INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF NILACHAL REFRACTORIES LIMITED

Report on the Financial Statements

We have audited the accompanying financial statements of NILACHAL REFRACTORIES LIMITED (the Company), which comprise the Balance Sheet as at 31st March 2018, the Statement of Profit and Loss, 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 matter 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 judgements 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 and the order under section 143(11) of the Act.

We conducted our audit in accordance with the standards on Auditing specified under Section 143(10) of the Act and other applicable authoritative pronouncements issued by the institute of Chartered Accountants of India. Those Standards and pronouncements 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 judgement, 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 qualified audit opinion on the standalone financial statements

Basis for Qualified Opinion

i. The company has made provision for gratuity and leave liability as per the provisions of the

relevant act and not as per actuarial valuation which constitutes a departure from the Accounting standards referred to in Section 133 of the Act. However, in absence of necessary information being made available to us, impact of the same on the loss for the year of the company and corresponding effect on liability cannot be ascertained and quantified.

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matters described in the Basis for Qualified Opinion paragraph, 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.

a) In the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2018

b) In the case of Statement of Profit & Loss of the loss for the year ended on that date; and

c) In the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

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 section (11) of section 143 of the Act and on the basis of such checks of the books and records of the Company as we consider appropriate and according to the information and explanations given tous, 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 purpose 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, statement of Profit & 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 as applicable except for the effects of the matters described in the basis for qualified opinion paragraph.

(e) On the basis of the written representations received from the Directors as on 31st March, 2018 taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2018 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 the Annexure "B"

(g) With respect to the other matters to the 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 litigation on its financial position in its financial statements. Refer Note 5 to the financial statements.

ii. The Company did not have any long-term contracts including derivative contracts for which they were any material foreseeable losses and

iii. There is no amount which was required to be transferred, to the investor Education and Protection Funds by the Company.

ANNEXURE "A" TO THE INDEPENDENT AUDITORS' REPORT OF NILACHAL REFRACTORIES LIMITED

The Annexure referred to in paragraph 1 under 'Report on other legal and regulatory requirements' section of our report of even date to in our independent Auditors' Report to the members of the Company on the standalone financial statements for the year ended 31st March, 2018, we report that:

(i) (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

(b) The fixed assets have been physically verified during the year by the management in accordance with a regular programme of verification which, in our opinion, provides for physical verification of all the fixed assets at reasonable intervals, According to the information and explanations given to us, no material discrepancies were noticed on such verification.

(c) According to the information and explanations given to us and the records examined by us we report that the title deed, comprising all the immovable properties of land and building which are freehold, were mortgaged with the lenders and confirmation was obtained from them during the audit of the preceding year and from the documents verified by us, it was held in the erstwhile name of the company as at the preceding Balance Sheet date in respect of immovable properties of self-constructed buildings on leasehold land which are disclosed as fixed assets in the financial statements, were mortgaged with the tenders and confirmation is obtained from them during the audit of the preceding year and from the documents verified by us, the land lease agreement was in the erstwhile name of Company, where the company is the lessee in the agreement as at the preceding Balance Sheet date.

However at the time of audit during the year under consideration, we are informed that the loans have been repaid in full and the tenders are in the process of releasing the title documents for which the documents could not be physically verified by us.

(ii) As explained to us, the inventories were physically verified during the year by the management at reasonable intervals and no material discrepancies were noticed on physical verification

(iii) The Company has not granted any loans, secured or unsecured, to companies, firms, Limited Liability Partnership or other parties covered in the register maintained under section 189 of the Companies Act, 2013.

(iv) The Company has not granted any loans, made investments or provided guarantee and hence reporting under clause (iv) of the CARO 2016 is not applicable.

(v) According to the information and explanation given to us, the Company has not accepted any deposits in terms of directives issued by the reserve Bank of India and the provisions of Section 73 to 76 or any other relevant provisions of the Act and the rules framed there under.

(vi) We are informed that the central Government has not prescribed the maintenance of cost records under section 148(1) of the Act, for any of the products dealt in by the Company

(vii) According to the information and explanations given to us in respect of statutory dues:

(a) The company has been regular in depositing undisputed statutory dues, including provident fund, employee state insurance, income-tax, sales tax, service tax, customs duty, excise duty, value added tax, cess and other material statutory dues applicable to it to the appropriate authorities. There have been few instances of delayed deposit

(b) There were no undisputed amount payable in respect of provident fund, employee state insurance, wealth tax, customs duty, excise duty, cess and other material statutory dues in arrears as on 31st March, 2018 for period of more than six months from the date they became payable. The particulars of dues of sales tax and Entry tax as at March 31, 2018 which have not been deposited on account of a dispute are as follows:

(vii) In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of loans or borrowings to financial institutions, bank and Government.

(viii) The company has not raised money by way of initial public offer or further public offer of equity shares convertible securities and debt securities hence reporting under clause (ix) of the CARO 2016 order is not applicable.

(ix) To the best of our knowledge and according to the information and explanations given to us, no fraud by the company or any fraud on the company by its officers or employees has been noticed or reported during the year.

(x) In our opinion and according to the information and the explanations given to us, the company has paid/provided managerial remuneration in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Companies Act, 2013

(xi) The company is not a Nidhi Company and hence reporting under clause (xii) of the CARO 2016 is not applicable

(xii) In our opinion and according to the information and the explanations given to us, the company is in compliance with section 188 and 177 of the Companies Act, 2013 where applicable for all transaction with the related parties and the details of related party transaction have been disclosed in the notes to the financial statements as required by the applicable accounting standards.

(xiii) In our opinion and according to the information and the explanations given to us, during the year the company has not entered into any non cash transactions with its directors or persons connected with him and hence provisions section 192 of the Companies Act, 2013 are not applicable.

(xiv) The company is not required to be registered under section 45-1 of the Reserve Bank of India Act, 1934.

ANNEXURE "B" TO THE INDEPENDENT AUDITORS' REPORT OF NILACHAL REFRACTORIES LIMITED

Report on Internal Financial Controls Over Financial Reporting 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 NILACHAL REFRACTORIES LIMITED (The Company) as of 31st March, 2018 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 the internal control stated in the Guidance Note on Audit or 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 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 of 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") issued by the Institute of Chartered Accountants of India and the Standards on Auditing prescribed under section 143(10) of the Companies Act, 2013 to the extent applicable to an audit of internal Financial Control. 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 judgement, including the assessment of the risks of material misstatement of the financial statement 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 these 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 to the best of our information and according to the explanations given to us, 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, 2018 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.