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Auditor Report of Balasore Alloys Ltd.

Mar 31, 2018

Report on the Standalone Financial Statements

We have audited the accompanying standalone financial statements of Balasore Alloys Limited (âthe Companyâ), which comprise the Balance Sheet as at 31^st March, 2018, the Statement of Profit and Loss , including the statement of Other Comprehensive Income, the Cash Flow Statement and the Statement of Changes in Equity for the year then ended, and a summary of significant accounting policies and other explanatory information (hereinafter referred to as â Standalone Financial Statementsâ).

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 (âthe Actâ) with respect to the preparation of these Standalone Financial Statements that give a true and fair view of the Financial Position , Financial Performance including Other Comprehensive Income, Cash Flows and the Statement Of Changes in Equity of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (IndAS) specified under section 133oftheAct, read with the Companies (IndianAccounting Standards) Rules,2015,as amended.

This responsibility also includes maintenance of adequate accounting records in accordance with the provision of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of the 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 fair presentation of the standalone 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 theAct and the Rules made thereunder.

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 standalone financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the standalone financial statements. The procedures selected depend on the auditor''s judgement, including the assessment of the risks of material misstatement of the standalone 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 standalone 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 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 standalone 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 31^st March, 2018, its Profit including Other Comprehensive Income, its Cash Flows and the Statement of Changes in Equity for the year ended on that date.

Emphasis of Matter

a) We draw attention to Note 43 to the standalone financial statements regarding slow implementation of underground mining project at Sukinda. As represented by the Management, financial tie-ups has been delayed in past, but the Company is confident that it would be able to tie-up the requisite finance and implement the project in due course. Hence, no adjustment have been carried out for carrying value of capital work in progress of Rs.8,621.20 lacs and the advances to vendor of Rs.15,940.64 lacs relating to this project at this stage.

b) We draw attention to Note 44 to the standalone financial statements regarding advance of Rs. 3,683.57 lacs contracted to a vendor for procurement of raw material. For the reasons stated in the said note management is confident of settling the advance and therefore, there is no need to make any adjustment at this stage.

Our Opinion is not qualified in respect of the aforesaid matters.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2016 (âthe Orderâ), issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in the âAnnexure Aâ a statement on the matters specified in paragraphs 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 appears from our examination of those books;

c) The Balance Sheet, Statement of Profit and Loss including Other Comprehensive Income , the Cash Flow Statement and Statement of Changes in Equity 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 theAct, read with Companies (Indian Accounting Standards) Rules, 2015, as amended.

e) On the basis of written representations received from the directors as on 31^st March, 2018 taken on record by the Board of Directors, none of the directors is disqualified as on 31^st March, 2018, from being appointed as a director in terms of section 164(2)of theAct;

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 âAnnexure Bâ. Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Company''s internal financial controls over financial reporting;

g) With respect to the other matters to be included in the Auditor''s Report in accordance with Rules 11 of the Companies (Audit and Auditors) Rules, 2014, as amended , 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 standalone financial statements as referred to in Note 36 to 40 to the standalone financial statements;

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

iii. There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company for the year ended 31^st March, 2018.

(Referred to in Paragraph 1 under the heading of âReport on other legal and regulatory requirementsâ of our report of even date)

1. In respect of its fixed assets:

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

b) The fixed assets were 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 explanation 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 and based on the examination of the registered sale deeds provided to us, we report that, the title deeds, comprising all the immovable properties of lands which are freehold, are held in the name of the Company as at the balance sheet date except certain portion of land which company is in process of getting in its name. In respectof immovable properties of land that have been taken on lease and disclosed as fixed asset in the financial statements, the lease agreements for the said lands and building thereof are in the name of the Company except certain building which is pending for title clearance.

ii) In our opinion the inventories were physically verified during the year by the Management at reasonable intervals and as explained to us, no material discrepancies were noticed on physical verification.

iii) In respect of the loans, secured or unsecured, granted by the company to companies covered in the register maintained under Section 189 of the Act:

a. The terms and conditions of the grant of such loans are, in our opinion, prima facie, not prejudicial to the Company''s interest.

b. The repayment of principal and payment of interest are as per stipulated terms.

c. In respect of the said loan, there are no overdue amounts at the end of the year.

iv. In our opinion and according to the information and explanations given to us, the Company has complied with the provisions of Sections 185 and 186 of the Act in respect of grant of loans, making investments and providing guarantees and securities, as applicable.

v. According to the information and explanations given to us, the Company has not accepted any deposit within the meaning of provisions of sections 73 to 76 or any other relevant provisions of the Act and the rules framed thereunder. Therefore, the provisions of clause (v) of paragraph 3 of the Order are not applicable to the Company.

vi. The maintenance of cost records has been specified by the Central Government under section 148(1) of the Act. We have broadly reviewed the cost records maintained by the Company pursuant to the Companies (Cost Records and Audit) Rules, 2014 prescribed by the Central Government under Section 148(1) (d) of the Act and are of the opinion that, prima facie, the prescribed - cost 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. In respect of statutory dues:

a) According to the records of the Company, undisputed statutory dues including Provident Fund, Employeeâs State Insurance, Income-Tax, Sales Tax, Goods and Service Tax , Service Tax, Customs Duty, Excise Duty, Value Added Tax, Cess, and any other statutory dues have been generally regularly deposited with the appropriate authorities. According to the information and explanations given to us undisputed amounts, in respect of the Statutory dues referred above outstanding as at 31^st March, 2018, for a period of more than six months from the date they became payable are as under:

Nature of Dues	Amount (Rs. in Lacs)	Period to which amount Relates
Income Tax	656.97	AY 2014-15
Income Tax	2,077.01	AY 2015-16
Income Tax	638.07	AY 2016-17
Income Tax	3,604.81	AY 2017-18
Income Tax (Advance Tax)	1,350.14	AY 2018-19
Total	8,327.00

b) The disputed statutory dues aggregating Rs. 1,744.93 Lacs , that have not been deposited on account of disputed matters pending before appropriate authorities are as under:

SI. No.	Name of the statute	Nature of the Dues	Amount (Rs. in Lacs)	Period to which the amount relates	Forum where dispute is pending
1.	Income Tax Act, 1961	Income Tax (including interest)	298.32	2010-11 & 2011-12	Commissioner of Income Tax (Appeal)
2.	Income Tax Act, 1961	Income Tax (including interest)	102.02	2012-13	Income Tax Appellate Tribunal
3.	Central Sales Tax Act, 1956 and Orissa Sales Tax Act	Sales Tax/VAT (including interest and Penalty)	70.92	1997-98	Sales Tax Appellate Tribunal
	Central Sales Tax Act, 1956 and Orissa Sales Tax Act	Sales Tax/VAT (including interest and Penalty)	2.45	1994-96	Additional Commissioner
			437.97	2007-2013	Orissa High Court, Cuttack
4.	Entry Tax Act, 1999	Entry Tax	23.47	2008-14	Additional Commissioner
			92.96	2007-13	Orissa High Court, Cuttack
5.	Central Excise Act, 1944	Excise Duty (including interest)	43.56	2011-12	Commissioner Appeals
6.	Chapter V of Finance Act, 1994	Service Tax	6.80	2005-07	Orissa High Court, Cuttack
			666.46	1996-1998 & 2004-2012	Central Excise & Service Tax Appellate Tribunal
	Total		1,744.93

viii. In our opinion and according to the information and explanations given to us, the Company has not defaulted in the repayment of loans to banks and dues to debenture holders. The Company has not borrowed any funds from financial institutions or government.

ix. In our opinion and according to the information and explanations given to us, term loans have been applied by the Company during the year for the purposes for which they were raised. The Company has not raised moneys by way of initial public offer or further public offer during the year.

x. Based on the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per information and explanations given to us, no fraud by the Company and no fraud on the Company by its officers or employees has been noticed or reported during the year.

xi. In our opinion and according to the information and explanations given to us, the Company has paid managerial remuneration in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Act.

xii. The Company is not a Nidhi Company and hence reporting under clause (xii) of paragraph 3 of the Order is not applicable to the company.

xiii. In our opinion and according to the information and explanations given to us, the Company is in compliance with Section 188 and 177 of the Act, where applicable, for all transactions with the related parties and the details of related party transactions have been disclosed in the financial statements etc. as required by the applicable accounting standards.

xiv. The Company has issued equity shares against the warrants allotted during the year on preferential basis. Company has complied with the requirement of section 42 of the Act and amount raised has been used for purpose for which it was raised.

xv. In our opinion and according to the information and explanations given to us, the Company has not entered into any non-cash transaction with the directors or persons connected with him and covered under section 192 of the Act. Hence, clause (xv) of the paragraph 3 of the Order is not applicable to the Company.

xvi. To the best of our knowledge and as explained, the Company is not required to be registered under section 45-IAof the Reserve Bank of India Act, 1934.

âAnnexure Bâ to Independent Auditors'' Report on the Standalone Financial Statements of Balasore Alloys Limited

(Referred to in paragraph 2(f) under the heading âReport on other legal and regulatory requirementsâ of our report of even date.

Report on the Internal Financial Controls under Clause (I) of Sub-section 3 of Section 143 of the Companies Act, 2013 (âthe Actâ)

We have audited the Internal Financial Control over financial reporting of Balasore Alloys Limited (âthe companyâ) as of 31st March, 2018 in conjunction with our audit of the standalone financial statements of the Company for the year then ended.

Management Responsibility for the 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 Act.

Auditor''s 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 âGuidance Noteâ) and the Standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the Act, 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 ICAI. 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 standalone 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 standalone 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 standalone financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the company''s assets that could have a material effect on the standalone 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, 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 issued by the ICAI.

For Chaturvedi & Shah

Chartered Accountants

Firm Registration No. 101720W

Amit Chaturvedi

Place : Kolkata Partner

Date : 28th May, 2018 Membership No. 103141

Mar 31, 2016

Report on the Standalone Financial Statements

We have audited the accompanying standalone financial statements of BALASORE ALLOYS LIMITED (âthe Companyâ), which comprise the Balance Sheet as at 31^st March, 2016, the Statement of Profit and Loss and the Cash Flow Statement for the year then ended, and a summary of the 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 (âthe Actâ) with respect to the preparation 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 prescribed under section 133 of the Act.

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 standalone 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 conducted our audit of the standalone financial statements 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 standalone financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the standalone financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the standalone 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 standalone 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 standalone 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 31^st March, 2016, and its profit and its cash flows for the year ended on that date.

Emphasis of Matter

We draw attention to Note 30 to the standalone financial statements regarding demand by North Eastern Electricity Supply Company of Orissa Limited (NESCO) towards revocation of the waiver of dues granted under a settlement in earlier years to Company. NESCO has raised total claim for Rs. 16,800.34 Lacs as at 31st March, 2016 (Rs. 16,699.05 Lacs as at 31st March, 2015) (including delayed payment surcharge) towards revocation of the waiver of dues granted under a settlement in an earlier year net of Rs 3,400 lacs already paid and provided in respective year of payment as a matter of prudence by the Company. The matter of revocation of settlement is pending with Hon''ble High Court of Orissa. Pending outcome of the court decision and based on discussion with Company''s legal counsel, no provision has been made towards above demand.

Our Opinion is not qualified in respect of the same.

Report on Other Legal and Regulatory Requirements

1. 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 prescribed under section 133 of the Act.

e) On the basis of the written representations received from the directors as on 31^st March, 2016 taken on record by the Board of Directors, none of the directors is disqualified as on 31^st March, 2016 from being appointed as a director in terms of Section 164 (2) of the Act.

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 standalone financial statements as referred to in Note 26 and 29 to 30 to the standalone financial statements.

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

iii. There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company.

2. As required by the Companies (Auditor''s Report) Order, 2016 (âthe Orderâ) issued by the Central Government in terms of Section 143(11) of the Act, we give in âAnnexure Bâ a statement on the matters specified in paragraphs 3 and 4 of the Order.

ANNEXURE âAâ TO THE INDEPENDENT AUDITOR''S REPORT ON THE STANDALONE FINANCIAL STATEMENTS OF BALASORE ALLOYS LIMITED (Referred to in paragraph 1 (f) under ''Report on Other Legal and Regulatory Requirements'' of our report of even date)

Report on the Internal Financial Controls Over Financial Reporting under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (âthe Actâ)

We have audited the internal financial controls over financial reporting of BALASORE ALLOYS LIMITED (âthe Companyâ) as of 31^st 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 (the âGuidance Noteâ) 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.

Auditor''s 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 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 controls. 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 standalone financial statements, whether due to fraud or error.

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 standalone 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 standalone 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 standalone financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting

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 31^st 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.

ANNEXURE B TO THE INDEPENDENT AUDITOR''S REPORT ON THE STANDALONE FINANCIAL STATEMENTS OF BALASORE ALLOYS LIMITED

(Referred to in paragraph 2 under ''Report on Other Legal and Regulatory Requirements'' section of our report of even date)

i. In respect of its fixed assets:

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

(b) The fixed assets were 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 explanation 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 and based on the examination of the registered sale deeds provided to us, we report that, the title deeds, comprising all the immovable properties of lands which are freehold, are held in the name of the Company as at the balance sheet date except certain portion of land which company is in process of getting in his name. In respect of immovable properties of land that have been taken on lease and disclosed as fixed asset in the financial statements, the lease agreements for the said lands and building thereof are in the name of the Company except certain building which is pending for title clearance.

ii. In our opinion the inventories were physically verified during the year by the Management at reasonable intervals and as explained to us, no material discrepancies were noticed on physical verification.

iii. In respect of the loans, secured or unsecured, granted by the company to companies covered in the register maintained under Section 189 of the Act:

a. The terms and conditions of the grant of such loans are, in our opinion, prima facie, not prejudicial to the Company''s interest.

b. The repayment of principal and payment of interest are as per stipulated terms.

c. In respect of the said loan, there are no overdue amounts at the end of the year.

v. According to the information and explanations given to us, the Company has not accepted any deposit within the meaning of provisions of sections 73 to 76 or any other relevant provisions of the Act and the rules framed there under. Therefore, the provisions of clause (v) of paragraph 3 of the Order are not applicable to the Company.

2014 prescribed by the Central Government under Section 148(1) (d) of the Act and are of the opinion that, prima facie, the prescribed - cost 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. In respect of statutory dues:

a. According to the records of the Company, undisputed statutory dues including Provident Fund, Employees'' State Insurance, Income-Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, Value Added Tax, Cess, and any other statutory dues have been regularly deposited with the appropriate authorities except Income-Tax , service tax and excise duty. According to the information and explanations given to us undisputed amounts, in respect of the Statutory dues referred above outstanding as at 31st March 2016 , for a period of more than six months from the date they became payable are as under:

Nature of Dues	Amount (Rs. in Lacs)	Period to which amount Relates
Income Tax	431.60	AY 2014-15
Income Tax	2,511.12	AY 2015-16
Income Tax (Advance Tax)	404.85	AY 2016-17
Total	3,347.57

b) The disputed statutory dues aggregating Rs. 2,281.79 Lacs , that have not been deposited on account of disputed matters pending before appropriate authorities are as under :

Sl. No.	Name of the statute	Nature of the Dues	Amount (Rs. in Lacs)	Period to which the amount relates	Forum where dispute is pending
1.	Income Tax Act, 1961	Income Tax (including interest)	137.51	2012-13	Commissioner of Income Tax (Appeal)
2.	Central Sales Tax Act, 1956 and Orissa Sales Tax Act	Sales Tax/VAT (including interest and Penalty)	70.92	1997-98	Sales Tax Appellate Tribunal
			10.66	1995-97 & 2011-13	Additional Commissioner
			437.97	2007-2013	Orissa High Court, Cuttack
3.	Entry Tax Act, 1999	Entry Tax	807.06	2008-14	Additional Commissioner
3.	Entry Tax Act, 1999	Entry Tax	92.96	2007-13	Orissa High Court, Cuttack
4.	Central Excise Act, 1944	Excise Duty (including interest)	51.45	2010-2013	Commissioner Appeals
5.	Chapter V of Finance Act, 1994	Service Tax	6.80	2005-2007	Orissa High Court, Cuttack
5.	Chapter V of Finance Act, 1994	Service Tax	666.46	1996-1998 & 2004-2012	Central Excise & Service Tax Appellate Tribunal
	Total		2,281.79

xii. The Company is not a Nidhi Company and hence reporting under clause (xii) of paragraph 3 of the Order is not applicable to the company.

xiv. During the year the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures and hence reporting under clause (xiv) of paragraph 3 of the Order is not applicable to the Company.

xv. In our opinion and according to the information and explanations given to us, during the year, the Company has not entered into any non-cash transactions with its directors or persons connected and covered under section 192 of the Act. Hence, clause (xv) of paragraph 3 of the Order is not applicable to the Company.

xvi. In our opinion and according to information and explanations provided to us, the Company is not required to be registered under section 45-I of the Reserve Bank of India Act, 1934.

For Chaturvedi & Shah

Chartered Accountants

Firm Registration No. 101720W

Amit Chaturvedi

Place : Kolkata Partner

Date : May 30, 2016 Membership No. 103141

Mar 31, 2015

We have audited the accompanying standalone financial statements of BALASORE ALLOYS LIMITED ("the Company"), which comprise the Balance Sheet as at 31st March, 2015, the Statement of Profit and Loss and the Cash Flow Statement for the year then ended, and a summary of the 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 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 provision of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of the 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 thereunder.

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 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, but not for the purpose of expressing an opinion on whether the Company has in place an adequate internal financial controls system over financial reporting and the operating effectiveness of such controls. An audit also includes evaluating the appropriateness of 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, 2015, and its profit and its cash flows for the year ended on that date.

Emphasis of Matter

We draw attention to Note 32 to the financial statements regarding demand by North Eastern Electrcity Supply Company of Orrisa Limited (NESCO) towards revocation of the waiver of dues granted under a settlement in earlier years.

North Eastern Electricity Supply Company of Orissa Limited (NESCO) has raised total claim for Rs. 16,699.05 Lacs as at 31st March, 2015 (Rs.15,769.65 Lacs as at 31st March, 2014) (including delayed payment surcharge) towards revocation of the waiver of dues granted under a settlement in an earlier year net of Rs 3,400 lacs already paid and provided in respective year of payment as a matter of prudence by the Company. The matter of revocation of settlement is pending with Honorable High Court of Orissa. Pending outcome of the court decision and based on discussion with Company's legal counsel, no provision has been made towards above demand.

Our Opinion is not qualified in respect of the same.

Report on other legal and regulatory requirements

1. As required by the Companies (Auditor's Report) Order, 2015 ("the Order") issued by the Central Government of India in terms of Section 143 (11) of the Act, we give in the Annexure a statement on the matters specified in paragraphs 3 and 4 of the Order.

2. As required under provisions of 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 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) There are no observations and comments on the financial transactions accounted during the year by the company or matters which have any adverse effect on the functioning of the Company.

f) On the basis of the written representations received from the directors as on 31st March, 2015 taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2015, from being appointed as a director in terms of section 164(2) of the Act.

g) With respect to the other matters to be included in the Auditor's Report in accordance with Rules 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 as referred to in Note 26 and Note 29 to 32 to the financial statements.

ii. The Company did not have any long term contracts including derivative contracts that require provision under any law or accounting standards for which there were any material foreseeable losses.

iii. There were no amounts which were required to be transferred to the investor Education and Protection fund by the Company.

Annexure to Independent Auditors' Report Referred to in Paragraph 1 under the heading of "report on other legal and regulatory requirements" of our report of even date

i) In respect of its fixed assets:

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

b) As explained to us, fixed assets have been physically verified by the management in a phased periodical manner as per regular program of verification, which in our opinion is reasonable, having regard to the size of the Company and nature of its assets. No material discrepancies were noticed on such physical verification.

ii) In respect of its inventories:

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

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) The Company has maintained proper records of inventories. As explained to us, there were no material discrepancies noticed on physical verification of inventories as compared to the book records.

iii) In respect of the loans, secured or unsecured, the Company has granted interest bearing loan to one company covered in the register maintained under Section 189 of the Act. In respect of the said loan Maximum amount outstanding at any time during the year and year-end balance is Rs 1,917 Lacs.

a) The Principal and Interest amount will be paid as per the terms stipulated. e) In respect of the said loan, there are no overdue amounts at the end of the year.

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

v) According to the information and explanations given to us, the Company has not accepted any deposit within the meaning of provisions of sections 73 to 76 or any other relevant provisions of the Act and the rules framed thereunder. Therefore, the provisions of clause (v) of paragraph 3 of the Order are not applicable to the Company.

vi) We have broadly reviewed the cost records maintained by the Company as prescribed by the Central Government under sub-section (1) of section 148 of the Act and are of the opinion that prima facie the prescribed cost 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) In respect of statutory dues:

a) According to the records of the Company, undisputed statutory dues including Provident Fund, Employees' State Insurance, Income-Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, Value Added Tax, Cess, and any other statutory dues have been regularly deposited with the appropriate authorities except Income-Tax , service tax and excise duty. According to the information and explanations given to us undisputed amounts, in respect of the Statutory dues referred above outstanding as at 31st March 2015 , for a period of more than six months from the date they became payable are as under:

Nature of Dues Amount Period to which (Rs in Lacs) amount Relates

Income Tax 1,940.05 AY 2014-15

Income Tax(Advance Tax) 862.95 AY 2015-16

Total 2,803.00

b) The disputed statutory dues aggregating Rs 1,471.12 Lacs, that have not been deposited on account of disputed matters pending before appropriate authorities are as under:

Sl. Name of the Nature of the Dues Amount No. statute (Rs in Lacs)

1. Income Tax Income Tax 31.84 Act, 1961 (including interest)

2. Central Sales Sales Tax/VAT (including 10.97 Tax Act, 1956 interest and Penalty) and Orissa Sales Tax Act 70.92

2.89

437.97

3. Entry Tax Act, Entry Tax 98.86 1999

92.96

4. Central Excise Excise Duty 43.56 Act, 1944 (including interest)

7.89

5. Chapter V of Service Tax 6.80 Finance Act, 1994

666.46

Total 1,471.12

Sl. Name of the Period to which Forum where No. statute the amount dispute is relates pending

1. Income Tax 2012-13 Commissioner of Income Act, 1961 Tax (Appeal)

2. Central Sales 1996-97 Orissa High Court, Tax Act, 1956 Cuttack and Orissa Sales Tax Act 1997-98 Sales Tax Appellate Tribunal

1994-97& 2011-12 Additional Commissioner

2007-2009 & Orissa High Court, 2010-2013 Cuttack

3. Entry Tax Act, 2009-10 & Additional 1999 2011-12 Commissioner

2007-2009 & Orissa High Court, 2010-2013 Cuttack

4. Central Excise 2010-2013 Commissioner Appeals Act, 1944

2011-12 Commissioner Appeals

5. Chapter V of 2005-2007 Orissa High Court , Finance Act, 1994 Cuttack

1996-1998 & Central Excise & Service 2004-2012 Tax Appellate Tribunal

c. There were no amounts which were required to be transferred to the Investor Education and protection fund in accordance with the relevant provision of the Companies Act 1956 and rules made thereunder.

viii) The Company has no accumulated losses at the end of the financial year and it has not incurred cash losses in the current year and immediately preceding financial year.

ix) Based on our audit procedures and as per the information and explanations given to us, we are of the opinion that the Company has not defaulted in repayment of dues to banks and debenture holders. The Company has not borrowed any funds from financial institutions during the year under audit.

x) According to information and explanation given to us the Company has not given any guarantee for loans taken by others from bank or financial institutions. Therefore, the provisions of clause (x) of paragraph 3 of the Order are not applicable to the Company.

xi) The term loans were applied for the purpose for which the loans were raised.

xii) In our opinion and according to the information and explanations given to us, no material fraud on or by the Company has been noticed or reported during the year.

For Chaturvedi & Shah Chartered Accountants Firm registration number: 101720W

Amit Chaturvedi Place : Kolkata Partner Date : May 27, 2015 Membership No. 103141

Mar 31, 2014

We have audited the accompanying financial statements of BALASORE ALLOYS 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 Standards notified under the Companies Act, 1956 ("the Act") read with the General Circular 15/2013 dated 13th September 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and fair 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 our 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 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 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, but not for the purpose of expressing an opinion on the effectiveness of the entity''s internal control. 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 audit opinion.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, as the case may be, 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:

(i) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2014;

(ii) in the case of the Statement of Profit and Loss, of the profit 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.

Emphasis of Matter

We invite attention to the following notes:

a) Note No. 31 regarding demand by North Eastern Electricity Supply Company of Orissa Limited (NESCO) towards revocation of the waiver of dues granted under a settlement in an earlier year and towards take or pay benefit claimed by the company. NESCO has raised total claim for Rs. 20,843.14 Lacs as at 31st March, 2014 (Rs. 18,927.66 Lacs as at 31st March, 2013) (including delayed payment surcharge). Company has paid Rs 3,400 lacs in previous years against these disputed claim and provided the same in that year as a matter of prudence. The matter of revocation of settlement is pending with Honourable High Court of Orissa and that of demand towards take or pay benefit before Electricity Appellate Tribunal, New Delhi. Pending outcome of the court/tribunal decision and based on discussion with Company''s legal counsel, no provision has been made towards above demand.

b) Note No. 32 regarding demand by lenders for their right to recompense under CDR Scheme sanctioned in earlier years.

Lenders have demanded Rs 3,219.95 lacs for the recompense amount made up to 31st March, 2007. Company has paid Rs. 536 lacs as on 31st March, 2014 and provided the same in previous and current year as a matter of prudence. Further, the recompense amount for the period from 1st April, 2007 to till date has not been finally worked out. The management has approached its lenders to determine the final liability towards such recompense amount, pending which no provision has been made towards above demand.

Our opinion is not qualified in respect of these matters.

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 sub-section (3) of section 227 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 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, 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 Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statement comply with the accounting standards notified under the Companies Act, 1956 read with the General Circular 15/2013 dated 13th September 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013; and

e) On the basis of the written representations received from the directors and taken on record by the Board of Directors, none of the directors is 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 referred to in paragraph 1 under the heading Report on other legal and regulatory requirements of our Report of even date Re: Balasore Alloys Limited ("the Company")

1. In respect of its Fixed Assets:

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

b) Fixed assets have been physically verified by the management in a phased periodical manner as per regular programme of verification, which in our opinion is reasonable, having regard to the size of the Company and nature of its assets. No material discrepancies were noticed on such physical verification.

c) There are no substantial disposals of fixed assets during the year.

2. In respect of its Inventory:

a) The inventory has been physically verified during the year by the management, except stock lying with third parties. In our opinion, the frequency of verification is reasonable. In respect of the inventory lying with third parties, these have been confirmed by them.

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) The Company has maintained proper records of inventory. As explained to us, there were no material discrepancies noticed on physical verification of inventory.

3. In respect of the loans, secured or unsecured, granted or taken by the Company to/ from Companies, firms or other parties covered in the register maintained under Section 301 of the Act:

a) The Company has not given any loan during the year to companies, firms or other parties covered in the register maintained under Section 301 of the Act. Consequently, the requirements of Clauses (iii) (b) to (iii) (d) of paragraph 4 of the Order are not applicable to the Company.

e) The Company during last year has taken interest free advance from promoter group companies towards participation in equity and/or quasi debt instruments. In respect of said loans, the maximum amount outstanding at any time during the year is Rs. 19,405 lacs and the year- end balance is Rs. 19,405 lacs.

f) Pending finalisation of the terms and pricing, we are unable to comment on the clause (iii) (f) and (g) of paragraph 4 of the Order.

4. In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business for the purchase of inventory, fixed assets and for the sale of goods. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal control system.

5. According to information and explanation given to us, there are no contracts or arrangements referred to in section 301 of the Act that need to be entered into the register maintained under section 301. Therefore, the provisions of clause (v) (b) of paragraph 4 of the Order are not applicable to the Company.

6. The Company has not accepted any deposit from the public.

7. In our opinion, the Company has an internal audit system commensurate with the size and nature of its business.

8. The Company has maintained cost records under Section 209 (1) (d) of the Companies Act, 1956 as per the Companies (Cost Accounting Records) Rules, 2011.We have broadly reviewed the accounts and records of the Company in this connection and are of the opinion, that prima facie, the prescribed accounts and records have been made and maintained. We have not, however, carried out a detailed examination of the same.

9. In respect of statutory dues:

a) According to the records of the Company, undisputed statutory dues including provident fund, investor education and protection fund, employees'' state insurance, income-tax, sales-tax, wealth-tax, service tax, customs duty, cess and other statutory dues have generally been regularly deposited with the appropriate authorities.

b) According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, investor education and protection fund, employees'' state insurance, income-tax, wealth-tax, service tax, sales-tax, customs duty, cess and other statutory dues were outstanding, as at March 31, 2014 for a period of more than six months from the date they became payable.

c) The disputed statutory dues aggregating Rs. 3,276.02 lacs that have not been deposited on account of disputed matters pending before authorities are as under :

Name of the Nature of the Dues Amount Period to which statute (Rs in Lacs) the amount relates

Income Tax Income Tax 2,361.25 2005-11 Act, 1961 (including interest)

10.97 1996-97 Central Sales Tax Act, 1956 73.00 1997-98 & 2009-10 Sales Tax/VAT (including and Orissa interest and Penalty) Sales Tax Act

2.89 1994-97& 2011-12

0.23 2008-09

Name of the Forum where Statute dispute is pending

Income Tax Act, 1961 Commissioner (Appeals)

Orissa High Court, Cuttack Central Sales Tax Act, 1956 Sales Tax Appellate Tribunal and Orissa Sales Tax Act Additional Commissioner

Commissioner (Appeals)

Name of the Nature of the Dues Amount Period to which statute (Rs in Lacs) the amount relates

Entry Tax Act, Entry Tax 98.86 2009-10 & 1999 2011-12

Central Excise Excise Duty & Service 43.56 2010-2013 Act, 1944 Tax (including interest)

6.80 2005-2007 Chapter V of Service Tax Finance Act, 1994 678.46 1996-1998 & 2004-2012

Name of the Forum where Statute dispute is pending

Entry Tax Act, 1999 Additional Commissioner

Central Excise Act, 1944 Commissioner Appeals

Orissa High Court , Cuttack

Chapter V of Finance Act, 1994 Central Excise & Service Tax Appellate Tribunal

10. The Company does not have accumulated losses at the end of the financial year. The Company has not incurred cash losses during the financial year covered by the audit and in the immediately preceding financial year.

11 . Based on our audit procedures and as per the information and explanations given to us, we are of the opinion that the Company has not defaulted in repayments of dues to banks.

12. According to the information and explanations given to us and based on the documents and records produced 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.

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

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

15. According to information and explanations given to us the Company has not given any guarantee for loans taken by others from bank or financial institutions. Therefore, the provisions of Clause (xv) of paragraph 4 of the Order are not applicable to the Company.

16. During the year no term loans has been raised. Therefore, the provisions of Clause (xvi) of paragraph 4 of the Order are not applicable to the Company.

17. According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, we report that funds amounting to Rs.11,643.04 Lacs raised on short term basis have been used for long-term investment.

18. During the year the Company has not made preferential allotment of shares to parties covered in the Register maintained under section 301 of the Act.

19. The Company did not have any outstanding debenture during the year.

20. The Company has not raised any monies by way of public issue during the year.

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

For Chaturvedi & Shah Firm registration number: 101720W Chartered Accountants

Amit Chaturvedi

Place : Kolkata Partner Date : May 20, 2014 Membership No. 103141

Mar 31, 2013

1. Report on the Financial Statements

We have audited the accompanying financial statements of BALASORE ALLOYS LIMITED ("the Company"), which comprise the Balance Sheet as at March 31, 2013, 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.

2. 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 Section 211(3C) of the Companies Act, 1956 ("the Act").This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

3. Auditor''s responsibility

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

4. Emphasis of Matter

We invite attention to the following notes: -

a) Note No. 30 regarding North Eastern Electricity Supply Company of Orissa Limited (NESCO) who has revoked the waiver of dues granted under a settlement in an earlier year and disputed on take or pay benefit claimed during the year , raised total claim for Rs. 15,527.66 Lacs as at 31st March, 2013 (Rs. 16,418.28 Lacs as at 31st March, 2012) (including delayed payment surcharge). As represented to us by the management, the Company is under discussion with NESCO and has also referred the matter to Hon''ble High Court of Orissa & Appellate Tribunal, New Delhi. However, pending outcome of the court case/ discussion, we are unable to comment upon the matter and its consequential impact on the Company''s profits.

b) Note No. 31 regarding :

(i) Lender''s right to recompense under Corporate Debt Restructuring Scheme sanctioned in earlier years and demand of Rs. 2,767.95 lacs for the sacrifice made upto 31st March, 2007, which has not been provided for.

(ii) Further, the recompense amount for the period from 1st April, 2007 to till date has not been worked out and presently unascertainable. The management has approached its lenders to determine the final liability towards such recompense amount till date, which is unascertainable and therefore we are unable to opine on the matter.

c) Note No 33 regarding loans of Rs. 500 Lacs and interest receivable of Rs. 366.98 Lacs thereon which are overdue and pending confirmation but based on the current status of negotiation with these parties, the management is hopeful to recover the amount in full. We are unable to opine on the recoverability of these loans and interest receivable and thus its consequential impact, if any, on the Company''s profit.

Our opinion is not qualified in respect of these matters.

5. Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the effects/possible effects of our observations in Para 4 above, as the case may be, 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:

(i) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2013;

(ii) in the case of the Statement of Profit and Loss, of the profit 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.

6. 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 sub-section (3) of section 227 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 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. Also, proper returns adequate for the purpose of our audit have been received from Company''s overseas branch not visited by us ;

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 and with the unaudited returns from the branch;

d) in our opinion, the Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statement comply with the accounting standards referred to in sub-section (3C) of section 211 of the Act; and

e) on the basis of the written representations received from the directors and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2013, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Act.

Annexure referred to in paragraph 1 under the heading Report on other legal and regulatory requirements of our Report of even date

Re: Balasore Alloys Limited ("the Company")

1. In respect of its Fixed Assets:

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

b) During the year company has not carried out physical verification of the fixed assets. However, an exhaustive physical verification was carried out in year 2009-10 whereby no material discrepancies were noticed. As per the information and explanation given to us, company is implementing a phased programme for verification.

c) There are no substantial disposals of fixed assets during the year.

2. In respect of its Inventory:

a) The inventory has been physically verified during the year by the management, except stock lying with third parties. In our opinion, the frequency of verification is reasonable. In respect of the inventory lying with third parties, these have been confirmed by them.

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) The Company has maintained proper records of inventory. As explained to us, there were no material discrepancies noticed on physical verification of inventory.

3. In respect of the loans, secured or unsecured, granted or taken by the Company to/ from Companies, firms or other parties covered in the register maintained under Section 301 of the Act:

a) The Company has not given any loan during the year to companies, firms or other parties covered in the register maintained under Section 301 of the Act. Consequently, the requirements of Clauses (iii) (b) to (iii) (d) of paragraph 4 of the Order are not applicable to the Company.

e) The Company has taken interest free advance from promoter group companies towards participation in equity and/or quasi debt instruments. In respect of said loans, the maximum amount outstanding at any time during the year is Rs. 19,405 lacs and the year end balance is Rs. 19,405 lacs.

f) Pending finalisation of the terms and pricing, we are unable to comment on the clause (iii) (f) and (g) of paragraph 4 of the Order.

4. In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business for the purchase of inventory, fixed assets and for the sale of goods. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal control system.

5. According to information and explanation given to us, there are no contracts or arrangements referred to in section 301 of the Act that need to be entered into the register maintained under section 301. Therefore, the provisions of clause (v) (b) of paragraph of the Order are not applicable to the Company.

6. The Company has not accepted any deposit from the public.

7. In our opinion, the Company has an internal audit system commensurate with the size and nature of its business.

8. The Company has maintained cost records under Section 209 (1) (d) of the Companies Act, 1956 as per the Companies (Cost Accounting Records) Rules, 2011. We have broadly reviewed the accounts and records of the Company in this connection and are of the opinion, that prima facie, the prescribed accounts and records have been made and maintained. We have not, however, carried out a detailed examination of the same.

9. In respect of statutory dues:

a) According to the records of the Company, undisputed statutory dues including provident fund, investor education and protection fund, employees'' state insurance, income-tax, sales-tax, wealth-tax, service tax, customs duty, cess and other statutory dues have generally been regularly deposited with the appropriate authorities.

b) According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, investor education and protection fund, employees'' state insurance, income-tax, wealth-tax, service tax, sales-tax, customs duty, cess and other statutory dues were outstanding, as at March 31, 2013 for a period of more than six months from the date they became payable.

c) The disputed statutory dues aggregating Rs 3,855.57 lacs that have not been deposited on account of disputed matters pending before authorities are as under : -

Name of the Nature of the Dues Amount Period to which Forum where statute (Rs in Lacs) the amount dispute is relates pending

Income Tax Income Tax 2,848.98 2005-11 Commissioner (Appeals) Act, 1961 (including interest)

Central Sales Sales Tax/VAT (including 10.33 1990-91, 1995-96 Additional Tax Act, 1956 interest and Penalty) & 2009-11 Commissioner (Appeals) and Orissa Sales Tax Act 78.68 1997-98 & 2005-06 Sales Tax Appellate Tribunal

10.97 1992-93 & 1996-97 High Court, Orissa

Entry Tax Act, Entry Tax 171.30 2003-04, 2008-09 Additional

1999 & 2009-11 Commissioner

Central Excise Excise Duty & Service 34.56 2010-12 Commissioner Appeals Act, 1944 Tax (including interest)

686.99 1996-1998 & Central Excise & Service

2004-2012 Tax Appellate Tribunal

6.80 2005-2007 High Court, Orissa

Orissa Electricity Electricity Duty 6.96 2000-01 High Court, Orissa (Duty) Act, 1961

10. The Company does not have accumulated losses at the end of the financial year. The Company has not incurred cash losses during the financial year covered by the audit and in the immediately preceding financial year.

1 1 . Based on our audit procedures and as per the information and explanations given to us, we are of the opinion that the Company has not defaulted in repayment of dues to banks. The Company has not borrowed any funds from financial institutions or debenture holders during the year under audit.

12. According to the information and explanations given to us and based on the documents and records produced 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.

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

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

15. According to information and explanation given to us the Company has not given any guarantee for loans taken by others from bank or financial institutions. Therefore, the provisions of Clause (xv) of paragraph 4 of the Order are not applicable to the Company.

16. The term loans were applied for the purpose for which the loans were obtained.

17. According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, we report that funds amounting to Rs. 10,659.46 Lacs raised on short term basis have been used for long-term investments.

18. During the year the Company has made preferential allotment of convertible warrants to parties covered in the Register maintained under section 301 of the Act. The allotments and pricing of the convertible warrants are in accordance with the SEBI (Issue of Capital & Disclosure Requirements) Regulations, 2009 and hence prices at which these convertible warrants have been issued, are not prima facie, prejudicial to the interests of the Company.

19. The Company did not have any outstanding debenture during the year.

20. The Company has not raised any monies by way of public issue during the year.

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

For Chaturvedi & Shah Firm registration number: 101720W

Chartered Accountants

Amit Chaturvedi

Place : Kolkata Partner

Date : May 30, 2013 Membership No. 103141

Mar 31, 2012

1. We have audited the attached Balance Sheet of Balasore Alloys Limited (or "the Company") as at 31st March, 2012 and also the Statement of profit and loss 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. 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) 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.

4. Further to our comments in the Annexure referred to 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 and proper returns adequate for the purposes of our audit have been received from Company's overseas branch not visited by us;

iii. 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 and with the unaudited returns from the branch;

iv. In our opinion, the balance sheet, the statement of profit and loss and the 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.

v. On the basis of the 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 is 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.

vi. Attention is drawn to the following items:

(a) Note No. 30 regarding North Eastern Electricity Supply Company of Orissa Limited (NESCO) who has revoked the waiver of dues granted under a settlement in an earlier year and raised claim for Rs 16,418.28 Lacs (Rs 9,874.34 Lacs as at 31st March, 2011) (including delayed payment surcharge). As represented to us by the management, the Company is under discussion with NESCO and has also referred the matter to Hon'ble High Court of Orissa. However, pending outcome of the court case/ discussion, we are unable to comment upon the matter and its consequential impact on the Company's profits.

The above matter had caused us to qualify our audit opinion on the financial statements for the year ended 31st March 2011.

(b) Note No. 32 regarding :

(i) Lender's right to recompense under Corporate Debt Restructuring Scheme sanctioned in earlier years and demand of Rs 3020 Lacs for the sacrifice made upto 31st March, 2007, which has not been provided for. Had the impact of above amount been considered, there would be a net profit of Rs 173.06 Lacs for the year as against the reported net profit of Rs 3193.06 Lacs for the year.

(ii) Further, the recompense amount for the period from 1st April, 2007 to till date has not been worked out and presently unascertainable. The management has approached its lenders to determine the final liability towards such recompense amount till date, which is unascertainable and therefore we are unable to opine on the matter.

(c) Note No 34 regarding loans of Rs 962.00 Lacs and interest receivable of Rs 543.13 Lacs thereon which are overdue and pending confirmation but based on the current status of negotiation with these parties, the management is hopeful to recover the amount in full. We are unable to opine on the recoverability of these loans and interest receivable and thus its consequential impact, if any, on the Company's profit.

vii. In our opinion and to the best of our information and according to the explanations given to us, except for the effects/ possible effects of our observations in Para vi above, as the case may be, 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 31st March, 2012;

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.

ANNEXURE TO THE AUDITORS' REPORT (REFERRED TO IN OUR REPORT OF EVEN DATE TO THE MEMBERS OF BALASORE ALLOYS LIMITED AS AT AND FOR THE YEAR ENDED 31ST MARCH, 2012)

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

(b) All fixed assets have not been physically verified by the management during the year but there is a regular programme of verification in a phased manner to cover all the items over a period of three years, which in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. As informed, no material discrepancies were noticed on such verification.

(c) There was no disposal of a substantial part of fixed assets during the year.

(ii) (a) The management has conducted physical verification of inventory at reasonable intervals during the year.

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

(c) The Company is maintaining proper records of inventory and no material discrepancies were noticed on physical verification.

(iii) (a) According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Accordingly, the provisions of clauses 4(iii)(a) to (d) of the Order are not applicable to the Company.

(e) According to information and explanations given to us, the Company has not taken any loans, secured or unsecured, from companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Accordingly, the provisions of clauses 4(iii)(e) to (g) of the Order are not applicable to the Company.

(iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business, for the purchase of inventory and fixed assets and for the sale of goods. During the course of our audit, we have not observed any major weakness or continuing failure to correct any major weakness in the internal control system of the company in respect of these areas. There is no sale of service during the year.

(v) (a) In our opinion, there are no contracts or arrangements that need to be entered in the register maintained under Section 301 of the Companies Act, 1956.

(vi) The Company has not accepted any deposits from the public.

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

(viii) We have broadly reviewed the books of account maintained by the Company 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, related to the mining and manufacture of silicon & ferro alloys, and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained.

(ix) (a) Undisputed statutory dues including provident fund, investor education and protection fund, employees' state insurance, income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty, cess and other material statutory dues have generally been regularly deposited with the appropriate authorities though there has been a slight delay in few cases.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, investor education and protection fund, employees' state insurance, income-tax, wealth-tax, service tax, sales-tax, customs duty, excise duty, cess and other material statutory dues were outstanding, at the year end, for a period of more than six months from the date they became payable.

(c) According to the records of the Company, the dues outstanding of income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty and cess on account of any dispute, are as follows:

Name of the Nature of dues Amount Period to which Forum where statute (Rs in Lacs) the amount dispute is relates pending

Orissa Value Disallowance of Input 7.76 2005-06 Appellate Tribunal Added Tax tax credit set off Act, 2004

Central Sales Non Submission of Forms, 84.34 1992-93, 1994-95 Commissioner, Tax Act, 1956 Consignment Sales and to 1997-98, Appellate Tribunal Sales tax deferment 2005-06 and High Court (including interest and of Orissa penalty on delayed payment)

Entry Tax Act, Entry Tax on coal and 99.44 2003-04, Additional 1999 imported materials 2008-09 Commissioner

Central Excise Duty on estimated 1464.09 2005-2010 Commissioner of Act, 1944 production Excise

Central Excise Incorrect availment of 1028.78 2004-2011 Commissioner of Excise/ Act, 1944 cenvat credit Additional Commissioner of Excise/ CESAT

Chapter V of Service tax on 77.94 1996-1998, Commissioner of Finance Act, commission/ delay in 2007-2008 Excise/CESAT 1994 payment of service taxes

Chapter V of Incorrect availment of 8.95 2004-2008 Commissioner Appeal/ Finance Act, service tax credits High Court of Orissa 1994

Orissa Electricity Electricity Duty 6.96 2001 High Court of (Duty) Act, 1961 Orissa

(x) The Company has no accumulated losses at the end of the financial year and it has not incurred cash losses in the current and immediately preceding financial year.

(xi) Based on our audit procedures and as per the information and explanations given by the management, we are of the opinion that the Company has not defaulted in repayment of dues to the banks. There are no dues to financial institution and debenture holders.

(xii) According to the information and explanations given to us and based on the documents and records produced before 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, 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 an outstanding guarantee given by way of pledge of its investment in an earlier year for loans taken by a related party from banks and financial institutions, the terms and conditions whereof in our opinion are not prima-facie prejudicial to the interest of the Company.

(xvi) Based on the information and explanations given to us by the management, term loans were applied for the purpose for which the loans were obtained.

(xvii) According to the information and explanations given to us and on overall examination of the balance sheet of the Company, we report that funds amounting to Rs 8,495.16 Lacs raised on short-term basis mainly through working capital have been used for long-term investment representing acquisition of fixed assets, investments and repayment of long term loans.

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

(xix) The Company did not have any outstanding debentures during the year.

(xx) The Company has not raised any money through a public issue during the year.

(xxi) Based upon the audit procedures performed for the purpose of reporting the 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 year.

For S. R. BATLIBOI & CO.

Firm registration number: 301003E

22 Camac Street Chartered Accountants

Block 'C', 3rd Floor per Sanjoy K Gupta

Kolkata - 700 016. Partner

Date : 28th May, 2012 Membership No. 054968

Mar 31, 2011

1. We have audited the attached Balance Sheet of Balasore Alloys Limited ('the Company') as at 31st March, 2011 and also the Profit and Loss account 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. 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 the 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) 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.

4. Further to our comments in the Annexure referred to 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 and proper returns adequate for the purposes of out audit have been received from the Company's overseas branch not visited by us;

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 and with the unaudited returns from the branch;

iv. 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;

v. On the basis of the written representations received from the directors, as on 31st March, 2011, and taken on record by the Board of Directors, we report that none of the directors is 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;

vi. Without qualifying our opinion, attention is drawn to Note No. 18(b) on Schedule 22 regarding loans of Rs 962.00 lacs and interest receivable of Rs 585.79 lacs (including Rs 42.66 lacs in respect of loans where no principal amount is outstanding) which are overdue but based on the current status of negotiation with these parties, the management is hopeful to recover the amount in full. However, pending receipt of confirmation from these parties, we are unable to offer our comments in the matter.

vii. Attention is drawn to the following notes on Schedule 22.

a) Note No. 18(a) regarding certain advances of Rs. 500 lacs (Rs 500 lacs as at 31st March, 2010) against supply of raw materials which are pending beyond the stipulated delivery schedules. We are unable to opine on the recoverability/adjustment of these advances through supply of such materials and thus its consequent impact, if any, on the Company's profit. This had also caused us to qualify our audit opinion on the financial statements relating to the preceding year.

b) Note No. 6 regarding North Easter Electricity Supply Company of Odisha Limited (NESCO) who has revoked the waiver of dues granted under a settlement in an earlier year and raised demand for Rs 9,874.34 lacs (including delayed payment surcharge). The Company has made necessary representation to NESCO and the matter is under negotiation. Pending the outcome of the negotiation, we are unable to comment upon its consequential impact on the Company's profits.

viii. Subject to the effect of matter contained in para vii above whose impact is presently not ascertainable and read with our observation in para vi 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 balance sheet, of the state of affairs of the Company as at 31st March, 2011;

b) in the case of profit and loss account, of the profit of the Company for the year ended on that date; and

c) in the case of cash flow statement, of the cash flows of the Company for the year ended on that date.

ANNEXURE TO THE AUDITORS' REPORT

(REFERRED TO IN OUR REPORT OF EVEN DATE TO THE MEMBERS OF BALASORE ALLOYS LIMITED AS AT AND FOR THE YEAR ENDED 31ST MARCH, 2011)

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

(b) All fixed assets have not been physically verified by the management during the year but there is a regular programme of verification in a phased manner to cover all the items over a period of three years, which in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. As informed, no material discrepancies were noticed on such verification.

(c) There was no disposal of a substantial part of fixed assets during the year.

(ii) (a) The management has conducted physical verification of inventory at reasonable intervals during the year.

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

(c) The Company is maintaining proper records of inventory and no material discrepancies were noticed on physical verification.

(iii) (a) According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Accordingly, the provisions of clause 4(iii)(a) to (d) of the Order are not applicable to the Company and hence not commented upon.

(b) According to information and explanations given to us, the Company has not taken any loans, secured or unsecured, from companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Accordingly, the provisions of clauses 4(iii)(e) to (g) of the Order are not applicable to the Company and hence not commented upon.

(iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business, for the purchase of inventory and fixed assets and for the sale of goods. During the course of our audit, we have not observed any major weakness of continuing failure to correct any major weakness in the internal control system of the company in respect of these areas. There is no sale of service during the year.

(v) In our opinion, there are no contracts or arrangements that need to be entered in the register maintained under Section 301 of the Companies Act, 1956.

(vi) The Company has not accepted any deposits from the public.

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

(viii) To the best of our knowledge and as explained, the Central Government has not prescribed maintenance of cost records under clause (d) of sub-section (1) of section 209 of the Companies Act, 1956 for the products of the Company.

(ix) (a) Undisputed statutory dues including provident fund, investor education and protection fund, employees' state insurance, income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty, cess and other material statutory dues have generally been regularly deposited with the appropriate authorities though there has been a slight delay in few cases.

Further, since the Central Government has till date not prescribed the amount of cess payable under section 441A of the Companies Act, 1956, we are not in a position to comment upon the regularity or otherwise of the company in depositing the same.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, investor education and protection fund, employees' state insurance, income-tax, wealth-tax, service tax, sales-tax, customs duty, excise duty, cess and other material statutory dues were outstanding, at the year end, for a period of more than six months from the date they became payable.

(c) According to the records of the Company, the dues outstanding of income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty and cess on account of any dispute, are as follows :

Name of the Nature of dues Amount Period to which Forum where statute (Rs in lacs) the amount dispute is relates pending

Odisha Value Disallowance of Input 7.76 2005-06 Appellate Tribunal Added Tax tax credit set off Act, 2004

Central Sales Non Submission of Forms, 155.06 1991-92, 1994-95 Commissioner, Tax Act, 1956 Consignment sales, transit to 2000-01, Appellate Tribunal sales tax on DEPB sales and 2002-03 and Odisha High sales tax deferment (including Court interest and penalty on delayed payment)

Central Excise Demand on advances 16.27 1993-94 & High Court Act, 1944 received from customers 1994-95

Odisha Electricity Electricity Duty 6.96 2001 High Court (Duty) Act, 1961

(x) The Company has no accumulated losses at the end of the financial year and it has not incurred cash losses in the current and immediately preceding financial year.

(xi) Based on our audit procedures and as per the information and explanations given by the management, we are of the opinion that the Company has not defaulted in repayment of dues to the banks. There are no dues to financial institution and debenture holders.

(xii) According to the information and explanations given to us and based on the documents and records produced before 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 Companies (Auditor's Report) Order, 2003 (as amended) are not applicable to the Company.

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

(xv) As indicated in Note No. 10 on Schedule 22, the Company has given a guarantee for loans taken by a related party from bank or financial institutions, the terms and conditions whereof in our opinion are not prima-facie prejudicial to the interest of the Company.

(xvi) Based on the information and explanations given to us by the management, term loans were applied for the purpose for which the loans were obtained.

(xvii) According to the information and explanations given to us and on overall examination of the balance sheet of the Company, we report that funds amounting to Rs 3039.44 lacs raised on short-term basis have been used for long-term investment representing acquisition of fixed assets, investments and repayment of long term loans.

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

(xix) The Company did not have any outstanding debentures during the year.

(xx) The Company has not raised any money through a public issue during the year.

(xxi) Based upon the audit procedures performed for the purpose of reporting the 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 year.

For S. R. BATLIBOI & CO.

Firm Registration Number : 301003E

Chartered Accountants

per Sanjoy K Gupta

Place : Kolkata Partner

Date : 26th May, 2011 Membership No. 54968

Mar 31, 2010

1. We have audited the attached Balance Sheet of Balasore Alloys Limited (the Company) as at 31st March, 2010 and also the Profit and Loss account and the cash flow statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Companys 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. 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 the 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 (Auditors Report) Order, 2003 (as amended) 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.

4. Further to our comments in the Annexure referred to 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 with 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 the written representations received from the directors, as on 31st March, 2010, and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March, 2010 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 drawn to Note No 18 on Schedule 22 regarding certain advances of Rs. 500 lacs (Rs 735 lacs as at 31st March, 2009) against supply of raw materials which are pending beyond the stipulated delivery schedules. We are unable to opine on the recoverability / adjustment of these advances through supply of such materials and thus its consequent impact, if any, on the CompanyÃs profit. This had also caused us to qualify our audit opinion on the financial statements relating to the preceding year;

vii. Subject to the effect of matter contained in para vi 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 balance sheet, of the state of affairs of the Company as at 31st March, 2010;

b) in the case of profit and loss account, of the profit of the Company for the year ended on that date; and

c) in the case of cash flow statement, of the cash flows of the Company for the year ended on that date.

ANNEXURE TO THE AUDITORS REPORT (REFERRED TO IN OUR REPORT OF EVEN DATE TO THE MEMBERS OF BALASORE ALLOYS LIMITED AS AT AND FOR THE YEAR ENDED 31ST MARCH, 2010)

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

(b) All fixed assets have not been physically verified by the management during the year but there is a regular programme of verification in a phased manner to cover all the items over a period of three years, which in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. As informed, no material discrepancies were noticed on such verification.

(c) There was no substantial disposal of fixed assets during the year.

(ii) (a) The management has conducted physical verification of inventory at reasonable intervals during the year.

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

(c) The Company is maintaining proper records of inventory and material discrepancies noted on physical verification of raw material stock have been properly adjusted in the books.

(iii) (a) As informed, the Company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Therefore, the provisions of clauses 4(iii)(b) to (d) of the Order are not applicable.

(b) As informed, the Company has not taken any loans, secured or unsecured from companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Therefore, the provisions of clauses 4(iii)(f) and (g) of the Order are not applicable.

(iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business, for the purchase of inventory and fixed assets and for the sale of goods. During the course of our audit, no major weakness has been noticed in the internal control system in respect of these areas. As informed, the Company has not made any sale of services during the year.

(v) According to the information and explanations provided by the management, there have been no transactions during the year that need to be entered into the register maintained under section 301 of the Companies Act, 1956.

(vi) As informed, the Company has not accepted any deposits from the public.

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

(viii) To the best of our knowledge and as explained, the Central Government has not prescribed maintenance of cost records under clause (d) of sub-section (1) of section 209 of the Companies Act, 1956 for the products of the Company.

(ix) (a) The Company has been generally regular in depositing undisputed statutory dues including provident fund, investor education and protection fund, employees state insurance, income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty, cess and other statutory dues with the appropriate authorities though there has been slight delay in some cases.

(b) According to the information and explanations given to us, undisputed dues in respect of provident fund, investor education and protection fund, employees state insurance, income-tax, wealth-tax, service tax, sales-tax, customs duty, excise duty, cess and other statutory dues which were outstanding, at the year end for a period of more than six months from the date they became payable are as follows :-

Name of the Nature of the dues Amount statute (Rs in lacs)

Orissa Value Added Sales Tax deferment 4.45 Tax Act, 2004

Name of the Period to which Due Date Date of Statute the amount Payment relates

Orissa Value Added 1998-99 February, 2008 12th May, Tax Act. 2004 2010

(c) According to the records of the Company, the dues outstanding of income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty and cess on account of any dispute, are as follows :

Name of the Nature of dues Amount statute (Rs in lacs)

Orissa Value Disallowance of Input 7.76

Added Tax tax credit set off

Act, 2004

Central Sales Non Submission of Forms, 282.07

Tax Act, 1956 Consignment sales, transit

sales tax on DEPB sales and

sales tax deferment (including

interest and penalty on

delayed payment)

Central Excise Demand on advances 16.27

Act, 1944 received from customers

Orissa ElectricityElectricity Duty 6.96

(Duty) Act, 1961

Name of the Period to which Forum where statute the amount dispute is relates pending

Orissa Value 2005-06 Appellate Tribunal Added Tax Act, 2004

Central Sales 1991-92, 1994-95 Commissioner,

Tax Act, 1956 to 2000-01, Appellate Tribunal

2002-03 and Orissa High Court

Central Excise 1993-94 & High Court Act, 1944 1994-95

Orissa Electricity 2001 High Court (Duty) Act, 1961

(x) The Company has no accumulated losses at the end of the financial year and it has not incurred cash losses in the current and immediately preceding financial year.

(xi) Based on our audit procedures and as per the information and explanations given by the management, the Company has delayed in repayment of dues to banks [excluding Rs. 656.33 lacs, the repayment of which has been re-scheduled as indicated in Note No. 6 on Schedule 22] to the extent of Rs. 109.77 lacs during the year (the delay in such repayments being less than 90 days). As informed, no such dues were however in arrears as on the balance sheet date. There are no dues to financial institution and debenture holders.

(xii) According to the information and explanations given to us and based on the documents and records produced 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.

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

(xv) As indicated in Note No. 10 on Schedule 22, the Company has given a guarantee by way of pledge of its certain investments as securities for loans taken by a related party from bank or financial institutions, the terms and conditions whereof, considering its strategic nature, are stated to be not prejudicial to the interest of the Company.

(xvi) Based on the information and explanations given to us by the management, term loans were applied for the purpose for which these loans were obtained.

(xvii) According to the information and explanations given to us and on overall examination of the balance sheet of the Company, we report that the Company has used funds raised on short-term basis to the extent of Rs 5069.37 lacs for long-term investment in fixed assets & investments and repayment of long term loans.

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

(xix) The Company did not have any outstanding debentures during the year.

(xx) The Company has not raised any money through a public issue during the year.

(xxi) Based upon the audit procedures performed for the purpose of reporting the 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 S. R. BATLIBOI & CO.

22, Camac Street Firm Registration Number : 301003E

Block C, 3rd Floor Chartered Accountants

Kolkata 700 016. per R. K. AGRAWAL

Date : 25th May, 2010 Partner

Place : Kolkata Membership No. 16667

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