Auditor Report of Anil Special Steel Industries Ltd.

Mar 31, 2014

We have audited the accompanying financial statements of Anil Special Steel Industries Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2014, and the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management''s Responsibility for the Financial Statements

Management is responsible for the preparation of these 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 Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 ("the Act"). This responsibility includes the design, implementation and maintenance of internal control 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 financial statements based on our audit. We conducted cur audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. 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 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 control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, 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.

Basis for Qualified Opinion

a) The Company is accounting the bonus & leave pay on cash basis. The accounting policy not being in consonance with accrual method of accounting. Accordingly bonus accrued for the year Rs.1,59,038/- and leave pay accrued up to 31st March''2014 Rs.49,25,602/- as per actuarial valuation, remain un-provided for. (Refer Note No. 1(J) and 1(1)).

b) Nonpayment/provision of contribution to Gratuity fund with Life Insurance Corporation of India (up to 31st March,2014) Rs.2,66,,21,346/-. (Refer Note No. 1(1)).

c) Non ascertainment of diminution in value of unquoted investment of Rs.34,70,000 and provision required to be made. (Refer Note No.12.1).

d) The addition to Deferred Tax Asset for the year Rs. 37,67,017/- and Cumulative Rs. 1,17,78,996/- up to 31st March''2014. (Refer Note No. 13.2)

e) The company has changed its depreciation method [ Refer Note No.1 (b).(iii) & (iv) ] during the financial year 2013-14.

Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matter described in the Basis for Qualified Opinion paragraph, the aforesaid 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 March 31, 2014;

(b) In the case of the Statement of Profit and Loss, of the profit 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.

Emphasis of Matter

We draw attention to Note no. 5.1 that company is relocating its industrial undertaking from Kanakpura, Jaipur and has entered into sale agreement for sale of land & building and has taken advance amount of Rs. 1,84,73,920/-. Our opinion is not qualified in respect of this matter.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2003 ("the Order") issued by the Central Government of India in terms of sub- section (4A) of section 227 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

2. As required by section 227(3) of the Act, we report that:

a. We have 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 appears from our examination of those books;

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

d. Except for the effects of the matter described in the Basis for Qualified Opinion paragraph, in our opinion, the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement comply with the accounting standards referred to in sub-section (3C) of section 211 of the Act;

e. On the basis of written representations received from the directors as on March 31,2014, and taken on record by the Board of Directors, none of the directors are disqualified as on March 31,2014, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Act.

Annexure to the Auditors'' Report (Referred to in paragraph (3) of our report of even date)

Referred to in paragraph under the heading of "Report on other Legal & Regulatory Requirements" of our report of even date to the Members of ANIL SPECIAL STEEL INDUSTRIES LIMITED:

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

b) A major portion of the assets has been physically verified by the Management in accordance with a phased programme of verification adopted by the Company. In our opinion, the frequency of verification is reasonable having regard to the size of the Company and the nature of its assets. To the best of our knowledge, no material discrepancies have been noticed on such verification.

c) There was substantial disposal of fixed assets during the year (refer. Note No.11.3 ) The company is relocating its running industrial undertaking (Unit-1 mfg. Fiat Rolled Products division) from Kanakpura, Jaipur and entered into sale agreement and has received an advance of Rs.1,84,73,920/- for sale of land & building.

(ii) a) The inventory of finished goods and work in progress and raw materials at works have been physically verified during the year by the Management at reasonable intervals. In respect of stores and spare parts and stocks at branches, the Company has a programme of verifica -tion of stocks at the end of year.

b) In our opinion and according to the information and explanations given to us, 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 information and explanations given to us, the Company is maintaining proper records of its inventories. The discrepancies noticed on verification between the physical stocks and the book records were not material and have been properly dealt with in the Books of Accounts.

(iii) (a) In our opinion and according to information and explanation given to us, the Company has not granted any loan secured or unsecured to the Companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956 during the year, hence, clause (b),(c),(d) of the order is not applicable to the company.

(e) In our opinion and according to information and explanations given to us, the Company has taken unsecured loans from one party covered in the register maintained under section 301 of the Companies Act, 1956. The maximum amount outstanding during the year was Rs.3,15,49,768/- and year ended balance is Rs. nil.

(f) The terms on which such loan is taken, are not prima facie prejudicial to the interest of the Company as these are interest free.

(g) The repayment of principal is being done as per stipulation.

(iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control procedure commensurate with the size of the Company and the nature of its business for purchases of inventory, fixed assets and sale of goods and services. During the course of our audit, we have not observed major weakness in internal control system.

(v) a) To the best of our knowledge and belief and according to the information and explanations given to us, we are of the opinion that the contract or arrangements that need to be entered into the register maintained under Section 301 of the Companies Act, 1956 have been so entered, b) In our opinion and according to the information and explanation given to us, there were no transactions made in pursuance of contracts or arrangements entered in the registers maintained under Section 301 and exceeding the value of five lakh rupees in respect of any party during the year.

(vi) As per explanation given to us, the company has availed temporary interest free unsecured loans from the related parties, bodies corporate and others to maintain margins required by the bankers/ Financial Institutions. In our opinion the company is yet to comply with the provisions of section 58 A of the Companies Act, 1956 and Rules made thereunder.

(vii) In our opinion, the Company is having internal audit system; however same need to be strengthened so as to be commensurate with the size and nature of its business.

(viii) As per information given to us, the company has maintained cost records, as prescribed under section 209(1 )(d) of the Companies Act, 1956, as prescribed by the Central Government. Flowever we have not made detailed examination of such records.

(ix) a) The Company is generally regular in depositing undisputed statutory dues including Provident Fund,

Investor Education and Protection Fund, Employee State Insurance, Income tax, Sales tax, Wealth tax, Service tax, Custom duty and other statutory dues with the appropriate authorities to the extent applicable, except the amount towards Provident Fund of Rs. 38,58,731/- which is outstanding for more than 6 months as at the end of financial year.

b) According to the records of the Company, there are no dues of Income Tax, Wealth Tax, Custom Duty, Excise Duty, Sales Tax and Service Tax which have not been deposited on account of any dispute, other than the following.

Name of the Nature of Amount Forum where dues Statute thedispute is pending

The Central Sales tax & penalty 1985-86 6,13,340/- Pending with Sales Tax Act, Tax Board 1956 The Central Sales tax & penalty 1986-87 4,38,845/- Pending with Sales Tax Act, Tax Board 1956 The Central Export Benefits claim 12,21,097/- Pending with Excise Act, 2005-06 CESTAT, Delhi 1944

The Central Duty demand on insurance 89,600/- Pending with Excise Act, claim of Gear Box 2001-02 CESTAT, Delhi 1944

The Central Duty on stock 2012-13 30,08,388/- Pending with Excise Act, Excise Deptt. 1944 Excise

However, the company has paid Rs.10,52,185/- against the demand of Central Sales Tax and Rs. 30,08,388/-

against excise duty on stock till 31st March 2014.

(x) The Company has no accumulated losses as on 31st March 2014. The Company has not incurred any cash losses during the financial year and in the immediately preceding financial year.

(xi) In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to Banks as on 31st March 2014.

(xii) According to 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. Therefore, the provisions of clause 4(xii) of the Companies (Auditor''s Report) Order, 2003 are not applicable to the Company.

(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 Companies (Auditor''s Report) Order, 2003 are not applicable to the Company.

(xiv) The Company has maintained proper records of the transactions and contracts in respect of dealing in mutual funds and timely entries have been made there in. All the investments have been held by the company in its own name. As informed to us the Company is not dealing/trading in shares, debentures and other investments.

(xv) In our opinion, the Company has not given guarantees for loans taken by others.

(xvi) As per explanation given to us the Company has not raised new term loans during the year.

(xvii) According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, considering the effect of current maturities of long term borrowings we report that no funds raised on short-term basis have been used for long-term assets.

(xviii) According to the information and explanations given to us, the company has not made any preferential allotment of shares during the year.

(xix) The company has not issued any debentures during the year.

(xx) During the year covered by our audit report, the Company has not raised any money by public issues.

(xxi) To the best of our knowledge and belief and according to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the course of our audit.

For Bansal R, Kumar & Associates Chartered Accountants FRN-08186N

Sd/- (Sanjay Agrawal) Partner Membership No. 089796

Place: Jaipur Date: 14th June, 2014

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Mar 31, 2012

1. We have audited the attached Balance Sheet of M/S. ANIL SPECIAL STEEL INDUSTRIES LIMITED as at 31st March, 2012 and also the Statement of Profit and Loss for the year ended on that date and the Cash Flow Statement for the year 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 Auditing Standards generally accepted in India. These standards require hat we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit include;; 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 issued by the Central Government of India in terms of sub-section (4A) 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 to the extent applicable.

4. Further to our comments in the Annexure referred to in paragraph (3) above:

(a) We have obtained all the information and explanations, which to the test of our knowledge and belief wore necessary for the purposes of our audit;

(b) In cur 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.

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

(d) In our opinion, the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956 except otherwise stated.

(e) On the basis of written representations received from the directors, as on 31st March 2012 and taken on record by the Board of Directors, we report that none of the directors are disqualified as on 31st March, 2012 from being appointed as a director in terms of clause (g) of sub section (1) of Section 274 of the Companies Act, 1956;

(f) In our opinion, and to the best of our information and according to the explanations given to us, the said accounts read together with Notes on Financial Statements give the information required by the Companies Act, 1956 in the manner so required and subject to

(i) The Company's accounting the bonus & leave pay on cash basis. The accounting policy not being in consonance with accrual method of accounting. Accordingly bonus accrued for the year Rs. 7,50,711/- and leave pay accrued up to 31st March'2012 Rs. 42.53,585/- as per actuarial valuation, remain un-provided for. (Refer Note No. 1(J) and 1(I)).

(ii) Non payment/provision of contribution to Gratuity fund with Life Insurance Corporation of India (up to 31st March, 2012) Rs. 2,34,02,604/-. (Refer Note No. 1(I))

(iii) Non ascertainment of the value of unquoted investments of Rs. 34,30,000/- resulting into diminution in value of investment and provision required to be made. Refer Note No/12.1).

(iv) Investment of Rs. 8,55.000/- on account of Life Insurance Policy taken in favour of Managing Director of the Company. (Refer Note No. 12.2)

(v) Non reversal of Deferred Tax Asset for the year Rs. 38,05,027/- and Cumulative Rs. 139,02,133/- up to 31st March'2012. (Refer Note No. 13.2) give a true and fair view in conformity with the accounting principles generally accepted in India:

i. in the case of Balance Sheet, of the state of affairs of the Company as at 31st March, 2012.

ii. in the case of the Statement of Profit and Loss, of the profit of the Company for the year ended on that date; and

iii. in the case of the Cash Flow Statement, of the cash flows for the year ended on that date

Annexure to the Auditors' Report

(Referred to in paragraph (3) of our report of even date)

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

b) A major portion of the assets has been physically verified by the Management in accordance with a phased programme of verification adopted by the Company. In our opinion, the frequency of verification is reasonable having regard to the size of the Company and the nature of its assets. To the best of our know edge, no material discrepancies have been noticed on such verification.

c) There was no substantial disposal of fixed assets during the year, which affect the going concern status of the Company.

(ii) a) The inventory of finished goods and work in progress and raw materials at works have been physically verified during the year by the Management at reasonable intervals. In respect of stores and spare parts and stocks at branches, the Company has a programme of verification of stocks at the end of year.

b) In our opinion and according to the information and explanations given to us, 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 information and explanations given to us, the Company is maintaining proper records of its inventories. The discrepancies noticed on verification between the physical stocks and the book records were not material and have been properly dealt with in the Books of Accounts.

(iii) a) In our opinion and according to information and explanation given to us, the Company has not granted any loan secured or unsecured to the Companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956 during the year, hence, clause (b), (c), (d) of the order is not applicable to the company.

(e) In our opinion and according to information and explanations given to us, the Company has taken unsecured/secured loans from one party covered in the register maintained under section 301 of the Companies Act, 1956. The maximum outstanding during the year was Rs. 5,69,39,265/- and year ended balance is Rs. 5,43,15,828/-.

(f) The terms on which such loan is taken, are not prima facie prejudicial to the interest of the Company as these are interest free.

(g) The repayment of principal is being done as per stipulation.

(iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control procedure commensurate with the size of the Company and the nature of its business for purchases of inventory, fixed assets and sale of goods and services. During the course of our audit, we have not observed major weaknesses in internal control systems.

(v) a) To the best of our knowledge and belief and according to the information and explanations given to us, we are of the opinion that the contract or arrangements that need to be entered into the register maintained under Section 301 of the Companies Act, 1956 have been so entered.

b) In our opinion and according to the information and explanation given to us, there were no transactions made in pursuance of contracts or arrangements entered in the registers maintained under Section 301 and exceeding the value of five lakh rupees in respect of any party during the year.

(vi) As per explanation given to us, the company has availed temporary interest free unsecured loans from the related parties, bodies corporate and others to maintain margins required by the bankers/Financial Institutions.

In our opinion the company has yet to comply with the provisions of section 58 A of the Companies Act, 1956 and Rules made thereunder

(vii) In our opinion, the Company is having internal audit system, however same need to be strengthened so as to be commensurate with the size and nature of its business.

(viii) As per information given to us, the company has maintained cost records, as prescribed under section 209(1)(d) of the Companies Act, 1956, as prescribed by the Central Government. However we have not made detailed examination of such records.

(ix) a) The Company is generally regular in depositing undisputed statutory dues including Investor Education and Protection Fund, Income tax, Sales tax, Wealth tax, Service tax, Custom duty and other statutory dues with the appropriate authorities to the extent applicable. According to the information and explanations given to us, there are no undisputed statutory dues outstanding as at last day of the financial year concerned for a period of six months from the date these became payable.

b) According to the records of the Company, there are no dues of Income Tax, Wealth Tax, Custom Duty, Excise Duty, Sales Tax and Service Tax which have not been deposited on account of any dispute, other than the following.

Name of the Statute Nature of the dues

The Central Sales Tax Act, 1956 Sales tax & penalty 1985-86

The Central Sales Tax Act, 1956 Sales tax & penalty 1986-87

The Central Excise Act, 1944 Export Benefits claim 2005-06

The Central Excise Act, 1944 Duty demand on insurance claim of Gear Box 2001-02



Name of the Statute Amount Forum where dispute is pending

The Central Sales Tax Act, 1956 6,13,340/- Pending with Tax Board

The Central Sales Tax Act, 1956 4,38,845/- Pending with Tax Board

The Central Excise Act, 1944 12,21,097/- Pending with CESTAT, Delhi

The Central Excise Act, 1944 89,600/- Pending with CESTAT, Delhi

However, the company has paid Rs. 10,52,185/- against the demand of Central Sales Tax

(x) The Company has no accumulated losses as on 31st March 2012. The Company has not incurred any cash losses during the financial year and in the immediately preceding financial year.

(xi) In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to Banks as on 31st March 2012.

(xii) According to 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.

Therefore, the provisions of clause 4(xii) of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company,

(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 Companies (Auditor's Report) Order, 2003 are not applicable to the Company.

(xiv) In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company.

(xv) In our opinion, the Company has not given guarantees for loans taken by others,

(xvi) As per explanation given to us the Company has raised new term loans during the year, As per information and explanations given to us, the same has been used for the purpose for which they were raised.

(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 no funds raised on short-term basis have been used for long-term assets.

(xviii) According to the information and explanations given to us, the company has converted Share Warrants into Equity Shares which were allotted on preferential basis to parties and Companies covered in the Register maintained under Sec. 301 of the Companies Act, 1956. In our opinion, the price at which Share Warrants had been issued is not prejudicial to the interest of the company.

(xix) The company has not issued any debentures during the year.

(xx) During the year covered by our audit report, the Company has not raised any money by public issues.

(xxi) To the best of our knowledge and belief and according to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the course of our audit.

For S. S. Surana & Co. Chartered Accountants FRN-001079C

Sd/-

(R. N. Goyal) Partner Membership No. 70331

Place: Jaipur Date: 29th May, 2012

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Mar 31, 2011

1. We have audited the attached Balance Sheet of M/s ANIL SPECIAL STEEL INDUSTRIES LIMITED as at 31st March 2011 and also the Profit and Loss Account for the year ended on that date and the Cash Flow Statement for the year ended on that date. 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 Auditing Standards generally accepted in India. These 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 issued by the Central Government of India in terms of sub-section (4A) 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 to the extent applicable.

4. Further to our comments in the Annexure referred to in paragraph (3) above:

(a) 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;

(b) 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.

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

(d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956 except otherwise stated.

(e) On the basis of written representations received from the directors, as on 31st1 March 2011 and taken on record by the Board of Directors, we report that none of the directors are disqualified as on 31st March 2011 from being appointed as a director in terms of clause (g) of sub section (1) of Section 274 of the Companies Act, 1956;

' (f) In our opinion, and to the best of our information and according to the explanations given to us, the said accounts read together with Notes of Accounts give the information required by the Companies Act, 1956 in the manner so required and subject to

(i) The Company is accounting the bonus & leave pay on cash basis, accordingly a sum of Rs.25.06 lacs on account of bonus and Rs.14.88 lacs on account of leave pay, paid during the year has been charged to revenue. The accounting policy not being in consonance with accrual method of accounting. Accordingly bonus accrued for the year Rs. 16.99 lacs and leave pay accrued up to 31st March'2011 Rs.42.93 lacs as per actuarial valuation, remain un-provided for. (Refer Note No. 10) & 2(m) of Schedule 19)

(ii) Non payment/provision of contribution to Gratuity fund with Life Insurance Corporation of India (Refer Note No. 1(i) of Schedule 19) for earlier years Rs. 231.53 lacs.For current year Rs.18.98 lacs has been provided for on account of Gratuity.

(iii) Investment of Rs.8.55 Lacs on account of Life Insurance Policy taken in favour of Managing Director of the Company.(Refer Note No.2(j) of Schedule 19)

(iv) Non provision of income tax amounting to Rs.60.72 lacs relying upon the legal opinion. (Refer Note No.2(l) of Schedule 19)

(v) Non ascertainment of the value of unquoted investments of Rs.34.70 lacs resulting into diminution in value of investment and provision required to be made. give a true and fair view in conformity with the accounting principles generally accepted in India:

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

ii. in the case of the Profit and Loss Account, of the profit of the Company for the year ended on that date; and

iii. in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

Annexure to the Auditors' Report

(Referred to in paragraph (3) of our report of even date)

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

b) A major portion of the assets has been physically verified by the Management in accordance with a phased programme of verification adopted by the Company. In our opinion, the frequency of verification is reasonable having regard to the size of the Company and the nature of its assets. To the best of our knowledge, no material discrepancies have been noticed on such verification.

c) There was no substantial disposal of fixed assets during the year, which affect the going concern status of the Company.

(ii) a) The inventory of finished and semi-finished goods and raw materials at works have been physically verified during the year by the Management. In respect of stores and spare parts and stocks at branches, the Company has a programme of verification of stocks at the end of year.

b) In our opinion and according to the information and explanations given to us, 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 information and 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 were not material and have been properly dealt with in the Books of Accounts.

(iii) (a) In our opinion and according to information and explanation given to us, the Company has not granted any loan secured or unsecured to the Companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956 during the year, hence, clause (b),(c),(d) of the order is not applicable to the company. (e) In our opinion and according to information and explanations given to us, the Company has taken unsecured/secured loans from one party covered in the register maintained under section 301 of the Companies Act, 1956 during the year. The maximum outstanding during the year was Rs. 81.18 Lacs and year ended balance is Rs.70.68 Lacs the terms of which are not prima facie prejudicial to the interest of the Company as these are interest free.

(iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control procedure commensurate with the size of the Company and the nature of its business for purchases of inventory, fixed assets and sale of goods and services. During the course of our audit, we have not observed major weaknesses in internal controls in respect of these areas. (v) a) To the best of our knowledge and belief and according to the information and explanations given to us, we are of the opinion that the contract or arrangements that need to be entered into the register maintained under Section 301 of the Companies Act, 1956 have been so entered. b) In our opinion and according to the information and explanation given to us, there were no transactions. made in pursuance of contracts or arrangements entered in the registers maintained under Section 301 and exceeding the value of five lakh rupees in respect of any party during the year.

(vi) As per explanation given to us, the company has availed temporary interest free unsecured loans from the director and their associates to maintain margins required by the bankers. The other borrowings include the security deposits from the employees. In our opinion the company has yet to comply with the provisions of section 58 A of the Companies Act, 1956 and Rules made thereunder.

(vii) In our opinion, the Company is having internal audit system commensurate with the size and nature of its business.

(viii) As per information given to us , the company has maintained cost records, as prescribed under section 209(1 Xd) of the Companies Act, 1956, as prescribed by the Central Government. However we have not made detailed examination of such records.

(ix) a.) The Company is generally regular (except delay in case of PF, ESI, TDS/TCS, State Entry Tax) in depositing undisputed statutory dues including Investor Education and Protection Fund, Income tax, Sales tax, Wealth tax, Service tax. Custom duty and other statutory dues with the appropriate authorities to the extent applicable. There are no statutory dues as at last day of the financial year concerned for a period of six months from the date they became payable.

b.) According to the records of the Company, there are no dues of Income Tax, Wealth Tax, Custom Duty, Excise Duty, Sales Tax and Service Tax which have not been deposited on account of any dispute, other than the following against which Rs. 10.52 Lacs have been deposited with Commercial Tax Office.

Name of the statute Nature of the dues Amount Forum where (Rs. in Lacs) dispute is pending

The Central Sales Tax Act, 1956 Branch Transfer 1985-86 6.13 DC (Appeal) Jaipur IV

The Central Sales Tax Act, 1956 Branch Transfer 1986-87 4.39 DC (Appeal) Jaipur IV

The Central Excise Act, 1944 Export Benefits claim 2005-06 12.21 Pending with CESTAT, Delhi

The Central Excise Act, 1944 Duty demand on insurance claim of Gear Box 2001-02 0.90 CESTAT, Delhi

The Central Excise Act, 1944 Diff. Duty demand on Sale of Commissioner (Appeals), Circular Saw Plant 2006-07 4.67 Jaipur

(x) The Company has no accumulated losses as on 31st March 2011. The Company has not incurred any cash losses during the financial year and in the immediately preceding financial year.

(xi) In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to Banks as on 31st March 2011.

(xii) According to 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. Therefore, the provisions of clause 4(xii) of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company.

(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 Companies (Auditor's Report) Order, 2003 are not applicable to the Company.

(xiv) In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company.

(xv) in our opinion, the Company has not given guarantees for loans taken by others.

(xvi) As per explanation given to us the Company has not raised new term loans during the year, except hire purchase finance of Vehicles/Equipments.

(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 no funds raised on short-term basis have been used for long-term assets.

(xviii) According to the information and explanations given to us, the company has made preferential allotment of Share Warrants to parties and Companies covered in the Register maintained under Sec.301 of the Companies Act 1956. In our opinion, the price at which Share Warrants have been issued is not prejudicial to the interest of the company.

(xix) The company has not issued any debentures during the year.

(xx) During the year covered by our audit report, the Company has not raised any money by public issues.

(xxi) To the best of our knowledge and belief and according to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the course of our audit.

For S.S.Surana & Co.

Chartered Accountants

Sd/-

(R.N Goyal) Partner

Membership No. 70331

FR No. 001079C

Place: Jaipur

Date: 30th April, 2011