Madras Fertilizers Auditors Report


To

The Members of

Madras Fertilizers Limited

Report on Audit of the Standalone Ind AS Financial Statements

Opinion

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

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, 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 Companies Act 2013 read with the 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, 2023, the Profit including other comprehensive income, changes in equity and its cashflows for the year ended on that date.

Basis for Opinion

We conducted our audit in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Companies Act, 2013. Our responsibilities under those Standards are further described in the Auditors Responsibilities for the Audit of the 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 financial statements under the provisions of the Companies Act, 2013 and the Rules there under, 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.

Emphasis of Matters:

a. Provision for un-utilized GST Input Tax Credit:

Attention is drawn to the Note No.30.10 to the Standalone Financial Statements. As explained in the said note, the management is of the opinion that sum of Rs.117.02 cr (being the amount net of provision of Rs.48.33 cr) being the GST ITC included under the other current assets is eligible for set-off in full against the output GST liability arising out of sale of products in the future years. Reconciliation of ITC as per books and as per GST records is under progress and effect for any difference will be given on completion of the reconciliation.

b. Penal Interest on GOI Loans:

Attention is drawn to the Note No.30.1.n to the Standalone Financial Statements, wherein the company has made a request to Government of India for the waiver of the interest and penal interest payable on the GOI loans as part of the revival package. Pending the disposal of the revival package, the Company has considered the penal interest at 2.75%, amounting to Rs.311.40 crores upto the financial year ending 31.03.2023 as Contingent Liability only.

c. Attention is drawn to the Significant Accounting Policy on Depreciation on Property, Plant and Equipment

With the feedstock conversion from Naphtha to RLNG, a technical assessment of the useful life of plant and machinery was made and the useful life of Plant and Equipment was extended for a further period of 15 years (except for NPK Plant which has an extended life of 10 years) from 01.04.2021 and depreciation is provided on the extended useful life of the plant and equipment. The depreciation on plant and equipment as per the technical estimate amounted to Rs.7.63 crores for FY 2022-23.

d. Attention is drawn to our remark under the Qualified opinion on Internal Financials Controls over Financial Reporting (Annexure C to our report) regarding inadequate controls on the following:

- GST ITC eligible claim and reconciliation

- Coverage, procedures and frequency of physical verification of inventories

- Scope and coverage of internal audit

Our opinion is not modified in respect of these matters.

Key Audit Matters:

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone financial statements for the year ended March 31,2023. 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.

S.No Key Audit Matter How our Audit procedures addressed the key audit matter
1 Recognition / de-recognition and measurement of Subsidy income and recoverability of subsidy receivables Our principal audit procedures adopted in relation to recognition of subsidy income in the accounts for the Financial Year 2022-23 were as under:
(Referto Note No.I.G and 18 to the standalone financial statements) • We have read the relevant notifications issued by the GOI and discussed with the management, to understand the underlying matters and basis for management judgement and estimates including necessary changes made in estimates to address variations noted in past. Also ascertained the prevailing trade practice in the fertilisers industries for the recognition of Subsidy income;
Subsidy income pertaining to Urea and Complex Fertilizers (NPK) is recognised on the basis of the rates notified by the Department of Fertilisers from time to time in accordance with the New Pricing Scheme (NPS) and Nutrient Based Subsidy (NBS) policy on the quantity of fertilisers sold by the Company.
Concessions in respect of urea, as notified under the New Pricing Scheme, is recognized when there is a reasonable assurance that the Company will comply with all necessary conditions attached to Subsidy with adjustments for escalation/de-escalation in the prices of inputs and other adjustments, as estimated by the management on every reporting date in accordance with the known policy parameters in this regard. • We examined the statement showing the sales quantity considered for subsidy income to ensure the quantity were correlated with the actual sales made by the Company. We also verified the quantities sold as reflected in the records of the company were in agreement with the quantities reflected in customer acknowledgements as appeared in the iFMS portal of the Department of Fertilisers on a selective sampling basis keeping in view with the concept of materiality and tested the DBT claims (subsidy claim) made by the Company;
During the current year ended March 31, 2023, the company has recognised subsidy income of Rs.3,139.30 Crores which constitute significant portion of its revenue from operations. The recognition and realisation of subsidy income depends on the rates and the period for which approval is issued by the GOI.
Government Subsidy Receivables forms a significant part of the Companys current assets, amounting to Rs.492.80 Crores as at March 31,2023 • We reviewed the accuracy of the management estimate of urea concession price in accordance with relevant New Pricing Scheme and tested the escalation/de-escalation adjustments made;
• We assessed the disclosures in the standalone financial statements in this regard;
• Review of subsidy receivable from Department of Fertilizer (i.e. Sovereign Authority) is supported by the approved claims generated from iFMS (Integrated Fertilizer Management System);
• Subsidy income remaining outstanding over significant period are discussed /enquired with management based on follow-up with Department of Fertilizers, Government of India including basis of management judgement and realisation certainty thereof;
Based on the above procedures performed, we ensured that the recognition of Subsidy Income and recoverability of subsidy receivable is in accordance with applicable financial reporting framework and relevant notifications issued by the Department of Fertilizers, GOI and fairly presented in the standalone financial statements.

Information Other than the Standalone Financial Statements and Auditors Report Thereon:

The Companys Board of Directors is responsible for the other information. The other information comprises the information included in the Directors Report and Management Discussion and Analysis, but does not include the standalone financial statements and our auditors report thereon.

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

In connection with our audit of the standalone financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained during the course of our audit or otherwise appears to be materially misstated.

When we read the Annual Report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance.

Responsibility of Management for the Standalone Financial Statements:

The Companys Board of Directors is responsible for the matters stated in section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, cash flows and changes in equity of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards specified under section 133 of the Act. 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 implementation and maintenance of 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 statement that give a true and fair view and are free from material misstatements, whether due to fraud or error.

In preparing the Standalone financial statements, 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 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 also responsible for overseeing the companys financial reporting process.

Auditors Responsibility for the Audit of the Standalone Financial Statements:

Our objectives are to obtain reasonable assurance about whether the standalone financial statements as a whole are free from material misstatements, 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:

a. Identify and assess the risks of material misstatements 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;

b. 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 Companies Act, 2013, we are also responsible for expressing our opinion on whether company has adequate internal financial controls system in place and the operating effectiveness of such controls;

c. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management;

d. 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;

e. 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;

Materiality is the magnitude of misstatements in the standalone financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the standalone financial statements may be influenced. We consider quantitative materiality and qualitative factors as in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the standalone financial statements.

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

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

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the standalone financial statements of the current period and are therefore the key audit matters. We describe these matters in our 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 Matters:

1. The company has eleven (11) Marketing Offices (ie., named as regional offices (ROs) across India, wherein all the sales related matters are being undertaken. As part of our audit, we have visited and reviewed the operations of one (1) of the ROs and the operations of the RO are satisfactory in nature.

2. During the audit, we observed that most of charges already satisfied are still appearing in the records of Index of charges under Ministry of Corporate Affairs (MCA) portal. The company has to take appropriate measures in order to clear the charges which are not live as on date.

Our opinion is not modified in respect of these matters.

Report on Other Legal and Regulatory Requirements:

1. As required under the directions and sub-directions issued by the Comptroller and Auditor General of India in terms of Sub-section (5) of Section 143 of the Companies Act 2013, we are enclosing our report in Annexure A".

2. As required by the Companies (Auditors Report) Order, 2020 ("the Order") as amended, issued by the Central Government of India in terms of sub-section (11) of section 143 of the Companies Act, 2013, we give in the Annexure a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable. Our report thereon is enclosed as "Annexure B".

3. Non-Compliance of Composition of Board-SEBI Listing Obligation and Disclosure Requirements (LODR) Regulations, 2015: The company is not having the required number of Independent Directors on its Board due to vacancy arising out of expiry of term from 6th June, 2019 onwards. (Refer Note No. 30.31 to the Standalone Financial Statements)

4. 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 proper adequate returns have been received from all the regional offices of the company;

c. The Companys Balance Sheet, the Statement of Profit and Loss (incl. Other Comprehensive income), the Statement of Cash Flows and the Statement of Changes in Equity dealt with by this report are in agreement with the books of accounts;

d. In our opinion, the aforesaid standalone financial statements comply with the Indian Accounting Standards specified under Section 133 of the Act, read with The Companies (Indian Accounting Standards) Rules, 2015, as amended thereon.

e. The provisions of Section 164(2) of the Act in respect of disqualification of directors are not applicable to the Company, being a Government Company in terms of notification no. G.S.R.463 (E) dated 5thJune, 2015 issued by Ministry of Corporate Affairs, Government of India;

f. With respect to the adequacy of the internal financial controls over financial reporting of the company and the operating effectiveness of such controls, refer to our separate Report in "Annexure C". Our report expresses a Qualified opinion on the adequacy and operating effectiveness of the Companys internal financial controls over financial reporting;

g. With respect to the other matters to be included in the Auditors Report in accordance with the requirements of section 197(16) of the Act, as amended:

The provisions of Section 197 read with Schedule V of the Act, relating to managerial remuneration are not applicable to the Company, being a Government Company, in terms of Ministry of Corporate Affairs Notification no. G.S.R. 463 (E) dated 5th June, 2015;

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 Note No.30.1 to the standalone financial statements;

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

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

The company is in the possession of the three deposits amounting to Rs.54,000/-, having maturity value of Rs.60,198/- which were seized by the Income Tax department in the course of search and seizure operations carried at the premises of the depositor. The said deposits had matured during 2001, however due to the intimation received from the department, these are neither been enchased nor transferred to the fund in accordance with Companies Act, 2013.

iv. a. The management has represented that, to the best of its knowledge and belief, other than as disclosed in the notes to the accounts, no funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the company to or in any other person(s) or entity(ies), 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, other than as disclosed in the notes to the accounts, no funds have been received by the company from any person(s) or entity(ies), 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; and

c. Based on such audit procedures as considered reasonable and appropriate in these circumstances, nothing has come to our notice that has caused them to believe that the representations under sub-clause (i) and (ii) contain any material misstatement.

v. The company has not declared and/or paid any dividend during the year in accordance with Sec. 123 of the Companies Act, 2013;

vi. Proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 for maintaining books ofaccount using accounting software which has a feature of recording audit trail (edit log) facility is applicable to the Company with effect from April 1, 2023, and accordingly, reporting under Rule 11(g) of Companies (Audit and Auditors) Rules, 2014 is not applicable for the financial year ended March 31, 2023.

ANNEXURE - A TO THE AUDITORS REPORT

Referred to in Paragraph 1 under "Report on Other Legal and Regulatory Requirements" section of our report to the Members of the Company of even dated

Report on Directions issued by the Comptroller and Auditor General of India under section 143(5) of the Companies Act, 2013)

PART-I- 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

Yes. The company has a system in place to process all the accounting transactions through IT system. However, the transactions relating to marketing activities captured in the IT system of regional offices are reported to HO periodically. The said transactions are reconciled with the corporate accountingmodule (ie.JOLIS), on monthly basis at Head-office. No instances of lack of integrity of the accounts along with the financial implications have been noted during the course of our examination of records.

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.

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).

According to the information & explanations given to us, there are no instances of restructuring of an existing loan or cases of waiver/write off of debts/loans/interest etc. made by a lender to the Company. The Company has applied to the Government of India for restructuring of its loans availed from Government. The matter relating to restructuring is under progress.

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 term and conditions? List the cases of deviation.

According to the information and explanations given to us and based on our examination of books of accounts of the company, the company has not received any funds for specific schemes from Central/State Government or its agencies.

PART-II- SUB-DIRECTIONS

1. Impact of revision of subsidies for fertilizer in valuation of closing stock may be stated.

During FY 22-23, the company has received a notification from Fertilizer Industry Coordination Committee (FICC) wherein the provisional rate for Urea Subsidy was revised downwards from Rs.70,841/MT to Rs.62,665/MT. The said revision has been duly factored in the determination of Net Realisable Value (NRV) for the valuation of Inventory of Finished Goodswhich is being valued at the NRV or Cost whichever is lower in accordance with the accounting policy of the company.

PART-III- SUB-DIRECTIONS

1. SBI sanctioned cash credit limit and letter of credit of the company with first charge on the current assets of the company as primary security and collateral security of first charge on the plant and machinery of the company (excluding the movable fixed assets of the company charged to Indian Oil Corporation Limited to an extent of Rs.50 crore) and equitable mortgage of 329.40 acres of land at Manali and the nature of the above security has to be disclosed in the Notes to the accounts.

The same has been duly complied with.

2. The disclosure regarding pending refund of TDS from IT department has to be made in the notes to the accounts.

The same has been duly complied with in note. 30.1F of the financial statements.

3. The GST ITC amount of Rs.46.56 Crore written off from receivables has to be written back to provision.

The same has been duly complied with in note 10 and note 30.10 of the financial statements.

4. Compliance with para 32 of Ind AS 1 (not offsetting assets and liabilities or income and expenses, unless required or permitted by an Ind AS) in respect of receivables from employees.

Our examination of books of accounts did not reveal any such offsetting/adjustments.

5. Requirement of accounting policy on "Plant and Machinery which are not in use for want of refurbishing or regrouped under CWIP at their carrying cost till put to use" has to be reviewed.

The accounting policy has been reviewed and revised accordingly. The reference is invited to significant accounting policy for Property, Plant and Equipment.

6. The mismatch on the Notes to the accounts on recognizing the subsidy income has to be rectified.

The subsidy income recognized has been duly accounted under Revenue from Operations.

ANNEXURE - B TO THE AUDITORS REPORT

Referred to in Paragraph 2 under "Report on Other Legal and Regulatory Requirements section of our report to the Members of the Company of even dated

Based on the audit procedures performed and information and explanations given to us, we report that:

i. In respect of the Companys Property, Plant and

Equipment,

a. The company has maintained proper records showing full particulars with respect to

A. Property, Plant and Equipment including quantitative details and situation thereon and relevant details of right-of-use assets;

B. The company does not have any intangible assets and hence reporting under this clause is not applicable;

b. According to the information and explanation given to us, physical verification of Property, Plant and Equipment, has been conducted by the company once during the financial year and there were no material discrepancies noticed on such physical verification undertaken. In our opinion, the frequency of the verification is reasonable, having regard to the size and the magnitude of the organization.

c. The company has clear tittle deeds of Lands held in its name.

d. During the year, the company has not revalued its Property, Plant and Equipment (Incl. Right of Use assets). Accordingly reporting under this clause does not arise.

e. According to the information and explanation given to us,there are no proceedings have been initiated or are pending against the company for holding any benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and rules made thereunder,

ii. In respect of the Inventories:

a. Physical verification of inventories inside factory premises (excepting stores and spares) and at Chennai Port has been carried out by an independent surveyor at year end.

The stock of finished goods lying at warehouses is considered as per certification given by the management and same were duly confirmed through the IFMS portal maintained by Dept. of Fertilizers.

As explained to us, physical verification of stores and spares was carried out by the management as at the year-end only and there were no material discrepancies of 10% or more in the aggregate for each class of inventory.

In our opinion the physical verification conducted by the management is not consistent with the requirements of this clause with regard to reasonable intervals and the coverage and procedure of such verification.

b. The Company has been sanctioned a working capital limit (i.e, both fund and non-fund based facilities) in excess of five crore rupees, in aggregate from banks on the basis of the security of inventories and book debts including GOI subsidy receivable.

On the basis of examination of relevant records, the quarterly returns or statements filed by the company with bank are not in agreement with books of the accounts and the particulars of difference is furnished in note no 30.32(g) to the Standalone Financial Statements.

iii. During the year, the company has not made any investments in, provided any guarantee or security or granted any loans or advances in the nature of loans, secured or unsecured, to companies, firms and limited liability partnerships or other parties covered under the register maintained under section 189 of the Companies Act, 2013.

Hence, the reporting under the provisions of clause (iii) (a), (b),(c),(d),(e) and (f) of the order are not applicable.

iv. The company has complied with the provisions of section 185 and 186 of the companies Act, 2013 in respect of grant of loans and advances, as applicable.

v. The company has not accepted any deposits coming within the purview of definition of deposits as per the provisions of the Companies Act, 2013 and accordingly reporting on the requirements under this clause is not applicable.

vi. The company is maintaining the cost records as specified by the Central Government under sub-section (1) of section 148 of the Companies Act for its fertilizers products.

We have broadly reviewed the cost records maintained by the Company pursuant to the Companies (Cost Records and Audit) Rules, 2014, as amended prescribed by the Central Government under sub-section (1) of Section 148 of the Companies Act, 2013 and are of the opinion that, prima facie, the prescribed cost records have been made and maintained.

We have, however not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

vii. In respect of statutory dues:

a. The company is generally been regular in depositing undisputed applicable statutory dues including provident fund, employees state insurance, income-tax, sales tax, and service tax, duty of customs, duty of excise, Goods and Services Tax, Cess and any other statutory dues applicable to it with the appropriate authorities;

There were no outstanding of aforesaid statutory dues as on March 31,2023 for a period of more than six months from the date they became payable except for the following:

Nature of Dues Amount (Rs.in Crores)
Entry Tax (Tamil Nadu) 2.53
Value Added Tax (Tamil Nadu) 0.40
Sales Tax (Pre GST) 2.55
Service Tax (pre GST) 0.29
Total 5.77

A sum of Rs 1.53 Crores, being the dues by the contractors towards Provident Fund and Employee State Insurance has been withheld by the company pending the receipt of communication from the concerned authorities for the remittance.

b. There were no dues of GST, Income Tax, value added tax, duty of customs, duty of excise and cess which have not been deposited on account of any dispute except in the following cases:

Name of the Statute Nature of Dues Amount ( In Crores)

Period to which the amount relates

Forum where dispute is pending

Disputed Deposited
Employees State Insurance Act, 1948 Claim for Damages & Interest for belated remittance 0.12 - Apr, 1989 to Mar, 1990 ESI Court
0.07 0.02 Oct,1999 to Sep,2000
0.43 0.09 Apr, 1992 to Sep,1995
0.55 0.05 Jan,1997 to Jul,1999 (*)
Income Tax Act,1961 Income Tax (#) 6.54 0.99 Assessment Year 2018-19 Commissioner of Income Tax (Appeals)
Departments Appeal
Kerala Value Added Tax Act,2003 VAT 1.71 - Assessment Year 2009-10 Honble Supreme Court of India
3.40 - Assessment Year 2010-11
Customs Act,1962 Differential Customs Duty, Redemption fine u/s 125(1) & Penalty u/s 114(A) 65.86 0.05 NA Honble High Court of Madras

(*) The company has already made provision for entire amount of Rs.0.35 Crores after adjusting the deposited amount.

(#) The Department has levied the penalty of Rs.20,000/-, with regard to non-compliance with the notices issued at the time of assessment.

viii. We have not come across any transactions that are not recorded in the books of account which have been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961. Hence, the recording of unrecorded income in the books of accounts does not arise.

ix. a. The Company has not defaulted in repayment of loans or borrowings to any financial institutions, banks, or dues to debenture holders excepting default of repayment of the following Government of India (GOI) Loans:*

Nature of borrowing Amount of Default (Rs.in Crores) Whether principal or interest Period of Default
Plan Loans 402.28 From FY 2004-05 to till the date
Non-Plan Loans 20.77 Principal
Revamp Loans 122.30
Total (A) 545.35
Plan Loans 612.83
Non-Plan Loans 40.07 Interest From FY 2003-04 to till the date
Revamp Loans 168.08
Total (B) 820.98
Grand Total (A+B) 1,366.33

b. To the extent of our knowledge, the company has not been declared willful defaulter by any bank or financial institution or government or any government authorities.

c. The company has utilized the proceeds of term loan availed from the bank for the purpose for which they were obtained.

d. On overall examination of the financial statements of the company, we report that no funds raised on short term basis have been used for long term purposes by the company.

e. The Company does not have any subsidiaries, associates or joint ventures. Accordingly, reporting with regard to borrowal of money in order to meet the obligations of its subsidiaries, associates or joint ventures does not arise.

f. The Company does not have any subsidiaries, associates or joint ventures. Accordingly, reporting with relating to borrowal of money on pledge of securities held in its subsidiaries, joint ventures or associate companies does not arise.

(. a. The Company has not raised money by way of initial public offer or further public offer (including debt instrument) during the period under audit. Accordingly, reporting under this clause does not arise.

b. During the year, company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures. Therefore, reporting under this clause is not applicable to the company.

xi. To the best of our knowledge,

a. No fraud by the company or on the company has been noticed or reported during the year.

b. No report has been filed by the auditors in Form ADT-4 as prescribed under rule 13 of Companies (Audit and Auditors) Rules, 2014 with the Central Government in accordance with section 143(12) of the Companies Act,2013.

c. As represented to us by the management, there are no whistle blower complaints received by the company during the year.

xii. The company is not a Nidhi company. Hence, the reporting under the provisions of clause (xii) (a), (b) and (c) of the order are not applicable.

xiii. In our opinion, all the related party transactions during the financial year are in compliance with Section 177 and 188 of Companies Act, 2013 and the details of the said transactions have been disclosed appropriately in the standalone financial statements in accordance with applicable Ind AS.

xiv. a. In our opinion and based on our examination, the company does not have an adequate internal audit system commensurate with the size and nature of its business.

b. The reports of the Internal Auditors were not furnished to us and hence the same could not be considered for statutory audit.

xv. In our opinion, the company has not entered into any noncash transactions with directors or persons connected with him during the financial year under Section 192 of the Companies Act, 2013.

xvi. The company is not required to be registered under Section 45-IA of the Reserve Bank of India Act, 1934.

Accordingly, the reporting under the provisions of clause (xvi) (b) and (c) of the order does not arise.

Further, in our opinion, there is no core investment company within the Group (as defined in the Core Investment Companies (Reserve Bank) Directions, 2016) and accordingly reporting under this clause is not applicable to the company.

xvii. The company has not incurred any cash losses in the financial year and in the immediately preceding financial year.

xviii. There has been no resignation of the statutory auditors during the year and accordingly reporting under this clause does not arise.

xix. The Company has accumulated losses amounting to Rs.449.20 Cr (PYRs.667.53 Cr) with a negative net worth of Rs.287.07 Cr (PY.Rs. 505.40 Cr). The current liabilities (which includes Loan from Government of India of Rs 554.24 Crores and interest of Rs 820.98 Crores due on the said loan) exceed its current assets by Rs.739.95 Cr (PY.Rs. 905.66 Cr). The company has submitted proposal for restructuring of the loans received from Government of India. However, considering the strategic importance of the industry in which the company operates and constitution of the equity shareholders and stakeholders, the standalone financial statements of the company have been prepared on going concern basis.

On a consideration of the companys accumulated losses and strategic importance as stated above and on the basis of the financial ratios, ageing and expected dates of realization of financial assets and payment of financial liabilities, other information accompanying the financial statements of the company, our knowledge of the Board of Directors and management plans, 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 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. A. On the verification of books of accounts and other relevant records, it was observed that there were no unspent amount which is required to be transferred to a Fund specified in Schedule VII to the Companies Act, 2013 within a period of six months of the expiry of the financial year.

b. There are no amount remaining unspent in respect of ongoing projects. Accordingly,the company is not under obligation to transfer the unspent amount in respect of ongoing projects, to a Special Account as per sub-section (6) of section 135 of the Act.

xxi. There are no financial results of any other company which have been consolidated with the standalone financial statements of the company and accordingly, requirements as to the reporting under this clause (xxi) does not arise.

ANNEXURE - C TO THE AUDITORS REPORT

Referred to in Paragraph 4(f) under "Report on Other Legal and Regulatory Requirements section of our report to the Members of the Company of even dated.

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 Financials Controls overFinancialReporting of Madras Fertilizers Limited (referred to as the "Company") for the year ended March31,2023, in conjunction with our audit of the Standalone Ind AS financial statements of the company.

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. 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 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.

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") issued by the ICAI and the Standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls, both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the 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 us 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 standalone 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:

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

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

c. 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 standalone 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.

Qualified Opinion

According to the information and explanations given to us and based on our audit, the following material weaknesses has been identified in the operating effectiveness of the Companys internal financial controls over financial reporting as at March 31,2023:

a. The companys internal financial control over GST Input Tax Creditclaim and reconciliation were not operating effectively and needs to be strengthened to precisely arrive at the eligible amount of GST ITC to be carried forward and set-off against output liability in the future years. As explained to us, the management is taking steps in undertaking the reconciliation and has appointed consultants for such purpose. The outcome of the verification / reconciliation by the consultants might result in reversal of GST ITC / levy of additional interest for the incorrect utilisation of GST ITC, if any.;

b. The Companys internal control system for inventory- In our opinion the physical verification conducted by the management is not adequate with regard to coverage, procedures used and frequency of the verification. As explained to us, the management is in the process of appointing a technical committee to strengthen the efficacy and periodicity of inventory verification with a view to ensure the identification of non-moving / slow-moving items on a timely basis and to provide for the loss, if any, that might arise on the completion of the verification and the report of the technical committee.; and

c. Internal audit not commensurate with the size and nature of business - As explained to us, the Company has an internal audit department only. The scope and coverage of the internal audit department is not commensurate with the size and nature of business of the Company. The inadequate scope and coverage of internal audit has resulted in material weakness in the internal financial control aspects.;

A material weakness is a deficiency, or a combination of deficiencies, in internal financial control over financial reporting, such that there is a reasonable possibility that a material misstatement of the companys annual or interim standalonefinancial statements will not be prevented or detected on a timely basis.

In our opinion, except for the possible effects of the material weaknesses described above on the achievement of the objectives of the control criteria, the company has in all material respects, maintains adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31,2023, 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.

We have considered the material weaknesses identified and reported above in determining the nature, timing, and extent of audit tests applied in our audit of the March 31,2023standalone financial statements of the Company, and these material weaknesses does not affect our opinion on the standalone financial statements of the Company and we have issued an unqualified opinion on the standalone financial statements.

For Chandran and Raman Chartered Accountants
Firm Registration No: 000571S
Sd/-
(S Pattabiraman)
Partner
Place: Chennai Membership No: 014309
Date: 17.05.2023 UDIN:2301309BGWQJY5738