Madras Fertilizers Ltd Auditor Reports

To

The Members of Madras Fertilizers Limited

Report on Audit of the Standalone Ind AS Financial

Statements

Qualified 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 31,2024, 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, except for the effects of matter described in the Basis for Qualified Opinion section of our report, 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 31,2024, the Profit including other comprehensive income, changes in equity and its cashflows for the year ended on that date.

Basis for Qualified Opinion

1. Attention is drawn to Note No 30.7 to the standalone financial statements. As stated in the said note, amount shown under Current Assets in the Balance Sheet includes Rs 13.78 Cr. The said sum represents amount considered as recoverable from suppliers / contractors by the company, being the amount of Input Tax Credit (ITC) becoming unavailable for set off against the GST liability on account of non-compliance with the GST regulations on the part of the said suppliers / contractors. The company has correspondingly reduced the said sum of Rs 13.78 Cr in the Input tax credit account in the accounts. The company could not obtain confirmation from the said suppliers / contractors confirming their liability to the company for the payment of the said sum. We are of the opinion that for want of confirmation as stated above, the said sum of Rs 13.78 Cr ought to have been provided for in the statement of Profit & Loss. The non-provisioning of the said sum had resulted in the overstatement of profit by Rs 13.78 Cr with the corresponding overstatement of current assets in the balance sheet.

2. Attention is drawn to Note No 30.7 & 30.8 to the standalone financial statements. As stated in the said note, reconciliation of ITC figures between the books and the electronic credit ledger for the FY 2018-19 & 2019-20 are pending as on the date of balance sheet. Further, the reconciliation of the ITC figures between the books and the figures as appearing in electronic credit ledger (GST portal) for the FY 2017-18 had not been taken up for reconciliation by the company. As stated in the said note, company holds adhoc provision of Rs 37.57 Cr to meet any shortfall, if any, that may arise on the completion of the reconciliation for the years as stated above. We are unable to express our opinion as to the impact on the non-reconciliation of ITC on the financial results of the company and also on the adequacy or otherwise, of the provision held by the company to meet the shortfall that may arise.

3 Our examination of books of accounts and other relevant records has indicated that a sum of Rs 7.68 Cr has been utilised from the working capital facility availed by the company from the bank for the payment towards ammonia energy reduction project which is under development. The said project is included under capital-work-in-progress and is a qualifying asset as per the significant accounting policy laid down by the company for capitalisation of borrowing cost. The company has not complied with the requirements of Ind AS 23 and also the significant accounting policy "H" regarding capitalisation of borrowing cost on borrowed funds resulting in non-capitalisation of borrowing cost of Rs 0.13 Cr. Had the company capitalised the said sum the capital work in progress in the balance sheet would be higher by the said amount of Rs 0.13 Cr with the corresponding increase in the profit in the statement of Profit and Loss by similar amount for current year.

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 qualified opinion.

Emphasis of Matter:

a. Penal Interest on GOI Loans:

Attention is drawn to the Note "No.30.1 l" 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.351.68 crores upto the financial year ending

31.03.2024 as Contingent Liability only.

b. Exceptional items:

- Attention is drawn to the Note No.30.28 to the Standalone Financial Statements, regarding the award received Rs 6.32 Cr from Indian Oil

Corporation Ltd towards the right to use the said land for laying the pipelines which is considered as an exceptional item of Income.

- Attention is drawn to the Note No.30.28 to the Standalone Financial Statements, regarding the loss of inventory amounting to Rs 56.31 Cr due to foods in Chennai in the month of Dec-23 which is considered as an exceptional item of expenditure.

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

- Reconciliation of GST Input Tax Credit eligible for set off under GST regulation

-Coverage, procedures and frequency of physical verification of inventories

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 31,2024. 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 2023-24 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 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.	• 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 refected in the records of the company were in agreement with the quantities refected 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;
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 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;
During the current year ended March 31,2024, the company has recognised subsidy income of Rs.1,982.95 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.	• We assessed the disclosures in the standalone financial statements in this regard;
Government Subsidy Receivables forms a significant part of the Companys current assets, amounting to Rs.321.20 Crores as at March 31,2024	• 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.

 

2. Estimation of Provision & Contingent Liabilities	Our audit procedure included, but was not limited to the following:
In the recognition and measurement of provisions, there is uncertainty about the timing or amount of the future expenditure required to settle the liability. In respect of contingent liabilities, there are estimates and assumptions made to determine the amount to be disclosed.	Analysing the managements internal instructions, process and control for determining and estimating the tax litigations, other litigations and claims and its appropriate accounting and / or disclosure.
As at the year ended 31 March 2024, the amounts involved are significant. There is a high degree of judgement required for the recognition and measurement of provisions and disclosure of contingent liabilities.	Discussed the pending matters with the Companys personnel with respect to status of cases of litigation and claims.
There is a risk of material misstatement that the estimates are incorrect and that the provisions or contingent liabilities are materially misstated.	Assessed managements conclusions through placing reliance upon the expert legal opinions, wherever obtained by the management.
	We have assessed the adequacy and appropriateness of presentation and disclosure of the Contingent liabilities 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 fows 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 three (3) 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.

3. The company makes provident fund contribution to the trust set up by the company under the name and style "MFL Employees Contributory Provident FundTrust".

As per the audit report of the Trust, Auditor has qualified his opinion stating that the investment portfolio of the trust includes investments in IL&FS Transportation Network Limited, and SREI Infrastructure amounting to Rs 5.45 Cr and Interest accrued thereon amounting to Rs 1.72 Cr, and the said entities are under the process of insolvency, and no provision is made in the accounts of the Provident Fund Trust for the diminution in the value of the said Investments.

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. The company has not complied with mandatory requirement of section 203 of the Companies Act 2013, regarding appointment of whole time Company secretary for the entire financial year. Company had the whole time company secretary only till 12.12.2023.

5. 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 Equitydealt 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.30.1to 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 en-cashed 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.123ofthe Companies Act, 2013;

vi. The software used by the company, for maintaining its books of account does not have a feature of recording audit trail (edit log) facility. Hence, we are unable to express our opinion on the further requirements as required to be reported under rule 11(g) of companies (Audit and Auditors) Rules, 2014.

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 accounting module (ie,OLIS), 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.

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. Intangible asset which is underdevelopment;

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 title 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 atwarehouses isconsidered as per certification given by the management and same were duly confirmed throughthe IFMS portal maintained by Dept. of Fertilizers.

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

In our opinion the physical verification of inventories 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 accounts. The particulars of difference is furnished in note no 30.31(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. According to the information and explanation given to us, the company has not granted any loans and

advances to the parties coming within the purview of section 185 and 186 of the companies Act, 2013 and hence reporting under this clause is not 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 31,2024 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
Sales Tax (Pre GST)	0.02
Service Tax (pre GST)	0.26
Employee State Insurance	0.97
GST (RCM)	0.82
Total	4.60

The above does not include a sum of Rs.1.74 Crores, being the amount withheld by the Company for dues by the contractors towards Provident Fund and Employee State Insurance, pending the receipt of communication from the concerned authorities for the demand for the said sum.

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:

		Amount (In Crores)
Name of the Statute	Nature of Dues	Disputed	Deposited	Period to which the amount relates	Forum where dispute is pending
Income Tax Act,1961	Income Tax	7.22	-	Assessment Year 2018-19	Commissioner of Income Tax (Appeals)
		1.79	0.08	2017-18	Appeal before Appellate Authority
Goods & Service Tax	GST along with Interest & Penalty - Tamilnadu	111.72	-	2018-19	Before Honble High Court of Madras by way of Writ Petition
		104.44	-	2019-20	Before Honble High Court of Madras by way of Writ Petition
	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

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	411.17	Principal	From FY 200405 to till the date
Non-Plan Loans	20.77
Revamp Loans	122.30
Total(A)	554.24
Plan Loans	656.76	Interest	From FY 200405 to till the date
Non-Plan Loans	42.16
Revamp Loans	176.64
Total(B)	875.56
Grand Total (A+B)	1,429.80

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 not availed any term loan from the bank and hence reporting under this clause is not applicable.

d. According to the information and explanations given to us, and the procedures performed by us, and on an overall examination of the financial statements of the company, we report that the company has used funds raised on short term basis aggregating to Rs. 7.68 Cr for long-term purposes.

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.

x. 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 has anadequate internal audit system commensurate with the size and nature of its business.

b. We have considered the internal audit reports for the year under audit, issued to the company up to the quarter ending December 2023 in determining the nature, timing and extent of our audit procedures

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.351.86 Cr (PY.Rs. 449.21 Cr) with a negative net worth of Rs.189.72 Cr (PY.Rs. 287.07 Cr). The current liabilities (which includes Loan from Government of India of Rs 554.24 Crores and interest of Rs 875.57 Crores due on the said loan) exceed its current assets by Rs.754.95 Cr (PYRs.739.95 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.

	For Chandran and Raman
	Chartered Accountants
	Firm Registration No: 000571S
Place: Chennai	(S Pattabiraman)
Date: 28.05.2024	Partner
	Membership No: 014309
	UDIN: 24014309BKELAC7392

Referred to in Paragraph 5(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 March 31,2024, 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 refect 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 31,2024:

a. During the current financial year the company has taken measures for the reconciliation of GST Input Tax Credit claim and reconciliation of the figures as per books and Electronic credit ledger. The reconciliation process has been completed in respect of three FYs 2020-21, 202122 & 2022-23 and effect has been given in the books of accounts for the differences noticed with regard to eligible ITC claim. The reconciliation of the figures as per books and Electronic credit ledger for remaining FYs is pending for completion. The outcome of the verification / reconciliation for the remaining years might result in reversal of GST ITC / levy of additional interest for the incorrect utilisation of GST ITC, if any. Considering the volume of transaction we are of the opinion that the procedures for Internal Financial Control with regard to compliance with GST regulations needs to be strengthened further to reduce the financial risk and liability that may arise.

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.;

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 31,2024, 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

31,2024 standalone 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
Place: Chennai	(S Pattabiraman)
Date: 28.05.2024	Partner
	Membership No: 014309
	UDIN: 24014309BKELAC7392