NFL Auditors Report

To the Members of


National Fertilizers Limited


Report on the Standalone Financial Statements


We have audited the accompanying standalone financial statements of National Fertilizers Limited (''''the Company''''), which comprise the balance sheet as at 31st March 2016, the statement of profit and loss and the cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory information.


Management''''s Responsibility for the Standalone Financial Statements


The Company''''s 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 and presentation of these standalone financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.


Auditor''''s Responsibility


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


We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under.


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


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


We believe that the audit evidence we have obtained is sufficient and appropriate to provide 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 explanations given to us, the aforesaid standalone financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at 31st March, 2016, and its profit and its cash flows for the year ended on that date.


Emphasis of matter


Without qualifying, we draw attention to:


(a) Note No. 3 to Standalone financial statement regarding provision of proposed dividend of 30% of PAT has been made as against 30% PAT or 30% on GOI equity (whichever is higher) as directed by Ministry of Finance vide notification against which Company has applied for exemption which is pending from Department of Economic Affairs (Government of India).


(b) Note No. 48(a) to standalone financial statement regarding non availability of balance confirmation in respect of Subsidy Rs. 4629.17 crore and Capital Grant Rs. 2030.58 crore which is due for recovery from Government of India.


Report on Other Legal and Regulatory Requirements


1. As required by the Companies (Auditor''''s Report) Order, 2016 (“the Order”) issued by the Central Government of India in terms of subsection (11) of section 143 of the Act, we give in the ''''Annexure A'''', a statement on the matters specified in the paragraph 3 and 4 of the order.


2. 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;


(c) the balance sheet, the statement of profit and loss and the cash flow statement dealt with by this Report are in agreement with the books of account;


(d) in our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014;


(e) on the basis of the written representations received from the directors as on 31st March 2016 taken on record by the Board of Directors, none of the directors is disqualified as on 31st March 2016 from being appointed as a director in terms of Section 164


(2) of the Act;


(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 B”; and


(g) with respect to the other matters to be included in the Auditor''''s 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 financial statements - Refer Note 36 to the financial statements;


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


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


3. As required by Section 143(5) of the Act, we have considered the direction and sub-directions issued by the Comptroller & Auditor General of India. We give our report in the attached “Annexure C”.


ANNEXURE"A" The Annexure refer to in our Independent Auditors Report to the members of the company on the standalone financial statement for the year ended 31st March, 2016, we report that:


(i) (a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets on the basis of the available information.


(b) As explained to us, the Company has a regular programme of physical verification of its fixed assets by which all fixed assets are verified in a phased manner, which in our opinion is reasonable, having regard to the size of the Company and nature of its assets. Accordingly, the physical verification of fixed assets has been carried out by the management during the year. We are informed that discrepancies noticed on such verification were not material and have been properly dealt with in the books of account.


(c) According to the information and explanations given to us and on the basis of our examination of the Company ,the title deeds of immovable properties are held in the name of the Company except following:






























Immovable Properties



Area



Nangal Unit



2578 Acres



Bhatinda Unit



14.261 Acres



Vijaipur Unit



1250.254 Acres



Alwar



0.164 Acres



Bhopal



9707.25 Square Feet



(ii) The physical verification of the inventory has been carried out by the management in accordance with the perpetual inventory programme, at regular intervals during the year. The discrepancies noticed have been properly dealt within the books of account;


(iii) The Company has not granted any loans, secured or unsecured, to companies, firms or other parties covered in the register maintained under Section 189 of the Companies Act. Accordingly, paragraph 3(iii)(a), (b), (c) of the Order is not applicable.


(iv) In our opinion and according to the information and explanations given to us, the Company has complied with the provisions of section 185 and 186 of the Act, with respect to the loans and investments made.


(v) According to the information and explanation given to us the Company has not accepted any deposits within the provisions of sections 73 to 76 or any other relevant provisions of the Companies Act and the rules framed there under.


(vi) We have broadly reviewed the Cost Records maintained by the Company specified by Central Government under Sub Section (1) of section 148 of the Companies Act, 2013 and are of the opinion that prima facie the prescribed records have been 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) (a) According to information and explanations given to us and on the basis of our examination of the records of the Company, the


Company is generally regular in depositing, with the appropriate authorities, undisputed statutory dues including Provident Fund, Employees’ State Insurance, Income tax, Sales tax, Wealth tax, Service tax, Customs duty, Excise duty, Cess and other statutory dues.


According to the information and explanations given to us, no undisputed amounts remain payable in respect of such statutory liabilities as at 31st March, 2016 for a period of more than six months from the date they became payable.


(b) According to the information and explanations given to us, the particulars of the disputed dues as at 31.03.2016 which have not been deposited on account of matters pending in appeal before appropriate authorities are as under:


































































































Name of the Statute



Nature of dues



Amount (in Rs.) Involved ('''' Crore)



Period to which amount relates



Forum where the dispute is pending



Income Tax Act, 1961



Income Tax



70.16



AY 2006-07 to AY 2010-11



Income Tax Appellate Tribunal, New Delhi



70.65



AY 2006-07, AY 2011-12, AY 2012-13 & AY 2013-14



Commissioner of Income Tax (Appeals)



11.34



AY 2009-10



Delhi High Court



Central Excise Act, 1944



Excise Duty



1.04



FY 1997-98 to FY 1999-2000



Punjab and Haryana High Court



Customs Act 1962



Custom Duty



6.48



F.Y. 1996-97



Commissioner of Customs (Appeal)



Punjab VAT Act



VAT



0.55



FY 2006-07 to FY 2009-10



Dy. Excise and Taxation Commissioner (Appeal), Patiala



Madhya Pradesh Value Added Tax Act, 2002



VAT



0.01



FY 2008-09



Appellate Board, Commercial Tax Bhopal



M P Vidyut Shulk Adhiniyam 2012



Electricity Generation Duty &Cess



0.39



FY 2008-09 to FY 2011-12



MP High Court



Punjab Municipal Act



Property Tax



0.82



FY 2007-08 to FY 2009-10 and FY 2013-14



Municipal Council, Nangal



0.09



FY 1982-83 to FY 1990-91



Municipal Council, Nangal



MP Commercial Tax Act,1994



Purchase Tax



1.30



FY 2001-02



Commercial Tax Appellate Board, Bhopal



Haryana Local Development tax Act, 2000



Entry tax



6.72



FY 2000-01 to FY 2002-03



Joint Excise Taxation Comm. Rohtak



Entry Tax Act 1976



Entry Tax



0.05



FY 2010-11 and FY 2012-13



Appellate Board, Commercial Tax



(viii) In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to any bank or bonds/debenture holders as at the Balance Sheet date.


(ix) As per the information and explanations given to us on an overall basis the term loans taken by the company have been applied for the purposes for which they were obtained.


(x) According to the information and explanations given by the management, no fraud on or by the Company has been noticed or reported during the year.


(xi) According to the information and explanations give to us and based on our examination of the records of the Company, the Company has paid/provided for managerial remuneration in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Act.


(xii) In our opinion and according to the information and explanations given to us, the Company is not a nidhi company. Accordingly, paragraph 3(xii) of the Order is not applicable.


(xiii) According to the information and explanations given to us and based on our examination of the records of the Company, transactions with the related parties are in compliance with sections 177 and 188 of the Act where applicable and details of such transactions have been disclosed in the financial statements as required by the applicable accounting standards.


(xiv) According to the information and explanations give to us and based on our examination of the records of the Company, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year.


(xv) According to the information and explanations given to us and based on our examination of the records of the Company, the Company has not entered into non-cash transactions with directors or persons connected with him. Accordingly, paragraph 3(xv) of the Order is not applicable.


(xvi) The Company is not required to be registered under section 45-IA of the Reserve Bank of India Act 1934.


ANNEXURE"B" The Annexure refer to in our Independent Auditors Report to the members of the company on the standalone financial statement for the year ended 31st March, 2016.


Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (“the Act”)


We have audited the internal financial controls over financial reporting of National Fertilizers Limited (“the Company”) as of 31st March 2016 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date.


Management''''s Responsibility for Internal Financial Controls


The Company''''s management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India (''''ICAI'''').These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to company''''s 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 Company''''s internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls over Financial Reporting (the “Guidance Note”) and the Standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, 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 auditor''''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.


We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company''''s internal financial controls system over financial reporting.


Meaning of Internal Financial Controls over Financial Reporting


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


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


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


3. provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company''''s assets that could have a material effect on the financial statements.


Inherent Limitations of Internal Financial Controls Over Financial Reporting


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


Opinion


In our opinion, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at 31st March 2016, 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.



For CHANDIOK AND GULIANI For HDSG & Associates


Chartered Accountants Chartered Accountants


Firm’s Registration No.: 001199N Firm’s Registration No.: 002871N



B. B.Kalia Harbir Gulati


Partner Partner


Membership no.: 085772 Membership no.: 084072


New Delhi 23rd May 2016


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