We have determined the matters described below to be the key audit matters to be communicated in our report.
Key audit matters
How our audit addressed the key audit matter
The Urea Subsidy Income is recognized and measured by the Company in accordance with notification circular/ policies issued by the Department of Fertilizers, Government of India.
During the year ended March 31, 2026, the Company has recognized Urea Subsidy Income of ₹ 1,689.59 crores and has outstanding Urea subsidy receivables of ₹ 438.31 crores.
The measurement of Urea Subsidy Income involves application of relevant regulatory pronouncements and notifications, understanding of applicable energy norms, and management estimates judgements including in respect of escalation / de-escalation in the price of the inputs, etc. for the year. The recognised subsidy income may deviate on account of revision / changes in such interpretation, estimates and judgements, arising from notification by the Department of Fertilizers.
Accordingly, recognition and measurement of subsidy income is determined to be a key audit matter for our audit of standalone financial statements.
Our audit procedures included the following:
Assessed the Company’s revenue recognition policy for Urea Subsidy Income.
Understood, evaluated and tested, on a sample basis, the design and operating effectiveness of key internal controls over recognition and measurement of Urea Subsidy Income.
Reviewed the relevant regulatory pronouncement in respect of Urea Subsidy Income and verified, on a sample basis, the claims filed by the Company along-with underlying accounting evidence in respect of such income.
Tested calculations for Urea Subsidy Income and reviewed estimates for escalation / de-escalation by comparing with actual production cost relevant for measurement of subsidy amount including final adjustment related to earlier years.
Reviewed follow-ups made by the Company with the Department of Fertilizers, Government of India and management assessment of recoverability of aged balances.
Tested the collections made during the year as well as subsequent period against such subsidy income recognized by the Company.
Assessed the appropriateness of disclosures in the Standalone financial statements in respect of Urea Subsidy Income.
The Company has total inventory of ₹ 1,018.34 crores (net of provision for excess inventory of stores and spares aggregating to Rs. 43.74 crores) which comprises of raw materials ₹ 360.86 crores, work-inprogress
65.47 crores, traded goods ₹ 2.19 crores and stores and spares ₹ 527.16 crores (including coal inventory of ₹ 39.20 crores) as at March 31,2026.
The Company has created the provision of ₹ 43.74 crores for excess inventory of stores and spares based on physical verification and on evaluation of its usability including for aged items.
Our audit procedures included the following:
Reviewed the management policy for physical verification and the documents related to management’s physical count procedure actually followed during the year.
Understood the management process for assessment of value in use/ net realisable value of various class of inventories and making provision for excess inventory.
Reviewed the management’s judgement applied in estimating the value of excess inventory for stores th
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