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Rashtriya Chemicals & Fertilizers Ltd.

BSE: 524230 Sector: Agri and agri inputs
NSE: RCF ISIN Code: INE027A01015
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VOLUME 670105
52-Week high 106.45
52-Week low 40.50
P/E 27.31
Mkt Cap.(Rs cr) 5,018
Buy Price 90.95
Buy Qty 335.00
Sell Price 0.00
Sell Qty 0.00
OPEN 94.00
CLOSE 94.30
VOLUME 670105
52-Week high 106.45
52-Week low 40.50
P/E 27.31
Mkt Cap.(Rs cr) 5,018
Buy Price 90.95
Buy Qty 335.00
Sell Price 0.00
Sell Qty 0.00

Rashtriya Chemicals & Fertilizers Ltd. (RCF) - Auditors Report

Company auditors report

TO THE MEMBERS OF RASHTRIYA CHEMICALS AND FERTILIZERS LIMITED.

Report on the Standalone Financial Statements

We have audited the accompanying standalone financial statements of RASHTRIYACHEMICALS AND FERTILIZERS LIMITED ("the Company") which comprises theBalance Sheet as at March 31 2016 the Statement of Profit and Loss the Cash FlowStatement for the year then ended and a summary of significant accounting policies andother explanatory information.

Management’s Responsibility for the Standalone Financial Statements

The Company’s Board of Directors is responsible for the matters in Section 134(5)ofthe Companies Act 2013 ("the Act") with respect to the preparation of thesestandalone financial statements that give a true and fair view of the financial positionfinancial performance and cash flows of the Company in accordance with the accountingprinciples generally accepted in India including the Accounting Standards specified underSection 133 of the Act read with Rule 7 of the Companies (Accounts) Rules 2014. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provision of the Act for safeguarding the assets of the Company and for preventing anddetecting frauds and other irregularities; selection and application of appropriateaccounting policies; making judgments and estimates that are reasonable and prudent; anddesign implementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the financial statements thatgive a true and fair view and are free from material misstatement whether due to fraud orerror.

Auditor’s Responsibility

Our responsibility is to express an opinion on these standalone financial statementsbased on our audit.

We have taken into account the provisions of the Act the accounting and auditingstandards and matters which are required to be included in the audit report under theprovisions of the Act and the Rules made thereunder.

We conducted our audit in accordance with the Standards on Auditing specified underSection 143(10) of the Act. Those Standards require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetherthe financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts andthe disclosures in the financial statements. The procedures selected depend on theauditor’s judgment including the assessment of the risks of material misstatement ofthe financial statements whether due to fraud or error. In making those risk assessmentsthe auditor considers internal financial control relevant to the Company’spreparation of the financial statements that give a true and fair view in order to designaudit procedures that are appropriate in the circumstances. An audit also includesevaluating the appropriateness of the accounting policies used and the reasonableness ofthe accounting estimates made by the Company’s Directors as well as evaluating theoverall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the standalone financial statements.

Opinion

In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Act in the manner so required and give a true and fair view in conformity with theaccounting principles generally accepted in India of the state of affairs of the Companyas at March 31 2016 and its profit and its cash flows for the year ended on that date.

Emphasis of Matters

We draw attention to the following matters in the notes to the standalone financialstatements:

a) Note No. 33 Consequent to Gas pooling being made applicable to Fertilizer (Urea)sector w.e.f. June 1 2015 it is expected that a differential pricing of gas may be madeapplicable for non-Urea usage. Company has represented to Department of Fertilizer (DoF)for maintaining supply of domestic gas for P&K fertilizers and chemicals. Ministry ofPetroleum & Natural Gas (MoPNG) vide its order No. L- 13013/3/2012- GP-I dated:December 16 2015 has directed GAIL (India) Limited to levy a higher gas price (i.e. thehighest rate of Re-gasified Liquefied Natural Gas (RLNG) used for production of urea) forgas consumed in non-urea operations. As the matter relating to the same is pending beforethe Inter

Ministerial Committee (IMC) of Government of India for decision Company hasrepresented that any decision on the same be taken only upon the issue being settled bythe IMC. However pending finalisation of price payable as per the said order Company hasrecognised a liability of ' 181.97 crore for the year ended March 31 2016 based on thepooled price of gas for its non-urea operations.

b) Note No. 34 Company expects the compensation towards recognition of increase incost of gas on account of Petroleum & Natural Gas Regulatory Board order in ureasubsidy for the periods relating to 2008-09 to 2010-11 to be notified by Government ofIndia. Accordingly it has not provided for an amount of ' 16.22 crore recognised assubsidy receivable towards the same which is outstanding for a period more than threeyears.

c) Note No. 10.4 regarding the non-disclosure of cost and depreciation of assetsleased to certain Public Sector Undertaking and others.

d) Note No. 32 regarding the claim of subsidy accounted on estimated basis pendingfinal settlement of such claims.

Our report is not modified in respect of these matters.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor’s Report) Order 2016 ("theOrder") issued by the Central Government of India in terms of sub-section (11) ofsection 143 of the Act we give in the "Annexure A" a statement on thematters specified in the paragraph 3 and 4 of the Order.

2. As required by Section 143 (5) of the Act we give in "Annexure B" thedirections and subdirections issued by the Comptroller and Auditors General of India theaction taken thereon and its impact on the accounts and financial statement of theCompany.

3. Non- Compliance of the Act:

a. The Board of Directors comprises seven directors consisting of four ExecutiveDirectors (Including the Chairman cum Managing Directors); two Nominee Directors and oneIndependent Director. Section 149 of the Act requires that there should be at least onewoman Director and one third of the total number of directors should be independentdirectors. The Company does not have a woman Director and has only one IndependentDirector

b. The Audit Committee comprises three directors consisting of one Executive Directorone Independent Director and one Nominee Director. Section 177 of the Act requires thatmajority of directors of Audit Committee should be independent. The Company does not havethe required number of independent directors on its Audit Committee.

c. The Nomination and Remuneration Committee comprises three Directors of which two areNominee Directors and One Independent Director. Section 178 of the Act required thatIndependent Directors should be at least half of the total strength of Nomination andRemuneration Committee. The Company does not have the required number of IndependentDirectors on its Nomination and Remuneration Committee.

d. As per the Schedule IV (Code for Independent Directors) pursuant to Section 149(8)of the Act a separate meeting of Independent Director should be held to review theperformance of NonIndependent Chairperson and Board as a whole. A separate meeting ofIndependent Directors has not been held during the period under review.

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 bestof 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 theCompany so far as it appears from our examination of those books.

c) The Balance Sheet the Statement of Profit and Loss and the Cash Flow Statementdealt with by this Report are in agreement with the books of account.

d) In our opinion the aforesaid standalone financial statements comply with theAccounting Standards specified under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014.

e) On the basis of the written representations received from the directors as on March31 2016 and taken on record by the Board of Directors none of the directors isdisqualified as on March 31 2016 from being appointed as a director in terms of Section164 (2) of the Act.

f) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate report in "Annexure C"; and

g) With respect to the other matters to be included in the Auditor’s Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand 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 financialposition in its financial statements - Refer Note 25 to the standalone financialstatements.

ii. The Company has made provision as required under the applicable law or accountingstandards for material foreseeable losses if any on longterm contract includingderivative contracts.

iii. There is no delay during the year in transferring the amount required to beremitted to the Investor Education and Protection Fund by the Company.

For NBS & Co For Kalyaniwalla & Mistry
Chartered Accountants Chartered Accountants
Firm Regn. No. 110100W Firm Regn. No. 104607W
Devdas Bhat Sai Venkata Ramana Damarla
Partner Partner
Membership. No. 048094 Membership. No. 107017
Place: Mumbai
Dated: May 26 2016

ANNEXURE A TO THE INDEPENDENT AUDITOR’S REPORT

Referred to in in Para 1 ‘Report on Other Legal and Regulatory Requirements’in our Independent Auditors’ Report to the members of the Company on the standalonefinancial statements for the year ended March 31 2016.

Statement on Matters specified in paragraphs 3 & 4 of the Companies (Auditor’sReport) Order 2016:

i. (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets with original cost and depreciationwritten off in respect of identifiable units of assets and where such information foridentifiable units of assets is not available the records show the cost and depreciationwritten off in respect thereof as a group or class. The items of assets in respect ofwhich quantitative details are not linked with the cost or book value are of small valueacquired prior to April 1978 and are fully depreciated particularly in respect of movableitems acquired from Fertilizers Corporation of India Limited.

(b) As explained to us the Plant & Machinery have been physical verified by themanagement at reasonable intervals during the year and all other fixed assets have beenphysical verified by the management with the help of an independent outside agency. Thediscrepancies reported on such verification were not material and have been properly dealtwith in the books of account.

(c) According to the information and explanations given to us and on the basis ofexamination of the records of the company the title deeds of immovable properties areheld in the name of the Company except:

Sr.

No.

Total No. of Cases Type of Assets Gross Block as at March 31 2016 (' Crore) Net Block as at March 31 2016 (' Crore) Remarks
1 2 Free Hold Land-Thal (1848933 Sq. Mtr. of land) 1.62 1.62 The Company is in the process of transferring the title deeds.
2 1 Free Hold Land- Trombay (378321 Sq. Mtr. of land) 0.24 0.24 The Company is in the process of transferring the title deeds.

ii. In our opinion and according to the information and explanations given to usphysical verification of finished goods packing materials and raw materials inside thefactory premises has been carried out by the management at reasonable intervals and stockof stores and spare parts has been conducted by them with the help of an independentoutside agency in a phased programme so as to complete the verification of all items overa period. Finished goods and other inventory stored outside the factory premises are takenas per warehousing certificates and third party confirmation respectively. No materialdiscrepancies were noticed on physical verification and the same have been properly dealtwith in the books of account.

iii. The Company has not granted any loans secured or unsecured to companies firmslimited liability partnerships or other parties covered in the register maintained undersection 189 of the Act. Therefore the provisions of sub-clause (a) (b) and (c) ofparagraph 3(iii) of the Order are not applicable.

iv. In our opinion and according to the information and explanations given to us theCompany has not advanced any loans or made any investments or provided any guarantees orsecurity to the parties covered under section 185 of the Act. The Company has given loansmade investments in the securities of other body corporate and given guarantee within thelimit specified by section 186 of the Act and details of such transactions have beendisclosed in the standalone financial statements.

v. In our opinion and according to the information and explanations given to us theCompany has not accepted any Deposits from the public and hence the directives issued bythe Reserve Bank of India and the provisions of Sections 73 to 76 or any other relevantprovisions of the Act and the Rules framed there under are not applicable.

vi. We have broadly reviewed the books of account maintained by the Company pursuant tothe rules made by the Central Government for the maintenance of cost records under section148 (1) of the Act and are of the opinion that prima facie the prescribed accounts andrecords have been made and maintained.

vii. (a) According to the information and explanations given to us and the recordsexamined by us the Company is generally regular in depositing undisputed statutory duesincluding Provident Fund Employees’ State Insurance Income Tax Sales Tax ServiceTax Duty of Customs Duty of Excise Value Added Tax Cess and other material statutorydues with the appropriate authorities. According to the information and explanations givento us there are no arrears of outstanding statutory dues in respect of above as on thelast day of the financial year for a period of more than six months from the date theybecame payable.

(b) According to the information and explanation given to us and the records examinedby us there are no material dues of Income Tax Sales Tax Service Tax Duty of CustomsDuty of Excise and Value added tax outstanding on account of any dispute except:

(' Crore)

Sr. No. Name of the Statute Nature of Dues Amount (' Crore) Period to which the amount relates Forum where dispute is pending
1 Customs Act 1962 Demand of Customs duty and penalty (Trombay Unit) 16.35 2004-05 Central Excise Service Tax Appellate Tribunal
2 Customs Act 1962 Demand of Differential Customs Duty on import of Urea MOP & DAP (Marketing) 80.77 2009-10 Assistant Commissioner of Customs Dharamtar Alibaug
3 Customs Act 1962 Demand of Differential customs duty on import of Potash (Marketing) 0.16 2012-13 Commissioner of Customs Mangalore
4 Income Tax Act 1961 Disallowance of additional depreciation claimed 0.53 A.Y 2009-10 Income Tax Appellate Tribunal
5 Income Tax Act 1961 Disallowance of provision towards wage revision 4.85 A.Y 2007-08 Income Tax Appellate Tribunal
6 Income Tax Act 1961 Disallowance of additional depreciation claimed 5.08 A.Y 2010-11 Income Tax Appellate Tribunal
7 Income Tax Act 1961 Demand of Tax for Short Deduction / non deduction of TDS 0.21 A.Y 2009-10 to 2010-11 Commissioner of Income Tax (Appeals)
8 Sales Tax Maharashtra Disallowance / errors in calculation of set off etc. in the Assessment Order Passed 6.58 A.Y 2009-10 Joint Commissioner of Sales Tax (Appeals)
18.24 A.Y 2006-07
9 Central Excise Act 1944 Demand of Central Excise duty Interest & Penalty in respect of Naphtha procured at concessional rats used for products which are not exempted (Thai Unit) 2.67 1996-2001 Supreme Court
3.54 March 2005 to October 2005 Central Excise Tax Appellate Tribunal
18.61 November 1996 to February 2005 (Interest) Supreme Court
10 Central Excise Act 1944 Demand of Central Excise duty in respect of Low Sulphur High Stock / Furnace Oil procured at concessional rates used for other than fertilizer products (Trombay Unit) 3.66 Prior to 1997 to March 2006 Commissioner Central Excise Service Tax Appellate Tribunal
Demand of Central Excise duty in respect of Low Sulphur High Stock / Furnace Oil procured at concessional rates used for other than fertilizer products (Trombay Unit) 2.92 August 1986 to February 2000 Commissioner of Central Excise (Appeals)
Demand of Central Excise Duty in respect of Methanol Consumed in ETP (Trombay Unit) 1.45 2001 - 2006 Central Excise Service Tax Appellate Tribunal.
11 Service Tax Demand of Service Tax on supply of wagons to Central Railway 1.54 April 2008 to December 2011 Commissioner of Central Excise Customs & Service Tax
0.18 January 2012 to December 2014 Assistant Commissioner Central Excise Customs & Service Tax Appellate Tribunal .
12 Service Tax Demand of Service Tax on Handling by Transporter Service 0.01 2006-07 & 2007-08 Superintendent (S.T Special Cell) Aurangabad
13 Service Tax Demand of Service Tax on fees received for operations and maintenance of HWP (Thal Unit) 8.01 October 2006 to December 2014 Additional Commissioner Central Excise & Service Tax Mumbai
14 Service Tax Service Tax on rent on BTAL Wagons 0.14 2008-09 to June 2011 Additional Commissioner Central Excise & Service Tax Mumbai
15 Service Tax Deputation of officials to Joint Venture 0.08 2008-09 to 2013 14 Additional Commissioner Central Excise & Service Tax Mumbai

viii. According to information and explanation given to us and based on examination ofthe records the Company has not defaulted in repayment of loans or borrowings to bank.The Company does not have any dues to financial institution government or debentureholders.

ix. The Company has not raised money through initial public offer or further publicoffer (including debt instruments). In our opinion and according to the information andexplanations given to us and based on the documents and records examined by us on anoverall basis the term loans obtained by the Company were applied for the purpose forwhich the loans were obtained.

x. During the course of our examination of the books of account and records of theCompany and according to the information and explanation given to us and representationsmade by the Management no material fraud by or on the Company by its officers oremployees has been noticed or reported during the year.

xi. According to the information and explanation given to us and based on ourexamination of the records of the Company the Company has paid/provided for managerialremuneration in accordance with requisite approvals mandated by the provisions of section197 read with Schedule V to the Act.

xii. In our opinion and according to the information and explanation given to us theCompany is not a Nidhi Company. Accordingly provisions of paragraph 3(xii) of the Orderare not applicable.

xiii. According to the information and explanation given to us and based on ourexamination of the records of the Company transactions with related parties are incompliance with sections 177 and 188 of the Act where applicable and details of suchtransactions have been disclosed in the financial statements as required by the applicableaccounting standards.

xiv. According to the information and explanation given to us and based on ourexamination of the records of the Company the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year.

xv. According to the information and explanation given to us and based on ourexamination of the records of the Company the Company has not entered into non- cashtransactions with the directors or persons connected with him. Hence the provisions ofSection 192 of the Act are not applicable.

xvi. The Company is not required to be registered under Section 45-IA of the ReserveBank of India Act 1934 hence the provisions of paragraph 3 (xvi) of the Order are notapplicable.

For NBS & Co For Kalyaniwalla & Mistry
Chartered Accountants Chartered Accountants
Firm Regn. No. 110100W Firm Regn. No. 104607W
Devdas Bhat Sai Venkata Ramana Damarla
Partner Partner
Membership. No. 048094 Membership. No. 107017
Place: Mumbai
Dated: May 26 2016

ANNEXURE B TO THE INDEPENDENT AUDITOR’S REPORT

Referred to in Para 2 ‘Report on Other Legal and Regulatory Requirements’ inour Independent Auditor’s Report to the members of the Company on the standalonefinancial statements for the year ended 31st March 2016.

Report on the Directions and Sub-directions issued by the Comptroller and AuditorsGeneral of India the action taken thereon and its impact on the accounts and financialstatement of the Company under Section 143(5) of the Act:

A. Directions

1. Whether Company has clear title / lease deeds for freehold and leasehold landrespectively? If not please state the area of freehold and leasehold land for whichtitle/lease deeds are not available.

Based on the audit procedures performed by us and as per the information andexplanations given to us the details of freehold land and title deeds available/notavailable with the company are as under:-

A) Information of Freehold Land

i. TROMBAY

Location Particulars Total Area (in Sq. Mt.) Area in the name of RCF (in Sq. Mt.) Remarks
RCF -Trombay Freehold Land 3097278 2718957 As informed to us matter is being taken up with concerned authorities for reconciliation of area

ii. THAL

Location Particulars Total Area (in Sq. feet/ Sq meter/ Acre/ hectares Area in the name of RCF (in Sq. feet/ Sq meter/ Acre/hectares) Remarks*
RCF Factory & Roads Freehold Land 313-52.12 Hectares 241-49.52 Hectares As per 7/12 extract the area in the name of the Company is 253-73.70 Hectares.
Township Kihim Freehold Land 7-10.10 hectares The land is in possession of RCF. As informed Transfer of title deeds is in process.
Township - Kurul - Veshvi - Chendhare Freehold Land 83-23.71 Hectares 78-85.91 Hectares Balance 4-37.8 Hectares of land is not in name of RCF. As informed steps are being taken for the transfer of title deeds.
Railway Land Freehold Land 101-38.83 Hectares As informed request letter has been sent to concerned authorities for providing 7/12 extract for the said area.
Total Thal Freehold Land 505-24.76 Hectares 320-35.43 Hectares

iii. MARKETING/AREA OFFICES/CORPORATE

Location Particulars Area (in Sq. feet/ Sq meter/ Acre Whether company has clear title deed to the land
AHMEDNAGAR Survey No.20 II Lines Karachi wala Nagar Near Mahesh Talkies Ahmednagar Maharashtra- 414001. Freehold Land 840 Sq meters YES
LUCKNOW

TC/10 V Vibutikhand Gomtinagar Lucknow U.P.

Freehold Land 1000 Sq meters YES
DELHI OFFICE

H-9 Green Park Extension New

Delhi -110016

Freehold Land 387.06 Sq meters YES

B) Information on Leasehold land

Details of Leased land are separately available with the Company and are separatelydisclosed in the asset register.

(' Crore)

Gross Block as on 01.4.2015 Additions Deletions Gross Block as on 31.3.2016 Accumulated Depreciation (Net of deletions)

As on 31.03.2016

Carrying Amount As on 31.3.016
5.14 - - 5.14 1.42 3.72

2. Please report whether there are any cases of waiver/ write off of debts/loansinterest etc. if yes the reasons there for and the amount involved

Based on the records examined by us during the year an amount of '0.06 crore has beenwritten off towards bad debts. This is in line with the Company’s accounting policyon provision for bad and doubtful debts and write off of the same.

3. Whether proper records are maintained for inventories lying with third parties &assets received as gift from Govt. or other authorities

Based on the audit procedures performed by us and as per the information andexplanations given to us proper records are maintained for inventories lying with thirdparties and are confirmed on the basis of warehousing certificates and confirmations.

Based on the records examined by us during the year the Company has not received anyassets as gift from Government or other authorities.

B. Sub-directions

1. State the area of land under encroachment and briefly explain the steps takenby the Company to remove encroachments.

To the best of our knowledge and belief and according to the information andexplanations given to us instances of encroachment of land have been observed at Trombayunit which are as under:-

i. Approx. 5 acres of land which is in the name of RCF has been encroached since thetime of FCI. The value of the land cannot be determined exactly. RCF has approached theagencies like MMRDA for development of this land.

ii. Approx. 15Acres is under slum/encroached since 1980.Slums from other pockets wereshifted on this land and is without clear title in favour of RCF. The matter is taken upwith appropriate authorities for obtaining clear title in favour of RCF.

Both the matters are pending in Mumbai High Court for resolution. As explained to usother than the above there are no cases of encroachment of land at other locations.

2. Whether subsidy received/recoverable from Government of India has been properlyaccounted for as per claims admitted.

Based on the audit procedures performed by us and as per the information andexplanations given to us subsidy received/recoverable from Government of India has beenproperly accounted for as per claims admitted. In addition to the same for the rates yetto be notified due to escalations/ de-escalations in the cost of inputs and other costssubsidy has been accounted on estimated basis which is in line with its stated accountingpolicy of revenue recognition given in Note no.32 to the standalone financial statementsfor the year 201516.

3. Whether subsidy received during the year has been reconciled with subsidy disbursedby the Government of India.

Subsidy received during the year amounting to ' 3788.01 crore is in agreement with theamount disbursed by the Government of India.

4. (i) Whether amount of (a) bank balance (b) trade receivable (c) trade payables (d)loans and advances for which third party confirmation was not made available has beenreported.

(ii) Where such balance has been confirmed by respective parties whether it varieswidely from the amounts reflected under respective heads in the financial.

The balance confirmation letters were available in case of the balances with the banksand bank loans and the same are reconciled.

In respect of Trade Receivables as informed to us during the year 2015-16 thestatement of balances was taken from SAP system and sent to the parties for confirmationand about 80.45 % confirmation of balances from debtors has been received and no materialdifferences were noticed.

As regards balance confirmation relating to trade payables despite the Company sendingbalance confirmation letters receipt of confirmation of balances is very insignificantdespite repeated follow-up. To facilitate reconciliation and review ofbalances bycustomers and vendors on a periodic basis Company has also installed Customer and VendorPortal in its website which would enable them to view their account online. Furtherdisclosure of amounts in dispute with vendors is included under claims not acknowledged asdebts in the notes forming part of financial statements.

Balances of subsidy claim receivables and tax refunds from Government authorities aresubject to confirmation which has also been disclosed in note no. 31 of financialstatements.

5. Independent verification may be made of information/inputs furnished to Actuaryviz. number of employees average salary retirement age etc. and assumptions made by theActuary regarding the discount rate future cost increase mortality rate etc. forarriving at the provision for liability of retirement benefits viz. gratuity leaveencashment post-retirement medical benefit etc.

Based on the audit procedures performed on test check basis for the purpose ofverification of information/inputs furnished by the company to Actuary viz. number ofemployees average salary retirement age etc. and no material discrepancies were noticed.

Following are the assumptions used by the Actuary:-

Sr

No.

Particulars Rate
1 Discount Rate 7.56%
2 Attrition Rate 2.00%
3 Salary Escalation Rate 8.00%
4 Mortality Rate IALM (2006-08) Ultimate

Assumptions made by Actuary regarding Salary Escalation Rate & Attrition Rate is asadvised by the Company. Based on the audit procedure performed on test check basis on thedata given by the management and according to information and explanation given by themanagement the said assumptions appear to be reasonable.

For NBS & Co For Kalyaniwalla & Mistry
Chartered Accountants Chartered Accountants
Firm Regn. No. 110100W Firm Regn. No. 104607W
Devdas Bhat Sai Venkata Ramana Damarla
Partner Partner
Membership. No. 048094 Membership. No. 107017
Place: Mumbai
Dated: May 26 2016

ANNEXURE C TO THE INDEPENDENT AUDITOR’S REPORT

Referred to in Para 4 (f) ‘Report on Other Legal and Regulatory Requirements’in our Independent Auditor’s Report to the members of the Company on the standalonefinancial statements for the year ended March 31 2016.

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")

We have audited the internal financial controls over financial reporting of RASHTRIYACHEMICALS AND FERTILIZERS LIMITED ("the Company") as of March 31 2016 inconjunction with our audit of the financial statements of the Company for the year endedon that date.

Management’s Responsibility for Internal Financial Controls

The Company’s management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls over Financial Reporting (the"Guidance Note") issued by the Institute of Chartered Accountants of India(ICAI). These responsibilities include the design implementation and maintenance ofadequate internal financial controls that were operating effectively for ensuring theorderly and efficient conduct of its business including adherence to company’spolicies the safeguarding of its assets the prevention and detection of frauds anderrors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information as required under the Act.

Auditors’ Responsibility

Our responsibility is to express an opinion on the Company’s internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note and the Standards on Auditing issued by ICAI and deemed to beprescribed under section 143(10) of the Act to the extent applicable to an audit ofinternal financial controls both applicable to an audit of Internal Financial Controlsand both issued by the ICAI. Those Standards and the Guidance Note require that we complywith ethical requirements and plan and perform the audit to obtain reasonable assuranceabout whether adequate internal financial controls over financial reporting wasestablished and maintained and if such controls operated effectively in all materialrespects.

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness.

Our audit of internal financial controls over financial reporting included obtaining anunderstanding of internal financial controls over financial reporting assessing the riskthat a material weakness exists and testing and evaluating the design and operatingeffectiveness of internal control based on the assessed risk. The procedures selecteddepend on the auditor’s judgment including the assessment of the risks of materialmisstatement of the financial statements whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company’s internal financial controlssystem over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A Company’s internal financial control over financial reporting is a processdesigned to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles. A company’s internal financial control overfinancial reporting includes those policies and procedures that (1) pertain to themaintenance of records that in reasonable detail accurately and fairly reflect thetransactions and dispositions of the assets of the company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation of financialstatements in accordance with generally accepted accounting principles and that receiptsand expenditures of the company are being made only in accordance with authorizations ofmanagement and directors ofthe company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition use or disposition of thecompany’s assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting

Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at March 31 2016 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India"

For NBS & Co For Kalyaniwalla & Mistry
Chartered Accountants Chartered Accountants
Firm Regn. No. 110100W Firm Regn. No. 104607W
Devdas Bhat Sai Venkata Ramana Damarla
Partner Partner
Membership. No. 048094 Membership. No. 107017
Place: Mumbai
Dated: May 26 2016