDITOR?S REPORT Referred to in Paragraph 19(f) under ‘Report on Other Legal and Regulatory Requirements? section of our report to the Members of HINDUSTAN ORGANIC CHEMICALS LIMITED

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 M/s. HINDUSTAN ORGANIC CHEMICALS LIMITED (the company) as of 31st March, 2025 in conjunction with our audit of the Standalone FinancialStatements 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. These responsibilities include the design, implementation and maintenance of adequate internal financial controls that efficient conduct of its were operating effectively 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 accounting records and the timely preparation of reliable financial information as required under the Companies Act, 2013.

Auditor?s 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, and, both issued by the Institute of Chartered Accountants of India. Those standards and the Guidance Notes 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 controls based on the assessed risk. The procedures selected depend on the auditor?s judgment including the assessment of risks of material misstatement of the Financial Statements, whether due to fraud or error,

We believe that the audit evidence we have obtained is appropriate to provide a basis for our audit opinion on the company?s internal financial control reporting . systems over financial

Meaning of internal financial controls over financial reporting

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

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

(2) provide reasonable assurance that the transactions are recorded as necessary to permit preparation of Financial Statements in accordance with generally accepted accounting principles, and that the 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 the prevention or timely deduction 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 of 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 the 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 March 31, 2025, based on the internal control over the financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of internal Financial Reporting issued by the Institute of Chartered Accountants of India.

Place: Ernakulam	For Balan & Co.
Date: 16.05.2025	Chartered Accountants
	FRN 340S
	M. Venugopal
	Partner
	Membership No. 244882
	UDIN: 25244882BMKTZO9628