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Auditor Report of Dredging Corporation Of India Ltd.

Mar 31, 2015

We have audited the accompanying financial statements of Dredging Corporation of India Limited ('the Company') which comprise the Balance Sheet as at March 31, 2015, the Statement of Profit and Loss and the 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

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 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 the section 133 of the Act, read with Rule 7 of the Companies (accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the Assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of the appropriate accounting policies; making judgments and estimates that are reasonable and prudent; design implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the accuracy and completeness of the accenting 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.

3. Auditor's Responsibility

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

We have taken into account the provisions of the Act, the Accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under.

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 the disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal 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 control system over financial reporting and the operating effectiveness of such controls. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by 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.

4. Opinion

I. Basis for Qualified Opinion:

The Company had not complied with the provisions of Section 135, 149 (1),149(4) 177 and 178 of the Companies Act, 2013. At this stage, we are unable to comment on the consequential impact of non-compliance of these provisions, if any.

Qualified Opinion:

In our opinion and to the best of our information and according to the explanations given to us, except for the possible effects of the matter described in the Basis for Qualified opinion paragraph, the aforesaid financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, 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 MATTERS:

We draw attention to the following matters in the Notes to the financial statements:

a) We draw attention to the Note No. VI of the financial statements, where in the Company has made investments in Equity shares amounting to Rs.3,000 lakhs in Sethusamudram Corporation Limited (SCL), a special purpose vehicle was incorporated on 06.1.2004 for developing the Sethusamudram Channel Project. The dredging work at Palk Strait was suspended from 16- 07-2009. The management does not consider any diminution in the value of the investment and the same has been carried at cost. With regard to the previous statutory auditors qualification in this respect on the accounts for the financial year 2012-13, National Stock Exchange of India Ltd. (NSE) vide its letter No. NSE/LIST/8500 dated 26/12/2014 advised the Company to restate the financial statements for FY 2012-13. In response Company has filed review petition dated 21/01/ 2015 to the NSE to review its decision.

We were informed that, SEBI has given personal hearing on the review petition filed by the DCI and decision from the SEBI is awaited, hence the provision for diminution on investment is not made.

b) Trade Receivables includes, Rs.11,433.18 lakhs receivable from M/s. Sethusamudram Corporation Ltd. (SCL) which is pending for more than 3 years. Out of the above, Company has provided for doubtful debts to the extent of Rs.3019.27 lakhs. The Company is of the view that an amount of Rs.30897.00 lakhs will be reimbursed by GOI (at whose behest the contract with SCL was entered) to DCI to compensate the actual expenditure incurred on this project. In view of this, a provision for doubtful debts is not made in respect of receivables in this regard amounting to Rs.8413.91 lakhs.

c) DCI acquired Dredge XVIII from Mazagon Dock Limited, Mumbai (MDL) in Jan 2011 with performance Bank Guarantee of Rs.27 cr. Since there were major guarantee defects and MDL was failed to attend the performance defects, BG of Rs.27 cr. has been invoked by the DCI. DCI had entered into new agreement with L&T for Rs.30 cr. to remedy the manufacturing defects and Rs.20 cr. has been capitalized during the current financial year.

d) The balance of sundry debtors, creditors, loans and advances, other receivables and other payables being subject to confirmation and reconciliation resulting in the balances as per books of account not verified by us.

5. Report on Other Legal and Regulatory Requirements

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

ii) As required by section 143(3) of the Act, we report that:

a. We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;

b. In our opinion proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books;

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

d. In our opinion, the afore said 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. On the basis of the written representation received from the directors as on 31 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.

f. 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:

* The company has disclosed the impact of pending litigations on its financial position in its financial statements- refer note XVI 5b-5e to the financial statements;

* The company did not have any long term contracts including derivative contracts for which there were any material foreseeable losses.

* There are no amounts which are required to be transferred to the Investor Education and Protection Fund by the company.

ANNEXURE TO THE AUDITORS' REPORT

(Referred to in Paragraph 1under "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 program of verification which in our opinion, provides for physical verification of all the fixed assets at reasonable intervals. According to the information and explanations given to us, no material discrepancies were noticed on such verification.

(ii) In respect of its inventory:

(a) Records evidencing the physical verification of inventories are not provided to us, hence, we are not able to comment on physical verification of inventories.

(iii) The company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained u/s 189 of the Act. Accordingly, the provisions of Clause 3

(iii) 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 with regard to the purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit, we have not observed any major weakness in such internal control system.

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

(vi) To the best of our knowledge, the Central Government has not prescribed maintenance of the cost records under Section 148 (1) of the Act in respect of the nature of business carried on by the Company.

(vii) According to the information and explanations given to us, in respect of Statutory Dues,

(a) The Company has generally been regular in depositing undisputed statutory dues including Provident Fund, Income Tax, Service Tax, Duty of Customs,Value Added Tax, Cess and other material statutory dues applicable to it with the appropriate authorities.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of Provident Fund, Income Tax, Service Tax, Duty of Customs,Value Added Tax, Cess and other material statutory dues in arrear, as at March 31, 2015 for a period of more than six months from the date they became payable.

(c) According to the information and explanations provided by the management, there are dues in respect of Service Tax given below, which have not been deposited on account of dispute :

Name of the Nature of Amount Period to which statute dues (Rs,in lakhs) relates to

6243.32 2005-2010

Finance Act,1994 Service Tax 728.66 2010-2011



318.87 2005-2008

206.95 2011-2012

19.32 2007-2008

Name of the Pending before Remarks

CESTAT, Bangalore Non-eligibility of Cenvat

Finance Act,1994 Service Tax CESTAT, Bangalore Credit in respect of Dredger

CESTAT, Bangalore and spare parts but disputed

CESTAT, Bangalore by Company

CESTAT, Bangalore Penalty on account of delay in payment of service tax but disputed by Company

(d) We are informed that there are no amounts which are required to be transferred to Investor Education and Protection Fund in accordance with the relevant provisions of the Companies Act 1956. Accordingly, the provisions of Clause 3 (vii) (c) of the Order are not applicable to the Company.

(viii) 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.

(ix) In our opinion, and according to the information and explanations given to us, the company has not defaulted in the repayment of dues to Banks, debenture holders and financial institutions.

(x) According to the information and explanations given to us, the company has not given guarantees for loans taken by others from Banks and financial institutions.

(xi) In our opinion, and according to the information and explanations given to us, no fresh term loans have been obtained by the Company, accordingly, the provisions of Clause 3 (xi) of the Order are not applicable to the Company.

(xii) To the best of our knowledge and according to the information and explanations given to us, no fraud by the Company and no material fraud on the company has been noticed or reported during the year.

For Tukaram & Co

Chartered Accountants

[Firm Regn No. 004436S]

-sd-

Place : Hyderabad (P.MURALI )

Date : 26.05.2015 Partner : Membership No. 221625


Mar 31, 2014

1. Report on the Financial Statements

We have audited the accompanying financial statements of Dredging Corporation of India Limited (''the Company'') which comprise the Balance Sheet as at March 31, 2014, the Statement of Profit and Loss and the 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 Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 ("the Act") read with the General circular 15/2013 dated 13 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 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 judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit modified audit opinion(Qualified opinion & Disclaimer of opinion).

4. Opinion

I. Basis for Qualified Opinion:

We draw attention to the Note VI to the financial statements wherein the company has not recognized impairment of long-term investments of Rs. 3,000 lacs (Last year: Rs. 3,000 lacs) in M/s Sethusamudram Corporation Limited (SCL); which is not in accordance with para 17 of "AS- 13 Accounting for Investments" as prescribed under sub-section 3C of the section 211 of the companies Act 1956 read with the General Circular 15/2013 dated 13 September 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act,2013["Act"]. The decline in investment value (other than temporary), is envisaged with reference to Investee''s assets and results , prolonged litigation , expected cash flows, restrictions on distributions by investee or disposal by Investor etc.

The above note was carried by way of Qualified Opinion for the year ended Mar31,2013 whereby it was stated that had such provision as stated in paragraph 4(a) been recognized, the profits of the company for the year ended 31st March 2013 and the reserves of the company as 31st March 2013 would have been lower by Rs. 3,000 lakhs; thereby resulting in net loss of Rs. 949.10 Lakhs for the year ending March31, 2013.

Though reported profits for the current year ended March31, 2014 remains unaffected, yet Shareholders'' Funds which stood at Rs. 1,39,540.61 lacs as at that date would be lower by Rs. 3,000 lacs.

Qualified Opinion:

In our opinion, and to the best of our information and according to the explanations given to us, subject to the effect of our remark in paragraph 4(I) in respect of the corresponding figures for the year ended March 31, 2013 of the adjustments , if any , to the results of operations for the year ended March 31, 2013 and to the state of affairs as on that date, the said financial statements read together with the other notes thereon 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.

II Basis of Disclaimer of Opinion:

Of the company''s fixed assets which are carried in the balance sheet , the company has not provided for impairment loss on Dredger XVIII [book value / carying amount as on March 31,2014: Rs. 21,266.19 lacs] which was acquired in January 2011 but was not in use since March 2012 on account of technical defects and design flaws. Non provision of impairment loss is a departure from AS-28" Impairment of Assets" as prescribed under the Act. Management was unable to provide an Independent Expert''s Technical Evaluation Report as also, a valuation Report in order to arrive at the fair value and , consequently, quantify the possible impairment loss of the dredger. As a result , we were unable to quantify the impairment loss in respect of the said asset.

Disclaimer of Opinion:

Because of the significance of the matters described in the basis for Disclaimer of Opinion paragraph , we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Accordingly, we do not express an opinion on the said matter.

III. Emphasis of Matters:

We draw attention to note X - " Trade Receivables" to the financial statements which describes the Uncertainty a to timing of recovery of debts from M/s Sethusamudram Corporation Ltd.(SCL) amounting to Rs. 11,433.18 lakhs in respect of which the company has not provided for doubtful debts for Rs. 8,413.91 lakhs on its trade receivables of Rs. 11,433.18 Lakhs (Last year : Rs. 11,878 Lakhs) due from M/s SCL - against which the company had already made a part provision of Rs. 3,019.27 lakhs in earlier years. Owing to certain recent developments in its favour, the company is confident of recovering the receivables from Government, at whose behest the contract with SCL was entered into.

We do not offer a qualified opinion in respect of the above matter.

5. Report on Other Legal and Regulatory Requirements

i) As required by the Companies (Auditor''s Report) Order, 2003 ("the Order"), as amended, 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.

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

a. we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;

b. in our opinion proper books of account as required by law have been kept by the Company so far as appears from our examination of those books;

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

d. in our opinion, subject to our remark in paragraph 4(I) &4 (II) above, the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement comply with the Accounting Standards referred to in the Act; and

e. the provisions of Section 274(1)(g) of the Companies Act, 1956 are not applicabe to this Company vide number 2/5/2001- CL-V: General Circular No.8/2002 dated 22-03-2002 issued by Ministry of Law, Justice and Company Affairs, Department of Company Affairs.

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) The Company has a regular program of physical verification of its fixed assets by which fixed assets are verified in a phased manner. Accordingly, certain fixed assets have been verified during the year and as informed to us, no material discrepancies were noticed on such verification.

(c) The Company has not disposed off substantial part of the fixed assets during the year and the going concern status of the Company is not affected.

(ii) In respect of its inventories:

(a) Physical verification of inventory has been conducted by the management at reasonable intervals during the year; except in case of Stock of stores/spares-in-transit.

(b) In respect of procedure of physical verification of Stock of stores / spares-in-transit followed by the management, the same needs substantial improvement, which should commensurate with the size of the Company and the nature of its business.

(c) Except in case of stock of stores/spares-in-transit, the Company has maintained proper records of Inventory; and as informed to us, no material discrepancies were noticed on physical verification as compared to the book records.

(iii) In respect of loans granted and taken to / from parties covered in the register maintained u/s 301 of the Companies Act, 1956 ("the Act")

(a) The company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained u/s 301 of the Act.

(b) 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 Act.

(iv) In respect of internal control

In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business for the purchase of inventory and fixed assets and for sale of goods and services. However, our test checks revealed weaknesses in the internal control system which requires that substantial improvement viz. omission of entries, lack of checks/controls to prevent omission/duplication of entries, delay in quarterly provisions etc.

(v) In respect of contracts or arrangements need to be entered into a register maintained u/s 301 of the Act.

According to the information and explanations given to us, there were no contracts or arrangements referred to in Section 301 of the Act that need to be entered into the Register required to be maintained in pursuance of Section 301 of the Act. In view of the above, clause 4(v)(b) is not applicable.

(vi) In respect of deposits from public

The Company has not accepted any deposits from the public during the year.

(vii) In respect of internal audit system: In our opinion, although the company has an internal audit system commensurate with its size and nature of its business; yet the same needs to be transformed from a transaction-based audit into risk-based audit and focus on internal controls, risk assessment, risk mitigation plans etc. Further, it was observed that, Management, in majority of cases, has neither furnished replies to audit queries/findings nor has initiated any action on them.

(viii) In respect of maintenance of cost records

To the best of our knowledge, the Central Government has not prescribed maintenance of cost records under Section 209(1)(d) of the Act in respect of the nature of business carried on by the Company.

(ix) In respect of statutory dues

(a) The Company is generally regular in depositing the undisputed statutory dues including Provident Fund, Investor education and protection Fund, Income Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Cess and any other statutory dues with the appropriate authorities. According to the information and explanations given to us, no undisputed amounts payable in respect of aforementioned dues were in arrears, as at March 31, 2014 for the period of more than six months from the date they became payable.

(b) As at March 31 2014, according to the records of the company and information an explanations given to us, the following are the particulars of dues on account of Service tax matters that have not been deposited on account of any dispute :

Name of the Nature of dues Amount Period to which the statute (Rs. in lakhs) amount relates Various years covering the period

6243.32 2005-2010

Finance Act,1994 Service Tax 728.66 2010-2011

318.87 2005-2008

206.95 2011-2012

19.32 2007-2008 TOTAL 7517.12

Name of the Forum where Subject matters statute pending

CESTAT, Bangalore Non-eligibility of Cenvat

Finance Act,1994 CESTAT, Bangalore Credit in respect of Dredger

CESTAT, Bangalore and spare parts but disputed

CESTAT, Bangalore by Company

CESTAT, Bangalore Penalty on account of delay in payment of sevice tax but disputed by Company

(x) In respect of accumulated losses and cash losses

The Company has no accumulated losses and has not incurred cash losses during the financial year covered by our audit and in the immediately preceding financial year.

(xi) In respect of dues to financial institution / banks / debentures

The company has not defaulted in repayment of dues to financial institutions or banks.

(xii) In respect of loans and advances granted on the basis of security

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 respect of provisions applicable to Chit fund

The Company is not a chit fund or a nidhi or mutual benefit fund / society. Therefore, the provisions of clause 4(xiii) of the Companies (Auditor''s Report) Order, 2003 are not applicable to the company.

(xiv) In respect of dealing or trading in shares, securities, debentures and other investment

The company has not been dealing or trading in shares, securities, debentures and other investments. Therefore, the provisions of clause 4(xiv) of the Companies (Auditor''s Report) Order, 2003 are not applicable to the company.

(xv) In respect of guarantee given for loans taken by others

The company has not given any guarantee for loans taken by others from banks or financial institutions. Therefore, the provisions of clause 4(xv) of the Companies (Auditor''s Report) Order, 2003 are not applicable to the company.

(xvi) In respect of application of term loans

The company has availed External Commercial Borrowings (ECB) term loans during the year for acquisition of Dredgers and the term loans were utilized for the purpose for which they were obtained.

(xvii) In respect of fund used

The company has not raised any funds on short-term basis or long-term basis during the year and therefore, the provisions of clause 4(xvii) of the Companies (Auditor''s Report) Order, 2003 are not applicable to the company.

(xviii) In respect of preferential allotment of shares

The company has not made any preferential allotment of shares to parties and companies covered in the register maintained u/s 301 of the Act, during the year.

(xix) In respect of securities created for debentures

The company has not issued any debentures during the year.

(xx) In respect of end use of money raised by public issues

We have verified the end use of money raised by public issue as disclosed in Note to Accounts.

(xxi) In respect of fraud

In our opinion and according to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the year that causes the financial statements to be materially mis-stated.

For G.R.KUMAR & Co. LLP Chartered Accountants [Firm Regd No. 004941S]

( CA N.S.S.H.Bhaskar ) Partner : M. No. 204962

Place : Visakhapatnam Date : 28th May, 2014


Mar 31, 2013

1. Report on the Financial Statements

We have audited the accompanying financial statements of Dredging Corporation of India Limited (''the Company'') which comprise the Balance Sheet as at March 31'' 2013'' the Statement of Profit and Loss and the 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 Standards referred to in sub-section (3C) of section 211 of the Companies Act'' 1956 ("the Act”). This responsibility includes the design'' implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement'' whether due to fraud or error.

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 judgment'' including the assessment of the risks of material misstatement of the financial statements'' whether due to fraud or error. In making those risk assessments'' the auditor considers internal control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management'' as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

4. Opinion

We draw attention to the following Note:- (I) The Company has not recognized impairment of long term investments of Rs.3''000 lacs (Last year : Rs.3000 lacs) in M/s. SCL; which is not in accordance with para 17 of "AS-13 Accounting for investments” as prescribed under sub-section 3C of section 211 of the Act. The decline in investment value (other than temporary)'' is envisaged with reference to Investee''s assets and results'' prolonged litigation'' expected cash flows'' restrictions on distributions by Investee or disposal by Investor etc.

Had such provision been recognized'' the profits of the Company for the year ended 31st March'' 2013 and the reserves of the Company as at 31st March'' 2013 would have been lower by ''Rs.3''000 lacs; thereby resulting in net loss of Rs.949.10 lacs. In our opinion'' subject to our remark in paragraph 4(I) above the financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(a) in the case of the balance sheet'' of the state of affairs of the Company as at March 31'' 2013;

(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

5. Report on Other Legal and Regulatory Requirements

i) As required by the Companies (Auditor''s Report) Order'' 2003 ("the Order”)'' as amended'' 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. ii) As required by section 227(3) of the Act'' we report that: a. we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit; b.in our opinion proper books of account as required by law have been kept by the Company so far as appears from our examination of those books; c. the Balance Sheet'' Statement of Profit and Loss and Cash Flow Statement dealt with by this Report are in agreement with the books of account; d.in our opinion'' subject to our remark in paragraph 4(I) above'' the Balance Sheet'' Statement of Profit and Loss and Cash Flow Statement comply with the Accounting Standards referred to in subsection (3C) of section 211 of the Companies Act'' 1956; and

e. the provisions of Section 274(1)(g) of the Companies Act'' 1956 are not applicabe to this Company vide number 2/5/2001- CL-V: General Circular No.8/2002 dated 22-03-2002 issued by Ministry of Law'' Justice and Company Affairs'' Department of Company Affairs.

ANNEXURE TO AUDITORS'' REPORT

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

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

(b) All the fixed assets have been physically verified by the management during the year in a phased manner. As informed to us'' no material discrepancies were noticed on such verification.

(c) The Company has not disposed off substantial part of the fixed assets during the year and the going concern status of the company is not affected.

(ii) (a) Physical verification of inventory has been conducted by the management at reasonable intervals during the year; except in case of Stock of stores/ spares-in-transit.

(b) In respect of procedure of physical verification of stock of stores/spares-in-transit followed by the management'' the same needs substantial improvement'' which should commensurate with the size of the Company and the nature of its business.

(c) Except in case of stock of stores/spares-in-transit'' the Company has maintained proper records of inventory; and as informed to us'' no material discrepancies were noticed on physical verification as compared to the book records.

(iii) (a) 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. (b) 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. (iv) In our opinion and according to the information and explanations given to us'' there are adequate internal control procedures commensurate with the size of the Company and the nature of its business for the purchase of inventory and fixed assets and for sale of goods and services. (v) According to the information and explanations given to us'' there were no contracts or arrangements referred to in Section 301 of Companies Act'' 1956 that need to be entered into the Register required to be maintained in pursuance of Section 301 of the Companies Act'' 1956.

In view of the above'' Clause 4 (v) (b) is not applicable. (vi) The Company has not accepted any deposits from the public during the year (vii) In our opinion'' although the Company has an internal audit system commensurate with its size and nature of its business; yet the same needs to be transformed into risk-based audit and focus on ineternal controls'' risk assessment'' risk mitigation plans etc. (viii) To the best of our knowledge the Central Government has not prescribed maintenance of cost records under Section 209(1)(d) of the Companies Act'' 1956 in respect of the nature of business carried on by the Company. (ix) (a) The Company is generally regular in depositing the undisputed statutory dues including Provident Fund'' Investor Education and Protection Fund'' Income Tax'' Sales Tax'' Wealth Tax'' Service Tax'' Customs Duty'' Cess and any other statutory dues with the appropriate authorities. According to the information and explanations given to us'' no undisputed amounts payable in respect of aforementioned dues were in arrears'' as at March 31'' 2013 for the period of more than six months from the date they became payable.

(x) The Company has no accumulated losses and has not incurred cash losses during the financial year covered by our audit and in the immediately preceding financial year.

(xi) The Company has not defaulted in repayment of dues to financial institutions or banks. As the due date of repayment of bonds do not fall in this year'' the question of repayment does not arise. (xii) The Company has not granted loans and advances on the basis of security by way of pledge of shares'' debentures and other securities.

(xiii) The Company is not a chit fund or a nidhi/mutual benefit fund/society. Therefore'' clause 4(xiii) of the Companies (Auditor''s Report) Order'' 2003 is not applicable to the company.

(xiv) The Company has not been dealing or trading in shares'' securities'' debentures and other investments. Therefore'' clause 4(xiv) of the Companies (Auditor''s Report) Order'' 2003 is not applicable to the Company.

(xv) The Company has not given any guarantee for loans taken by others from banks or financial institutions. Therefore'' clause 4(xv) of the Companies (Auditor''s Report) Order'' 2003 is not applicable to the Company.

(xvi) The Company has availed External Commercial Borrowings (ECB) term loans during the year for acquisition of Dredgers and the term loans were utilised for the pupose for which they were obtained.

(xvii) The Company has not raised any funds on short-term basis or long-term basis during the year and therefore'' clause 4(xvii) of the Companies (Auditor''s Report) Order'' 2003 is not applicable.

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

(xix) The Company has issued tax free'' secured'' non-convertible and redeemable bonds of Rs.1000 each amounting Rs.5887.80 lakhs.

The bonds are fully secured by way of charge on DCI Back-Hoe Dredger. (xx) We have verified the end use of money raised by public issue as disclosed in Note to Accounts. (xxi) In our opinion and according to the information and explanations given to us'' no fraud on or by the Company has been noticed or reported during the year that causes the financial statements to be materially misstated.

For G.R.Kumar & Co.

Chartered Accountants

Firm Reg No. 004941S

sd/-

(CA G.R.KUMAR)

Place : Visakhapatnam Partner

Date : 18.06.2013 Membership No. 052367


Mar 31, 2012

1. We have audited the attached Balance Sheet of DREDGING CORPORATION OF INDIA LIMITED, VISAKHAPATNAM as at 31st March, 2012 and also the Statement of Profit and Loss of the Company for the year ended on that date annexed thereto and the Cash Flow Statement for the year ended on that date. These financial statements are the responsibility of the Company's Management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with auditing standards generally accepted in India. 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 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 of our opinion.

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

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

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

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

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

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

(v) The provisions of Section 274(1)(g) of the Companies Act, 1956 are not applicable to this company vide number 2/5/ 2001-CL-V : General Circular No.8/2002 dated 22-03-2002 issued by Ministry of Law, Justice and Company Affairs, Department of Company Affairs.

(vi) In our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with the Accounting Policies and Notes on 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, 2012;

(b) in the case of the Statement of Profit and Loss, 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 AUDITORS' REPORT

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

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

(b) All the fixed assets have been physically verified by the management during the year in a phased manner. As informed to us, no material discrepancies were noticed on such verification.

(c) The Company has not disposed off substantial part of the fixed assets during the year and the going concern status of the company is not affected.

(ii) (a) Physical verification of inventory has been conducted by the management at reasonable intervals during the year; except in case of Stock of stores/ spares-in-transit.

(b) In respect of procedure of physical verification of stock of spares/spares-in-transit followed by the management, the same needs substantial improvement, which should commensurate with the size of the Company and the nature of its business.

(c) Except in case of stock of spares/spares-in-ransit, the Company has maintained proper records of inventory; and as informed to us, no material discrepancies were noticed on physical verification as compared to the book records.

(iii) (a) 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.

(b) 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.

(iv) In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business for the purchase of inventory and fixed assets and for sale of goods and services.

(v) According to the information and explanations given to us, there were no contracts or arrangements referred to in Section 301 of Companies Act, 1956 that need to be entered into the Register required to be maintained in pursuance of Section 301 of the Companies Act, 1956.

In view of the above, Clause 4 (v) (b) is not applicable.

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

(vii) In our opinion, although the Company has an internal audit system commensurate with its size and nature of its business; yet the same needs to be transformed into risk-based audit and focus on inernal controls, risk assessment etc.

(viii)The Central Government has not prescribed maintenance of cost records under Section 209(1)(d) of the Companies Act, 1956 in respect of the nature of business carried on by the Company.

(ix) (a) The Company is generally regular in depositing the undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Income Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Cess and any other statutory dues with the appropriate authorities. According to the information and explanations given to us, no undisputed amounts payable in respect of aforementioned dues were in arrears, as at 31st March, 2012 for the period of more than six months from the date they became payable.

(b) According to information and explanations given to us, there were no statutory dues that they have not been deposited on account of dispute.

(x) The Company has no accumulated losses and has not incurred cash losses during the financial year covered by our audit and in the immediately preceding financial year.

(xi) The Company has not defaulted in repayment of dues to financial institutions or banks. As there are no debentures, the question of repayment does not arise.

(xii) The Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

(xiii) The Company is not a chit fund or a nidhi/mutual benefit fund/society. Therefore, clause 4(xiii) of the Companies (Auditor's Report) Order, 2003 is not applicable to the company.

(xiv) The Company has not been dealing or trading in shares, securities, debentures and other investments. Therefore, clause 4(xiv) of the Companies (Auditor's Report) Order, 2003 is not applicable to the Company.

(xv) The Company has not given any guarantee for loans taken by others from banks or financial institutions. Therefore, clause 4(xv) of the Companies (Auditor's Report) Order, 2003 is not applicable to the Company.

(xvi) The Company has availed External Commercial Borrowings (ECB),Term Loans during the year for acquisition of Dredgers and the term loan is utilised for the pupose for which it was obtained.

(xvii) The Company has not raised any funds on short-term basis or long-term basis during the year and therefore, clause 4(xvii) of the Companies (Auditor's Report) Order, 2003 is not applicable.

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

(xix) The Company has not issued debentures during the year and therefore, the clause 4(xix) of the Companies (Auditor's Report) Order, 2003 is not applicable.

(xx) The Company has not raised money by public issue during the year and therefore, the clause 4 (xx) of the Companies (Auditor's Report) Order, 2003 is not applicable.

(xxi) In our opinion and according to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the year that causes the financial statements to be materially misstated.

For G.R.Kumar & Co.

Chartered Accountants

Firm Reg No. 004941S

-sd-

(CA P.VIKAM)

Place : New Delhi Partner

Date : 28/05/2012 Membership No. 216542


Mar 31, 2011

1. We have audited the attached Balance Sheet of DREDGING CORPORATION OF INDIA LIMITED, VISAKHAPATNAM as at 31st March, 2011 and also the Profit and Loss Account of the Company for the year ended on that date annexed thereto and the Cash Flow Statement for the year ended on that date. These financial statements are the responsibility of the Company's Management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with auditing standards generally accepted in India. 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 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 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 hereto a statement on the matters specified in paragraph 4 and 5 of the said Order.

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

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

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

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

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

(v) The provisions of Section 274(1)(g) of the Companies Act, 1956 are not applicable to this company vide number 2/

5/2001-CL-V : General Circular No.8/2002 dated 22-03-2002 issued by Ministry of Law, Justice and Company Affairs,Department of Company Affairs.

(vi) In our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with the Accounting Policies and Notes on 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 the 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 AUDITORS' REPORT

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

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

(b) All the fixed assets have been physically verified by the management during the year in a phased manner. As informed to us, no material discrepancies were noticed on such verification.

(c) The Company has not disposed off substantial part of the fixed assets during the year and the going concern status of the company is not affected.

(ii) (a) Physical verification of inventory has been conducted by the management 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 has maintained proper records of inventory. As informed to us, no material discrepancies were noticed on physical verification as compared to the book records.

(iii) (a) 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. In view of the above, clause 4 (iii) (b), (c) and (d) are not applicable. (e) 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. In view of the above, Clause 4 (iii) (f) and (g) are not applicable.

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

(v) (a) According to the information and explanations given to us, there were no contracts or arrangements referred to in Section 301 of Companies Act,1956 that need to be entered into the Register required to be maintained in pursuance of Section 301 of the Companies Act, 1956. In view of the above, Clause 4 (v) (b) is not applicable.

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

(vii) In our opinion, the Company has an internal audit system commensurate with its size and nature of its business. (viii) The Central Government has not prescribed maintenance of cost records under Section 209(1)(d) of the Companies Act,1956 in respect of the nature of business carried on by the Company.

(ix) (a) The Company is generally regular in depositing the undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Income Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Cess and any other statutory dues with the appropriate authorities. According to the information and explanations given to us, no undisputed amounts payable in respect of aforementioned dues were in arrears, as at 31st March, 2011 for a period of more than six months from the date they became payable. (b) According to information and explanations given to us, there were no statutory dues that have not been deposited on account of dispute.

(x) The Company has no accumulated losses and has not incurred cash losses during the financial year covered by our audit and in the immediately preceding financial year.

(xi) The Company has not defaulted in repayment of dues to financial institutions or banks. As there are no debentures,the question of repayment does not arise.

(xii) The Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

(xiii) The Company is not a chit fund or a nidhi/mutual benefit fund/society. Therefore, clause 4(xiii) of the Companies (Auditor's Report) Order, 2003 is not applicable to the company.

(xiv)The Company has not been dealing or trading in shares, securities, debentures and other investments. Therefore, clause 4(xiv) of the Companies (Auditor's Report) Order, 2003 is not applicable to the Company. (xv) The Company has not given any guarantee for loans taken by others from banks or financial institutions. Therefore,clause 4(xv) of the Companies (Auditor's Report) Order, 2003 is notapplicable to the Company.

(xvi) The Company has not obtained any term loans during the year and therefore, clause 4

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

(xvii) The Company has not raised any funds on short-term basis or long-term basis during the year and therefore, clause

4(xvii) of the Companies (Auditor's Report) Order, 2003 is not applicable.

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

(xix) TheCompany has not issued debentures during the year and therefore, the clause 4(xix) of the Companies (Auditor's Report) Order, 2003 is not applicable. (xx) The Company has not raised money by public issue during the year and therefore, the clause 4 (xx) of the Companies

(Auditor's Report) Order, 2003 is not applicable. (xxi) In our opinion and according to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the year that causes the financial statements to the materially misstated.

For Rao & Narayan Chartered Accountants -Sd-

(P.V. SUBBA RAO)

Place : New Delhi Partner Date : 30/05/11 Membership No. 09269


Mar 31, 2010

1. We have audited the attached Balance Sheet of DREDGING CORPORATION OF INDIA LIMITED, VISAKHAPATNAM as at 31st March, 2010 and also the Profit and Loss Account of the Company for the year ended on that date annexed thereto and the Cash Flow Statement for the year ended on that date. 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 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 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 hereto a statement on the matters specified in paragraph 4 and 5 of the said Order.

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

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

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

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

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

(v) The provisions of Section 274(1 )(g) of the Companies Act, 1956 are not applicable to this company vide number 2/5/ 2001 -CL-V : General Circular No.8/2002 dated 22-03-2002 issued by Ministry of Law, Justice and Company Affairs, Department of Company Affairs.

(vi) In our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with the Accounting Policies and Notes on 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 the 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 AUDITORS REPORT (Referred to in paragraph (3) of our Report of even date)

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

(b) All the fixed assets have been physically verified by the management during the year in a phased manner. As informed to us, no material discrepancies were noticed on such verification.

(c) The Company has not disposed off substantial part of the fixed assets during the year and the going concern status of the company is not affected.

(ii) (a) Physical verification of inventory has been conducted by the management 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 has maintained proper records of inventory. As informed to us, no material discrepancies were noticed on physical verification as compared to the book records.

(iii) (a) 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. In view of the above, clause 4 (iii) (b), (c) and (d) are not applicable. (e) 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. In view of the above, Clause 4 (iii) (f) and (g) are not applicable. (iv) In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business, for the purchase of inventory and fixed assets and for sale of goods and services. During the course of our audit, we have not observed any major weaknesses in internal control.

(v) (a) Accordingtotheinformationandexplanationsgiventous,therewereno contracts or arrangements referred to in Section 301 of Companies Act, 1956 that need to be entered into the Register required to be maintained inpursuance of Section 301 of the Companies Act, 1956. In view of the above, Clause 4 (v) (b) is not applicable. (vi) The Company has not accepted any deposits from the public during the year

(vii) In our opinion, the Company has an internal audit system commensurate with its size and nature of its business. (viii) The Central Government has not prescribed maintenance of cost records under Section 209(1 )(d) of the Companies Act, 1956 in respect of the nature of business carried on by the Company. (ix) (a) The Company is generally regular in depositing the undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Income Tax, Sales Tax, Wealth Tax, ServiceTax, Customs Duty, Cess and any other statutory dues with the appropriate authorities. According to the information and explanations given to us, no undisputed amounts payable in respect of aforementioned dues were in arrears, as at 31" March, 2010 for a period of more than six months from the date they became payable. (b) According to information and explanations given to us, there were no statutory dues that have been deposited on account of dispute. (x) The Company has no accumulated losses and has not incurred cash losses during the financial year covered by our audit and in the immediately preceding financial year. (xi) The Company has not defaulted in repayment of dues to financial institutions or banks. As there are no debentures, the question of repayment does notarise. (xii) The Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

(xiii) The Company is not a chit fund or a nidhi/mutual benefit fund/society. Therefore, clause 4(xiii) of the Companies (Auditors Report) Order, 2003 is not applicable to the company. (xiv) The Company has not been dealing or trading in shares, securities, debentures and other investments. There fore, clause4(xiv) of the Companies (Auditors Report) Order, 2003 is not applicable to the Company. (xv) The Company has not given any guarantee for loans taken by others from banks or financial institutions. Therefore, clause 4(xv) of the Companies (Auditors Report) Order, 2003 is not applicable to the Company. (xvi) The Company has not obtained any term loans during the year and therefore, clause 4(xvi) of the Companies (Auditors Report) Order, 2003 is not applicable to the Company.

(xvii) The Company has not raised any funds on short-term basis or long-term basis during the year and therefore, clause 4(xvii) of the Companies (Auditors Report) Order, 2003 is not applicable. (xviii) The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under section 301 ofthe Companies Act, 1956. (xix) The Company has not issued debentures during the year and therefore, the clause 4(xix) of the Companies (Auditors Report) Order, 2003 is not applicable.

(xx) The Company has not raised money by public issue during the year and therefore, the clause 4 (xx) of the Companies (Auditors Report) Order, 2003 is not applicable.

(xxi) In our opinion and according to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during theyearthat causes the financial statements to the materially misstated.

For Rao & Narayan Chartered Accountants

-Sd-

(P.V. SUBBA RAO)

Partner

Membership No. 09269

Place: Visakhapatnam Date : 27/05/10



 
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