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Dharamsi Morarji Chemicals Co Ltd			(Industry : Fertilizers)

BSE Code:	506405	NSE Symbol:	DHARAMORAR	P/E (TTM):	0
ISIN Demat:	INE505A01010	Div & Yield %:	0	EPS (TTM) ( Cr.) :	0
Book Value ( Cr.):	-19.29	Market Cap ( Cr.):	17.05052	Face Value ( Cr.) :	10

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AUDITORS

The Members of

The Dharamsi Morarji Chemical Company Limited

Report on the Accounts for the nine months period ended March 31 st, 2011, in compliance with section 227(2) of the Companies Act, 1956.

1) We have audited the attached Balance Sheet of The Dharamsi Morarji Chemical Company Limited, as at March 31, 2011 and also the Profit and Loss Account and the Cash Flow Statement for the nine months period ("the period") ended on that date annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

2) We conducted our audit in accordance with the auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3) As required by the Companies (Auditor's Report) Order, 2003, as amended by the Companies (Auditor's Report) (Amendment) Order, 2004, issued by the Central Government of India in terms of sub-section (4-A) of section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4) Further to our comments in the Annexure referred to in paragraph 3 above, we report that:

(i) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit.

(ii) In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books.

(iii) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account;

(iv) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt by this report comply with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956.

(v) On the basis of written representations received from the directors as on March 31, 2011 and taken on record by the Board of Directors, we report that none of the directors of the Company are disqualified as on March 31, 2011 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956;

(vi) Attention is invited to Note No.22, regarding preparation of accounts on a 'Going Concern' basis despite continued losses and erosion of total net worth of the Company, in view of the management's perceptions and reasons detailed therein.

(vii) The Company had recognized net deferred tax asset in earlier years aggregating to Rs.2654.15 lacs till 31^st March, 2009 considering unabsorbed loss up to 31^st March, 2008 and unabsorbed depreciation up to 31^st March, 2009. For the subsequent financial period, further net deferred tax asset has not been recognized in view of management's perceptions and reason detailed in Note No. 16 (b). We are not in a position to opine on the net deferred tax asset recognized till date as regards its ultimate realization since the virtual certainty of the available sufficient future taxable income, as required by Accounting Standard 22 i.e. 'Accounting for taxes on income' notified pursuant to Companies (Accounting Standards) Rules, 2006, could not be substantiated.

Had the Company not recognized the said net deferred tax asset aggregating to Rs.2654.15 Lacs, the Accumulated Losses as at the end of the period would have been higher by Rs.2654.15 Lacs.

(viii) During the period, consequent to the negotiated settlements with the secured/unsecured lenders of the Company, waived dues representing only the Principal amount of borrowings aggregating to Rs.3362.76 Lacs have been credited directly to the 'Capital Reserve' of the Company for the reasons detailed in Note No. 14, instead of crediting the same to the Profit and Loss Account of the period, as per the treatment recommended by the Expert Advisory Committee of the Institute of Chartered Accountants of India, in respect of a similar case.

Had this been credited to the Profit & Loss Account of the period, the Loss for the period would have been lower by Rs.3362.76 Lacs and accumulated losses as at the end of the period would have been lower by a like amount.

(ix) Had the impact of matters stated at (vii) and (viii) been considered, Loss for the period ended 31" March, 2011 of Rs.479.53 Lacs would have been converted into Profit for the period ended 31^st March, 2011 of Rs.2883.23 Lacs and accumulated losses as at 31^st March, 2011 of Rs.9357.42 Lacs would have been Rs.8648.81 Lacs.

(x) Subject to Clause No.(vii) and (viii)above, in our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

a. in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2011;

b. in the case of the Profit and Loss Account, of the Loss for the period ended on that date; and

c. in the case of the Cash Flow Statement, of the cash flow for the period ended on that date.

	For K. S. Aiyar & Co.
	Chartered Accountants
	FRN: 100186W
	Raghuvlr M. Aiyar
	Partner
Mumbai, 30th May, 2011	Membership No. 38128

ANNEXURE TO THE AUDITORS' REPORT

(Referred to in paragraph 3 of our report of even date on the Accounts for the nine months period ended March 31, 2011, of The Dharamsi Morarji Chemical Company Limited)

(i) (a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets. However, in the case of some assets individual records with quantitative details and values are to be segregated, updated and reconciled.

(b) A substantial portion of the fixed assets has been physically verified by the management during the period and in our opinion, the frequency of verification is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification.

(c) The fixed assets disposed off during the period were not substantial. According to the information and explanations given to us, we are of the opinion that the disposal of the fixed assets has not affected the going concern status of the Company.

(ii) (a) The inventories have been physically verified during the period by the management. In our opinion, the frequency of verification is reasonable.

(b) The procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) In our opinion and according to the explanations given to us, the Company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book records have been properly dealt with in the books of account.

(iii) (a) According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured to the companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly sub clause (b), (c) and (d) are not applicable.

(b) The Company has taken interest free loan amounting to Rs. 1715.43 Lacs from a director's of the Company and inter-corporate deposits of Rs.896.80 Lacs from four parties listed in the register maintained under section 301 of the Companies Act, 1956.

(c) In our opinion and according to the information and explanations given to us, the terms and conditions of the unsecured loans taken were prima facie not prejudicial to the interest of the Company.

(d) According to the information and explanations given to us the repayment of the principal amounts are as stipulated.

(iv) In our opinion and according to the information and explanatioas given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchase of inventory, fixed assets and with regard to the sale of goods and services. However, there is scope to strengthen the internal controls at operational level through proper implementation. During the course of our audit no major weakness has been noticed in the internal controls.

(v) (a) In our opinion and according to the information and explanations given to us, the particulars of contracts or arrangements referred to in Section 301 of Companies Act, 1956 have so been entered in register required to be maintained under that section.

(b) In our opinion and according to the information and explanations given to us, these contracts or arrangements have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

(vi) In our opinion and according to the information and explanations given to us, the Company has not complied with certain provisions of Sections 58A and 58AA or any other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 with regard to the deposits accepted from the public including non-filing of returns of fixed deposits etc. As informed to us, no order has been passed by the Company Law Board or National Law Tribunal or Reserve Bank of India or any other Court or any other Tribunal in contravention of the aforesaid provisions and/or rules by the Company.

(vii) In our opinion, the Company has an internal audit system commensurate with the size and nature of its business, however, the scope and coverage of the same needs to be increased.

(viii) We have broadly reviewed the books of account maintained by the Company which have been made pursuant to the Rules made by the Central Government for the maintenance of cost records under Section 209 (1 )(d) of the Companies Act, 1956, in respect of Sulphuric Acid, Single Super Phosphate (Fertilizer) and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the same.

(ix) (a) According to the records of the Company, the Company is not regular in depositing with appropriate authorities undisputed statutory dues including Customs Duty and Wealth Tax, Provident Fund, Investor Education Protection Fund, Employees' State Insurance, Income Tax, Sales Tax, Excise Duty, Service Tax, Cess and other statutory dues applicable to it. Based on our audit procedures and according to the information and explanations given to us, the following undisputed statutory dues were outstanding as at March 31,2011 for a period of more than six months from the date they became payable.

Nature of Dues	Period to which Amount relates	Due Dates	Amount (Rs. In Lacs)
Service Tax/Interest thereon	2005-06	Various	0.19
	2006-07	Various	45.51
	2007-08	Various	33.31
	2008-09	Various	3.53
		Total	82.54
Professional Tax	2006-07	Various	11.18
	2007-08	Various	10.99
	2008-09	Various	0.99
	2009-10	Various	0.55
	2010-11	Various	0.65
		Total	24.36
VAT and CST		Various	8.10
PF,FPF,EDLI, Admin Charges. ESIC etc		Various	0.18
Tax deducted at source on:
Salary	2010-11	Various	10.36
Contractors	2010-11	Various	0.74
Prof. Fees	2010-11	Various	3.07
Interest	2010-11	Various	2.33
Brokerage	2010-11	Various	1.58
Non resident	2010-11	Various	0.04
		Total	18.12
IEPF-Unclaimed divedend	Cannot be Ascertained	Cannot be Ascertained	10.63
IEPF-Unclaimed Interest on FD/Debentures	Cannot be Ascertained	Cannot be Ascertained	5.29
IEPF-Unclaimed Fixed Deposits	Cannot be Ascertained	Cannot be Ascertained	19.83
Sales Tax Loans			221.90

(ix) (b) According to the records of the Company, Income Tax, Sales Tax, Wealth Tax, Customs Duty, Excise Duty, Service Tax and Cess which have not been deposited on account of dispute are given below:

Name of the Statute	Nature of Dues	Forum where dispute is Pending	Period to which relate	Amount (Rs in Lacs)
Central Excise Act	Duty/I nterest/Penaity	Asst.Commissioner	June 1999 to August 1999	2.29
	Duty/I nterest/Penaity	Asst.Commissioner	Sept 1999 to Dec 1999	1.81
	Duty/lnterest/Penatty	Asst.Commissioner	Jan 2000 to June 2000	3.04
	Duty/lnterest/Penalty	Asst.Commissioner	July 1996 to May 1999	4.03
	Duty/Interest/Penalty	Asst. Commissioner	July 2000 to May 2001	2.68
	Duty/Interest/Penalty	Asst.Commissioner	Various	24.48
	Duty/lnterest/Penalty	Asst.Commissioner	Various	0.57
	Duty/lnterest/Penalty	Asst.Commissioner	August 2003 to May 2004	1.18
	Duty on captive consumption	Asst.Commissioner	Various	0.80
	Alleged undervaluation of SA	CESTAT	Various	9.76
	Cenvat Credit on CHA related services	Deputy Commissioner	April 2010 to March 2011	2.93
			Total	53.57
Sales Tax Act	Tax/I nterest/Penaity	Appelate Tribunal	1992-93	6.91
			1993-94	4.20
			Total	11.11
Entry Tax	Tax/Interest	High Court		4.47

(x) The accumulated losses of the Company are more than fifty percent of the Net Worth of the Company as at the end of the financial period, and it has not incurred cash loss during the current financial period, but it had incurred cash loss during the immediately preceding financial perdiod.

(xi) Company had defaulted in repayment of Sales Tax Loans for which rescheduling has been sought by the Company.

(xii) Based on our examination of the records and the information and explanations given to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

(xiii) In our opinion, the Company is not a chit fund or a nidhi/mutual benefit fund/society. Therefore, the provisions of clause 4(xiii) of the Order are not applicable to the Company.

(xiv) In our opinion and according to the information and explanations given to us, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly the provisions of clause 4 (xiv) of the Order are not applicable to the Company.

(xv) The Company has not given any guarantee for loans taken by others from bank or financial institutions.

(xvi) The term loans outstanding in the books of the Company as on March 31,2011 have been taken and utilized in earlier accounting periods, including working capital term loans, which have been converted from working capital fund based Kmits.

(xvii) According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, we report that the funds amounting to Rs.4255.26 lacs raised on short-term basis have been used for long-term purposes.

(xviii) The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the companies Act, 1956.

(xix) The Company has not issued any debentures during the period.

(xx) The Company has not raised money by public issue during the period.

(xxi) Based upon the audit procedures performed for the purpose of reporting true and fair view of the financial statements and as per the information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.

	For K. S. Aiyar & Co.
	Chartered Accountants
	FRN: 100186W
	RAGHUVIR M. AIYAR
	Partner
Mumbai, 30th May, 2011.	Membership No. 38128