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Auditor Report of Elgi Rubber Company Ltd.

Mar 31, 2016

Independent Auditors’ Report

To the members of M/s Elgi Rubber Company Limited

Report on the Standalone Financial Statements

1. We have audited the accompanying standalone financial statements of Elgi Rubber Company Limited ("the Company"), which comprise the balance sheet as at March 31, 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

2. 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 and presentation of these standalone financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of 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 financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

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

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

5. We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act and other applicable authoritative pronouncements issued by the Institute of Chartered Accountants of India. Those Standards and pronouncements require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

6. 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. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company’s Directors, as well as evaluating the overall presentation of the financial statements.

7. 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

8. 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 March 31, 2016, and its loss and its cash flows for the year ended on that date.

Report on Other Legal and Regulatory Requirements

9. As required by ‘the Companies (Auditor’s Report) Order, 2016’, issued by the Central Government of India in terms of sub-section 11 of section 143 of the Act (hereinafter referred to as the "Order"), and on the basis of such checks of the books and records of the Company as we considered appropriate and according to the information and explanations given to us, we give in the Annexure A a statement on the matters specified in paragraphs 3 and 4 of the Order.

10. 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 specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014

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

f. With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in Annexure B and

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 knowledge and belief and according to the information and explanations given to us

i. The Company has disclosed the impact, if any, of pending litigations as at March 31, 2016 on its financial position in its standalone financial statements;

ii. The Company has made provision as at March 31, 2016, as required under the applicable law or accounting standards for material foreseeable losses, if any, on long-term contracts including derivative contracts and

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company during the year ended March 31, 2016.

Annexure - A to the Independent Auditor’s Report

Referred to in para 9 of the independent auditor’s report of even date to the members of Elgi Rubber Company Limited on the standalone

financial statements for the year ended March 31, 2016.

We report that

1. a. The Company is maintaining proper records showing full particulars, including quantitative details and situation, of fixed assets.

b. The fixed assets are physically verified by the Management according to a phased programme designed 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. Pursuant to the programme, a portion of the fixed assets had been physically verified by the Management during the year and no material discrepancies have been noticed on such verification.

c. The title deeds of immovable properties, as disclosed in Note 2.09 on fixed assets to the financial statements, are held in the name of the Company, except for certain land and building acquired, pursuant to the scheme of merger having a carrying value of Rs, 1,901.89 Lacs from its subsidiary Company viz Treadsdirect Ltd and Rs, 42.75 Lacs from its another subsidiary Company viz. Parani Steels Private Limited, as at March 31, 2016, which are in the process of getting transferred in the name of the Company.

2. The physical verification of inventory excluding stocks with third parties has been conducted at reasonable intervals by the Management during the year. The discrepancies noticed on physical verification of inventory as compared to book records were not material and have been appropriately dealt with in the books of accounts.

3. The Company has granted unsecured loans to 2 companies covered in the register maintained under Section 189 of the Act. There are no firms /LLPs/ other parties covered in the register maintained under Section 189 of the Act to whom the Company has granted any unsecured loans.

a. In respect of the aforesaid loans, the terms and conditions under which such loans were granted are not prejudicial to the Company’s interest.

b. In respect of the aforesaid loans, the schedule of repayment of principal and interest has been stipulated, and the parties are repaying the principal amounts, as stipulated, and also regular in payment of interest as applicable.

c. In respect of the aforesaid loans, there is no amount which is overdue for more than ninety days.

4. In our opinion, and according to the information and explanations given to us, the Company has complied with the provisions of Section 185 and 186 of the Companies Act, 2013 in respect of the loans and investments made, guarantees and securities provided by it.

5. The Company has not accepted any deposits from the public within the meaning of Sections 73, 74, 75 and 76 of the Act and the Rules framed there under to the extent notified.

6. Pursuant to the rules made by the Central Government of India, the Company is required to maintain cost records as specified under Section 148(1) of the Act in respect of its products. We have broadly reviewed the same, and are of the opinion that, prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the records with a view to determine whether they are accurate or complete.

7. a. According to the information and explanations given to us and the records of the Company examined by us, in our opinion, the

Company is generally regular in depositing the undisputed statutory dues in respect of sales tax including value added tax and is regular in depositing undisputed statutory dues including provident fund, employees’ state insurance, income tax, service tax, duty of customs, duty of excise, cess and other material statutory dues, as applicable, with the appropriate authorities.

b. According to the information and explanations given to us and the records of the Company examined by us, there are no dues of income tax and service-tax, sales tax including value added tax, duty of customs and duty of excise which have not been deposited on account of any dispute other than the following as at March 31, 2016

Name of the Nature of dues statute

Amount (Rs, in million)

Period to which amount relates

Forum where dispute is pending

Income tax Rejection of certain claims and

disallowances, Non deduction of tax deducted at source on foreign payment and recalculation of capital gains

4.68

FY 2011 - 12

CIT Appeals, Coimbatore

Income Tax Rejection of certain claims,

(Erstwhile Treads disallowances and Non deduction of direct Ltd) tax deducted at source on foreign payment

5.69

FY 2010-11

CIT Appeals, Coimbatore

Income Tax Rejection of certain claims,

(Erstwhile Treads disallowances and Non deduction of direct Ltd) tax deducted at source on foreign payment

1.34

FY 2011-12

CIT Appeals, Coimbatore

Excise Duty Differential duty on own consumption (Erstwhile Treads direct Ltd)

5.27

FY 2006-07

CESTAT, Bangalore

Excise Duty Valuation dispute (Erstwhile Treads direct Ltd)

0.45

FY 2006-2007 to 2009-2010

Commissioner of Central Excise, Chennai.

Excise Duty Valuation dispute (Erstwhile Treads direct Ltd)

2.18

FY 2009-2014

Joint Commissioner -Calicut

Excise Duty Valuation dispute (Erstwhile Treads direct Ltd)

0.88

FY 2014-15

Assistant Commissioner Palakkad

Excise Duty Cenvat of Capital goods on leased machinery

0.14

FY 1997-98 & 1998-99

CESTAT - Chennai

Legal Metrology Compounding Fee

0.15

FY 2015-16

Controller of Legal Metrology, Kerala.

Service Tax (Erst Tax on Windmill services while Elgi Rubber Products Ltd)

0.09

FY 2005-06 to 2007-08

CESTAT - Chennai

Service tax (Erst Service Tax on Know how while Titan Tyre Care Products Ltd)

1.47

FY 2008-09

Commissioner of Central Excise - Coimbatore

Service Tax CENVAT of Service tax on

Reverse charge machanisim

1.47

FY 2013-14

Additional Commissioner - Kanjikode

VAT (Erstwhile Levy of Entry Tax on Rubber Treadsdirect Ltd) Products

0.08

FY 2004-05

Deputy Commissioner, Bhopal.

VAT (Erstwhile Dispute on rate of tax Treadsdirect Ltd)

4.17

FY 2008-09 to 2010-11

Appellate Tribunal , Hyderabad

VAT (Erstwhile Dispute on rate of tax Treadsdirect Ltd)

1.04

FY 2008-09 to 2010-11

Appellate Tribunal , Hyderabad

Name of the

Nature of dues

Amount

Period to which

Forum where

statute

(Rs, in million)

amount relates

dispute is pen

VAT (Erstwhile

Non Submission of documents

33.21

2007-08

Deputy Commissioner

Treadsdirect Ltd)

Appeals, Ernakulam.

VAT (Erstwhile

Non Submission of documents

25.24

2009-10

Assistant Commissioner,

Treadsdirect Ltd)

Special Circle, Palakkad

VAT (Erstwhile

Levy of Tax on labour charges

4.59

2010-2011 to

High Court Madras

Treadsdirect Ltd)

on Works Contract

2012-2013

VAT (Erstwhile

Sale/Purchase effected after RC

23.41

2010-2011

Assistant Commissioner -

Treadsdirect Ltd)

Cancellation

Palakkad

VAT (Erstwhile

ITC Reversal on VAT Dispute

12.06

2010-2011 to

Assistant Commissioner

Treadsdirect Ltd)

2011-2012

Appeals - Palakkad

VAT (Erstwhile

Non-submission of documents

5.64

2010-11

Appellate and Revisional

Treadsdirect Ltd)

board of Commercial Taxes

VAT (Erstwhile

Non production of documents

0.26

2013-14

Enquiry Officer, Walayar

Treadsdirect Ltd)

at Walayar check post

8. According to the records of the Company examined by us and the information and explanation given to us, the Company has not defaulted in repayment of loans or borrowings to any financial institution or bank or Government or dues to debenture holders as at the balance sheet date.

9. In our opinion, and according to the information and explanations given to us, the term loans have been applied for the purposes for which they were obtained.

10. During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of material fraud by the Company or on the Company by its officers or employees, noticed or reported during the year, nor have we been informed of any such case by the Management.

11. The Company has paid/ provided for managerial remuneration in accordance with the requisite approvals mandated by the provisions of Section 197 read with Schedule V to the Act.

12. As the Company is not a Nidhi Company and the Nidhi Rules, 2014 are not applicable to it, the provisions of Clause 3(xii) of the Order are not applicable to the Company.

13. The Company has entered into transactions with related parties in compliance with the provisions of Sections 177 and 188 of the Act. The details of such related party transactions have been disclosed in the financial statements as required under Accounting Standard (AS) 18, Related Party Disclosures specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

14. The Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year under review. Accordingly, the provisions of Clause 3(xiv) of the Order are not applicable to the Company.

15. The Company has not entered into any non-cash transactions with its directors or persons connected with him. Accordingly, the provisions of Clause 3(xv) of the Order are not applicable to the Company.

16. The Company is not required to be registered under Section 45-IA of the Reserve Bank of India Act, 1934. Accordingly, the provisions of Clause 3(xvi) of the Order are not applicable to the Company.

For Reddy, Goud & Janardhan

Chartered Accountants Firm Registration No. 003254S

B Anand

Coimbatore Partner

30.05.2016 Membership No. 29146

The annexure referred to the Independent Auditor’s Report of even date to the members of Elgi Rubber Company Limited on the standalone financial statements for the year ended March 31, 2016.

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Act

1. We have audited the internal financial controls over financial reporting of Elgi Rubber Company Limited ("the Company") as of March 31, 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

2. 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.

Auditors’ Responsibility

3. 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 "Guidance Note") and the Standards on Auditing 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 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.

4. 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 judgments, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

5. 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

6. A company’s internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal financial control over financial reporting includes 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 the transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company and

3. provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting

7. 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

8. 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 March 31, 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 on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.

For Reddy, Goud & Janardhan

Chartered Accountants

Firm Registration No. 003254S

B Anand

Coimbatore Partner

30.05.2016 Membership No. 29146


Mar 31, 2015

We have audited the accompanying standalone financial statements of Elgi Rubber Company Limited ("the Company"), which comprise the balance sheet as at 31st March, 2015, the statement of profit and loss, 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 provisions of the Act for safeguarding of 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 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 and other applicable authoritative pronouncements issued by the Institute of Chartered Accountant of India. Those standards and pronouncement 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 standalone 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 adequate internal financial controls 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 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.

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 sub- section (11) 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 to the extent applicable.

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 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 specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

e. 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.

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:

i. The Company has disclosed the impact of pending litigations on its financial position in its financial statements - Refer Note No. 2.20 to the 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 has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

The Annexure to the independent Auditor's Report

The annexure referred to in our independent auditor's report to the members of Elgi Rubber Company Limited ('the Company') on the standalone financial statements for the year ended on 31st March 2015.

We report that:

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

b. The Company has a regular programme of physical verification of its fixed assets by which fixed assets are verified in a phased manner over a period of three years. In accordance with this programme, certain fixed assets were verified during the year and no material discrepancies were noticed on such verification. In our opinion, this periodicity of physical verification is reasonable having regard to the size of the Company and the nature of its assets.

2. a. In our opinion and according to the information and explanations given to us, the management has conducted the physical verification of inventory at reasonable intervals during the year under review.

b. In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and nature of its business.

c. According to the information and explanations given to us, we are of the opinion that the Company is maintaining proper records of inventory and no material discrepancies were noticed on their physical verification.

3. The Company had not granted any loan secured or unsecured to any Companies, firms or other parties covered in the register maintained under Section 189 of the Companies Act, 2013 and hence the provisions of clause (iii) (a) and (b) said Order are not applicable.

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, with regard to the purchase of inventory and fixed assets and for the sale of goods and services. We have not observed any major weakness in the internal control system during the course of the audit.

5. The Company has not accepted any deposits from public.

6. 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 148 (1) of the Companies Act, 2013 related to the windmill activities and are of the opinion that prima-facie, the specified accounts and records have been made and maintained. We have not, however, made a detailed examination of the same.

7. a. According to the information and explanations given to us and on the basis of our examination of the records of the Company. amounts deducted/accrued in the books of accounts in respect of undisputed statutory dues including provident fund, employees' state insurance, income-tax, sales-tax, excise duty, wealth-tax, service tax, customs duty, value added tax, cess and other material statutory dues have been regularly deposited during the year by the Company with appropriate authorities.

According to the information and explanations given to us no undisputed amount payable in respect of provident fund, income tax, sales tax, wealth tax, service tax, duty of customs, value added tax, cess and other material statutory dues were in arrears as at 31st March 2015 for a period of more than six months from the date they became payable.

b. According to the information and explanations given to us, there are no material dues of wealth tax, duty of customs and cess which have not been deposited with the appropriate authorities on account of any dispute. However, according to information and explanations given to us, the following dues of income tax, sales tax, service tax and value added tax have not been deposited by the Company on account of disputes:

Name of the Nature of dues Amount Period to which statute (Rs. in million) amount relates

Income tax Rejection of certain claims and 4.68 FY 2011 - 12 disallowances and recalculation of capital gains

Income tax Disallowance of depreciation expense 0.67 FY 2008 - 09

related to exempted income

Service tax Service tax on windmill 0.09 FY 2004 - 08

Service tax on knowhow 1.48 FY 2008 - 09

Excise duty Excise duty on capital Goods 0.14 FY 1997 - 99

VAT VAT on movement of hired goods 0.26 FY 2013-14

Stamp duty Additional Stamp duty demand 2.85* FY 2009 - 10

Name of the Forum where dispute is pending Statute

Income Tax CIT Appeals, Coimbatore

Income Tax ITAT, Chennai

Service Tax CESTAT, Chennai Additional commissioner, Coimbatore.

Excise Duty CESTAT, Chennai

VAT Enquiry Officer, Walayar

Stamp Duty IG(Stamps), Chennai

*(Net of Rs. 0.5 million paid towards the demand)

c. According to the information and explanations given to us, the amount required to be transferred to Investor Education and Protection Fund in accordance with the relevant provisions of the Companies Act, 1956 (1 of 1956) and Rules made thereunder has been transferred to such fund within time.

8. 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.

9. 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 a bank. There are no debenture holders during the year nor any dues to any financial institutions.

10. In our opinion, the Company has given guarantees for banking facilities availed by a few subsidiary Companies from banks and according to the information and explanations given to us, the terms and conditions on which such guarantees have been given to such entities are not prima facie prejudicial to the interest of the Company, considering the Company's economic interest in such entities.

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

12. According to the information and explanations given to us, no material fraud on or by the Company has been noticed or reported during the course of our audit.

For Reddy, Goud & Janardhan

Chartered Accountants Firm Registration No. 003254S

B Anand

Coimbatore Partner

28.05.2015 Membership No. 29146


Mar 31, 2014

We have audited the accompanying financial statements of M/s Elgi Rubber Company Limited ("the Company"), which comprises the Balance Sheet as at 31st March 2014, the Statement of Profit and Loss and the Cash Flow Statement of the Company 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 referred to in sub-section (3C) of section 211 of the Companies Act, 1956 ("the Act" ) read with the General Circular 15/2013 dated 13th September 2013 of the Ministry of Company 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.

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.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, 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:

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

Report on Other Legal and Regulatory Requirements

1. 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.

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

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

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

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

d. in our opinion, 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 read with the General Circular 15/2013 dated 13th September 2013 of the Ministry of Company Affairs in respect of Section 133 of the Companies Act, 2013 and

e. on the basis of written representations received from the directors as on 31 March 2014, and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March 2014, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

The Annexure referred to in our report of even date

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

b. The assets have been physically verified by the management in accordance with a phased programme of verification, which in our opinion is reasonable, considering the size of the company and the nature of its assets. No material discrepencies were noticed on such verification.

c. The Company has not disposed off substantial part of fixed assets during the year and in our opinion, it has not affected the status of going concern and assumption of the company.

2. 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, the procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the company and nature of its business.

c. The company is maintaining proper records of inventories. The discrepancies noticed on verification between the physical stock and the book records were not material.

3. a. The Company had not granted any loan secured or unsecured to any companies, firms or other parties as covered in the register maintained under section 301 of the Companies Act, 1956 except in the case of one subsidiary company wherein the company has granted trade advance in the nature of loan and hence the provisions of clause (iii) (a) to clause (iii) (d) of the said Order (as amended) are not applicable.

In the case of the trade advance in the nature of loan granted to the subsidiary company, the rate of interest and other terms and conditions on which such advance is given, in our opinion, is not prima facie prejudicial to the interest of the company. The receipt of the trade advance and interest are in accordance with the terms and conditions as agreed to by the company.

b. The Company had not taken any loan secured or unsecured from the companies or firms/parties as covered in the register maintained under section 301 of the Companies Act, 1956 except from one party amounting to Rs.18.0 Million during the year and the year-end balance is Nil in respect of such party. The maximum amount involved during the year was Rs.18.0 Million.

c. In our opinion and according to the information and explanations given to us, the rate of interest and other terms and conditions for such loan are prima-facie not prejudicial to the interest of the Company.

4. 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 with regard to the purchases of inventory, fixed assets and with regard to sale of goods and services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal control.

5. In our opinion and according to the information and explanations given to us and to the best of our knowledge and belief,

a. The particulars of contract or arrangements referred to in Section 301 of the Companies Act,1956 that needed to be entered into the register maintained under the said section have been so entered.

b. Where such transactions are in excess of Rs. 0.5 million in respect of any party during the year, the transactions have been made at prices, which are prima-facie reasonable having regard to the prevailing market prices at the relevant time, except that reasonableness could not be ascertained where comparable quotations are not available having regard to the specialized nature of some of the transactions of the Company.

6. The company has not accepted any deposits from public and hence provisions of Para (vi) of the said order (as amended) are not applicable.

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

8. We have broadly reviewed the books of account relating to material, labour and other items of cost 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 and we are of the opinion that prima-facie the prescribed accounts and records have been made and maintained. We have, however, not made a detailed examination of the records with a view to determine whether they are accurate or complete.

9. a. According to the information and explanations given to us and books and the records as produced and examined by us, in our opinion, undisputed statutory dues including provident fund, investors 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 applicable have been regularly deposited by the company during the year with the appropriate authorities.

b. According to the information and explanations given to us, no undisputed amounts payable in respect of income tax, wealth tax, service tax, sales tax, customs duty, excise duty and cess were in arrears, as at 31st March 2014 for a period of more than six months from the date they became payable.

c. According to the information and explanations given to us, the details of disputed statutory dues remaining unpaid and the forum where the dispute is pending are listed as under:

Name of the Nature of dues Amount statute (Rs. in million)

Service Tax Service Tax on Wind Mill 0.09

Service Tax on Wind Mill 0.05

Service Tax Service Tax on Wind Mill 0.09

Service Tax on knowhow 1.48

Excise Duty Excise duty on Capital Goods 0.14

VAT VAT on movement of hired Goods 0.26

Income Tax Disallowance of Depreciation expense 0.67 related to exempted income

Stamp duty Stamp Duty demand 4.37

Name of the Period to which Forum where statute amount relates dispute is pending Service Tax 01.04.2005-31.03.2008 CESTAT, Chennai

01.04.2008-31.03.2009 CESTAT, Chennai

Service Tax 01.04.2005-31.03.2008 CESTAT,Chennai

01.04.2008-31.03.2009 Additional Commissioner Coimbatore.

Excise Duty 01.04.1997-31.03.1999 CESTAT, Chennai

01.04.2013-31.03.2014 Enquiry Officer, Walayar

Income Tax 01.04.2008-31.03.2009 ITAT Chennai Stamp duty 01.04.2009-31.03.2010 DR(Stamps), Coimbatore

10. There are no accumulated losses and the company has not incurred cash losses during the financial year covered by our audit and in the immediately preceding financial year.

11. In our opinion and according to the information and explanations given to us, the company has not defaulted in repayment of dues to a financial institution or to a bank. There are no debenture holders during the year.

12. We are of the opinion that 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 Para 4 of the Order (as amended) are not applicable.

14. In our opinion, in respect of dealing or trading in shares and securities, the company has maintained proper records and timely entries have been made therein. Further, the company has held the shares and securities in its own name.

15. In our opinion, the Company has given guarantees for banking facilities availed by a few subsidiary companies from banks and according to the information and explanations given to us, the terms and conditions on which such guarantees have been given are not prima facie prejudicial to the interest of the company.

16. The Company has not borrowed any term loan during the year and hence the provisions of clause (xvi) of Para 4 of this Order (as amended) are not applicable.

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 raised on short term basis have prima-facie, not been used during the year for long term investments.

18. The Company has not made any preferential allotment of shares during the year and hence the provisions of clause (xviii) of Para 4 of this Order (as amended) are not applicable.

19. The Company has not issued any debentures during the year and hence the provisions of clause (xix) of Para 4 of this Order (as amended) are not applicable.

20. The company has not raised any monies by way of public issues during the year and hence the provisions of clause (xx) of Para 4 of this Order (as amended) are not applicable.

21. During the course of our examination of the books of accounts carried on in accordance with the generally accepted auditing practices in India and according to the information and explanations given to us, we have neither come across any instance of fraud on or by the Company, noticed or reported during the year nor have been informed of such case by the management.

For Reddy, Goud & Janardhan Chartered Accountants Firm Registration No. 003254S

B Anand Coimbatore Partner 19.05.2014 Membership No. 29146


Mar 31, 2013

Report on the Financial Statements

We have audited the accompanying financial statements of M/s Eigi Rubber Company Limited (the Company"), which comprises the Balance Sheet as at 31 st March 2013, the Statement of Profit and Loss of the Company for the year then ended, the Cash Flow Statement of the Company 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 referred to in sub-section (3C) of section 211 of the Companies Act, 1956 ("the Act"). This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor''s Responsibility

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

Opinion

In our opinion and to the best of our information and according to the explanations given to us, 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:

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

Report on Other Legal and Regulatory Requirements

1. 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.

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

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

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

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

d. In our opinion, 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. On the basis of written representations received from the directors as on 31 March 2013, and taken on record by the Board of Directors, none of the directors is disqualified as on 31st March 2013, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

Annexure referred to in our report of even date

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

b. The assets have been physically verified by the management in accordance with a phased programme of verification, which in our opinion is reasonable, considering the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification.

c. The Company has not disposed off substantial part of fixed assets during the year and in our opinion, it has not affected the status of going concern assumption of the company.

2. 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, the procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the company and nature of its business.

c. The company is maintaining proper records of inventories. The discrepancies noticed on verification between the physical stock and the book records were not material.

3. a. The Company had not granted any loan secured or unsecured to any companies, firms or other parties as covered in the register maintained under section 301 of the Companies Act, 1956 except in the case of one subsidiary company wherein the company has granted trade advance in the nature of loan and hence the provisions of clause (iii) (a) to clause (iii) (d) of the said Order (as amended) are not applicable.

In the case of the trade advance in the nature of loan granted to the subsidiary company, the rate of interest and other terms and conditions on which such advance is given, in our opinion, is not prima facie prejudicial to the interest of the company. The receipt of the trade advance and interest are in accordance with the terms and conditions as agreed to by the company.

b. The Company had not taken any loan secured or unsecured from the companies or firms/parties as covered in the register maintained under section 301 of the Companies Act, 1956 except from one party amounting to Rs. 20 Million during the year and the year end balance is Rs. 4 Million in respect of such party. The maximum amount involved during the year was Rs.16 Million.

c. In our opinion and according to the information and explanations given to us, the rate of interest and other terms and conditions for such loan are prima-facie not prejudicial to the interest of the Company.

4. 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 with regard to the purchases of inventory, fixed assets and with regard to sale of goods and services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal control.

5. In our opinion and according to the information and explanations given to us and to the best of our knowledge and belief,

a. The particulars of contract or arrangements referred to in Section 301 of the Companies Act, 1956 that needed to be entered into the register maintained under the said section have been so entered.

b. Where such transactions are in excess of Rs. 0.5 Million in respect of any party during the year, the transactions have been made at prices, which are prima-facie reasonable having regard to the prevailing market prices at the relevant time, except that reasonableness could not be ascertained where comparable quotations are not available having regard to the specialized nature of some of the transactions of the Company.

6. The company has not accepted any deposits from public and hence provisions of Para (vi) of the said order (as amended) are not applicable.

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

8. We have broadly reviewed the books of account relating to material, labour and other items of cost 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 and we are of the opinion that prima-facie the prescribed accounts and records have been made and maintained. We have, however, not made a detailed examination of the records with a view to determine whether they are accurate or complete.

9. a. According to the information and explanations given to us and books and records as produced and examined by us, in our opinion, the undisputed statutory dues including provident fund, investors 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 applicable have been regularly deposited by the company during the year with the appropriate authorities.

b. According to the information and explanations given to us, no undisputed amounts payable in respect of income tax, wealth tax, service tax, sales tax, customs duty, excise duty and cess were in arrears, as at 31 st March 2013 for a period of more than six months from the date they became payable.

10. There are no accumulated losses and the company has not incurred cash losses during the financial year covered by our audit and in the immediately preceding financial year.

11. In our opinion and according to the information and explanations given to us, the company has not defaulted in repayment of dues to a financial institution or to a bank. There are no debenture holders during the year.

12. We are of the opinion that 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 Para 4 of the Order (as amended) are not applicable.

14. In our opinion, in respect of dealing or trading in shares and securities, the company has maintained proper records and timely entries have been made therein. Further, the company has held the shares and securities in its own name.

15. In our opinion, the Company has given guarantees for banking facilities availed by a few subsidiary companies from a bank and according to the information and explanations given to us, the terms and conditions on which such guarantees have been given are not prima facie prejudicial to the interest of the company.

16. The Company has not borrowed any term loan during the year and hence the provisions of clause (xvi) of Para 4 of this Order (as amended) are not applicable.

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 raised on short term basis have prima-facie, not been used during the year for long term investments.

18. The Company has not made any preferential allotment of shares during the year and hence the provisions of clause (xviii) of Para 4 of this Order (as amended) are not applicable.

19. The Company has not issued any debentures during the year and hence the provisions of clause (xix) of Para 4 of this Order (as amended) are not applicable.

20. The company has not raised any monies by way of public issues during the year and hence the provisions of clause (xx) of Para 4 of this Order (as amended) are not applicable.

21. During the course of our examination of the books of accounts carried on in accordance with the generally accepted auditing practices in India and according to the information and explanations given to us, we have neither come across any instance of fraud on or by the Company, noticed or reported during the year nor have been informed of such case by the management.

For Reddy, Goud & Janardhan

Chartered Accountants

Firm Registration No. 003254S

B Anand

Coimbatore Partner

17.05.2013 Membership No. 29146


Mar 31, 2012

We have audited the attached Balance Sheet of M/s Elgi Rubber Company Limited as at March 31, 2012, the Statement of Profit and Loss and also 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.

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.

1. As required by the Companies (Auditor's Report) Order (as amended) 2003, issued by the Central Government of India in terms of sub section (4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure, a statement on the matters specified in paragraphs 4 and 5 of the said order to the extent applicable

2. Further to our comments in the Annexure referred to in paragraph 1 above, we report that

2.1 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.

2.2 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.

2.3 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.

2.4 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 to the extent applicable.

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

2.6 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 the Balance Sheet, of the state of affairs of the Company as at March 31, 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 the Cash Flow Statement, of the cash flows of the Company for the year ended on that date.

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

b. The assets have been physically verified by the management in accordance with a phased programme of verification, which in our opinion is reasonable, considering the size and the nature of its assets.

c. The Company has not disposed off substantial part of fixed assets during the year and in our opinion, it has not affected the status of going concern of the Company.

2. 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, the procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the company and nature of its business.

c. The Company is maintaining proper records of inventories. The discrepancies noticed on verification between the physical stock and the book records were not material.

3. a. The Company had not granted any loan secured or unsecured to any companies, firms or other parties as covered in the register maintained under section 301 of the Companies Act, 1956 and hence the provisions of clause (iii) (a) to clause (iii) (d) of the said Order (as amended) are not applicable. -

b. The Company had not taken any loan secured or unsecured from the companies or firms or parties as covered in the register maintained under section 301 of the Companies Act, 1956 except from one party amounting to Rs.37 Million during the year and the same had been repaid before the end of the year. The maximum amount involved during the year was Rs.32.5 Million.

c. In our opinion and according to the information and explanations given to us, the rate of interest and other terms and conditions for such loan are prima-facie not prejudicial to the interest of the Company.

4. 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 with regard to the purchases of inventory, fixed assets and with regard to sale of goods and services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal control.

5. In our opinion and according to the information and explanations given to us and to the best of our knowledge and belief,

a. The particulars of contract or arrangements referred to in Section 301 of the Companies Act,1956 that needed to be entered into the register maintained under the said section have been so entered.

b. Where such transactions are in excess of Rs. 0.5 million in respect of any party during the year, the transactions have been made at prices, which are prima-facie reasonable having regard to the prevailing market prices at the relevant time, except that reasonableness could not be ascertained where comparable quotations are not available having regard to the specialized nature of some of the transactions of the Company.

6. The Company has not accepted any deposits from public and hence provisions of Para (vi) of the said order (as amended) are not applicable.

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

8. We have broadly reviewed the books of account relating to material, labour and other items of cost 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 and we are of the opinion that prima-facie the prescribed accounts and records have been made and maintained. We have, however, not made a detailed examination of the records with a view to determine whether they are accurate or complete.

9. a. According to the information and explanations given to us and books and records as produced and examined by us, in our opinion, the undisputed statutory dues including provident fund, investors 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 applicable have been regularly deposited by the Company during the year with the appropriate authorities.

b. According to the information and explanations given to us, no undisputed amounts payable in respect of income tax, wealth tax, service tax, sales tax, customs duty, excise duty and cess were in arrears, as at 31st March 2012 for a period of more than six months from the date they became payable.

c. According to the information and explanations given to us, the details of disputed statutory dues remaining unpaid and the forum where the dispute is pending are listed as under:

Name of the Nature of dues Amount Statute (Rs.in Million)

Service tax Service tax on wind mill 0.09

Service tax on wind mill 0.05

Service tax on wind mill 0.07

Service tax on cenvat credit 0.30

Excise duty Excise duty on cenvat credit 0.13

Excise duty on capital goods 0.14

Income tax Disallowance of depreciation 0.71 expense related to exempted income

Stamp duty Stamp duty demand 4.37

Name of the Statute Period to which Forum where Amount relates dispute is pending

Service Tax 01.04.2005-31.03.2008 CESTAT, Chennai

01.04.2008-31.03.2009 CESTAT, Chennai

01.04.2009-31.03.2010 Commissioner (Appeals) Chennai

01.04.2007-31.03.2008 CCE, Cochin

Excise Duty 01.04.2007-31.03.2008 CCE, Cochin

01.04.1997-31.03.1999 CESTAT, Chennai

Income Tax 01.04.2008-31.03.2009 CIT Appeals Coimbatore.

Stamp Duty 01.04.2009-31.03.2010 DR(Stamps), CBE

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

11. In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to a financial institution or to a bank. There are no debenture holders during the year.

12. We are of the opinion that 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 Para 4 of the Order (as amended) are not applicable.

14. In our opinion, in respect of dealing or trading in shares and securities, the Company has maintained proper records and timely entries have been made therein. Further, the Company has held the shares and securities in its own name.

15. In our opinion, the Company has given guarantees for banking facilities availed by a subsidiary company from a bank and according to the information and explanations given to us, the terms and conditions on which such guarantees have been given are not prima facie prejudicial to the interest of the company.

16. The Company has not borrowed any term loan during the year and hence the provisions of clause (xvi) of Para 4 of this Order (as amended) are not applicable.

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 raised on short term basis have prima-facie, not been used during the year for long term investments.

18. The Company has not made any preferential allotment of shares during the year and hence the provisions of clause (xviii) of Para 4 of this Order (as amended) are not applicable.

19. The Company has not issued any debentures during the year and hence the provisions of clause (xix) of Para 4 of this Order (as amended) are not applicable.

20. The Company has not raised any monies by way of public issues during the year and hence the provisions of clause (xx) of Para 4 of this Order (as amended) are not applicable.

21. During the course of our examination of the books of account carried on in accordance with the generally accepted auditing practices in India and according to the information and explanations given to us, we have neither come across any instance of fraud on or by the Company, noticed or reported during the year nor have been informed of such case by the management.

For Reddy, Goud & Janardhan

Chartered Accountants

Firm Registration No. 003254S

B Anand

Coimbatore Partner

23.05.2012 Membership No. 29146

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