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Auditor Report of Euro Ceramics Ltd.

Mar 31, 2015

Report on the Financial Statements

1. We have audited the acCompanying standalone financial statements of Euro Ceramics Limited ("the Company"), which comprise the Balance Sheet as at March 31, 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

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 of these standalone financial statements to 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.

Auditors' 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 Standards and matters which are required to be included in the audit report.

5. We have 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 the 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 the internal financial control relevant to the Company's preparation of the financial statements that give a true and fair view, in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on whether the Company has in place an adequate internal financial controls system over the financial reporting and the operating effectiveness of such controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by the Company's Directors, as well as evaluating the overall presentation of the financial statements.

7. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Qualified Opinion

8. In our opinion and to the best of our information and according to the explanations given to us, except for the matters illustrated and described in the Basis for Qualified Opinion herein below, 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, 2015, and its loss and its cash flows for the year ended on that date.

Basis for Qualified Opinion

1. The attention is invited to note no.33 to the financial statements, towards the fact that the Company's financial facilities/arrangements including Term Loans, Working Capital Facilities and Non Fund Based Credit Facilities have expired and the accounts with the Banks have turned into Non Performing Assets since more than 2 years.

The Company is unable to renegotiate, restructure or obtain replacement of financing arrangements and the banks have initiated legal proceedings for the recovery from the Company u/s. 19 of the Debt Recovery Tribunal (DRT), u/s. 13(2) of the Securitization & Reconstruction of Financial Assets & Enforcement of Security (Second) Interest (SARFAESI) Act, 2002 and winding up petition at Mumbai High Court. In addition to this, the Group has been continuously incurring substantial losses since past few years and as on March 31, 2015, the Company's current liabilities exceed its current assets by Rs. 43,777.81 lacs. Further, the networth of the Company has fully eroded and the Company has filed for registration u/s. 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985, before the Hon'ble Board for Industrial & Financial Reconstruction.

All the above events indicate a material uncertainty that casts a significant doubt on the Company's ability to continue as a going concern and therefore it may be unable to realize its assets and discharge its liabilities in the normal course of business. The financial results do not disclose the fact that the fundamental accounting assumption of going concern has not been followed.

2. Further attention is also invited to note no.34 to the financial statements, the Company on the basis of registration filed u/s. 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985, before the Hon'ble Board for Industrial & Financial Reconstruction, and the hearings for which are in process for determination of sickness; has not provided for interest on financing facilities amounting to Rs. 8,758.47 lacs for the year ending March 31, 2015, subject to reconciliation with banks. Had the same been provided, the loss for the year ending March 31, 2015, would have increased by Rs. 8,758.47 lacs. The corresponding liabilities would also have increased by Rs. 8,758.47 lacs as at March 31, 2015.

3. The Company has not provided for impairment or diminishing value of its assets/investment as per 'Accounting Standard 28 – Accounting for Impairment of Assets' as notified under the Companies (Accounting Standards) Rules, 2006 read with the General Circular 15/2013 dated September 30, 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013. The effect of such Impairment or diminishing value has not been quantified by the management and hence the same is not ascertainable.

Report on other legal and regulatory requirements

9. As required by 'the Companies (Auditor's Report) Order, 2015', 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 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, 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, except for as stated in basis for qualifications above.

e) On the basis of the written representations received from the directors as on March 31, 2015 taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2015 from being appointed as 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 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, 2015, on its financial position in its standalone financial statements except as stated in basis for qualifications above;

ii) The Company has made provision as at March 31, 2015 as required under the applicable law or Accounting Standards for material foreseeable losses, if any, on long-term contracts including derivative contracts except as stated in basis for qualifications above;

iii) There has been delay in transferring unclaimed dividend amounting to Rs. 25,303/- pertaining to financial year 2006-07 into the Investor Education and Protection Fund, by the Company during the year ended March 31, 2015.

(Referred to in paragraph 9 of the Independent Auditors' Report of even date to the members of Euro Ceramics Limited on the standalone financial statements as of and for the year ended March 31, 2015)

(1) In respect of Fixed Assets:

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

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

(2) In respect of its Inventories:

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

b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories followed by the Management are reasonable and adequate in relation to the size of the respective entities and the nature of their businesses.

c) In our opinion and according to the information and explanations given to us, the Company has maintained proper records of its inventories. The discrepancies noticed on verification between the physical stocks and the book records were not material.

(3) In respect of loans, secured or unsecured, granted by the Company to companies, firms or other parties covered in the register maintained under section 189 of the Act:

a) According to the information and explanation given to us, the Company has granted loan to party covered in the register maintained under section 189 of the Act.

b) In our opinion and according to the information and explanations given to us, there are no stipulations made regarding repayment of principal amount and interest. Hence we are unable to comment as to regularity of repayments of principal and interest amount.

(4) In our opinion and according to the information and explanations given to us, there are adequate internal control systems commensurate with the size of the respective entities and the nature of their businesses with regards to purchases of inventory, fixed assets and with regards to the sale of goods and services. Further, on the basis of our examination of the books and records of the Company, and according to the information and explanations given to us, we have neither come across, nor have been informed of, any continuing failure to correct major weakness in the aforesaid internal control system.

(5) In our opinion and according to the information and explanations given to us, the Company during the year has not accepted any deposits from the public within the meaning of section 73 & 76 of the Act and the Rules framed there under to the extent notified. Further in respect of deposits accepted by the Company before the commencement of this Act, within the meaning of section 74 & 75 of the Act and the Rules framed there under to the extent notified, the principal amount of such deposits and interest due thereon remained unpaid even after expiry of one year from such commencement. However, the Company duly filed an application within the meaning of section 74(2) with the Company Law Board requesting to allow further time for compliance. However the final decision of the Tribunal as required under section 75 (1) of the Act is still awaited.

(6) The Central Government of India has not specified the maintenance of cost records under sub-section (1) of section 148 of the Act for any of the products of the Company.

(7) In respect of Statutory Dues:

a) According to the information and explanation given to us and the records of the Company examined by us, in our opinion the Company has been facing liquidity stress since past few years due to which there were delays in depositing various undisputed statutory dues with appropriate authorities including provident fund, employee's state insurance, income tax, sales tax, wealth tax, service tax, duty of customs, duty of excise, value added tax, cess and other material statutory dues, as applicable to it and there are no arrears of outstanding statutory dues as at the yearend for a period of more than six months from the date they became payable except service tax payable amounting to Rs. 9.81 lacs.

b) According to the information and explanation given to us and the records of the Company examined by us, there are no dues of sales tax, wealth tax, service tax, duty of customs, duty of excise, value added tax, as at March 31, 2015, which have not been deposited on account of any dispute. However there are dues of income tax which have not been deposited on account of a dispute which are as under:

Amount Period to Forum Name of the Nature of Dues Statute Rs. which the where the amount dispute is relates pending

Income Tax Demand arisen 207.76 Financial Assessing pursuant to lacs Year officer assessment 2011-12

c) There has been delay in transferring unclaimed dividend amounting to Rs. 25,303/- pertaining to financial year 2006-07 into the Investor Education and Protection Fund, by the Company during the year ended March 31, 2015.

(8) The Company has accumulated losses at the end of financial year and also had the same at the end of the immediately preceding financial year. However the Company has not incurred cash loss during the financial year covered by our audit but had incurred cash losses in the immediately preceding financial year. The accumulated losses of the Company have exceeded its net worth.

(9) In our opinion and according to the information and explanations given to us the Company has defaulted in repayment of loans and interests dues to the banks and financial institution. The principal outstanding of Term Loans and Cash Credit facilities amounts to Rs. 45,453.37 lacs and overdue interest (not provided) calculated based on last sanction letters amounts to Rs. 18,044.93 lacs as at March 31, 2015, subject to reconciliation with the banks. The period of default is more than 2 years.

(10)According to the information and explanations given to us, the Company has given the guarantee for loans taken by its subsidiary from bank. The terms and conditions of the same are not prejudicial to the interest of the Company. However in our opinion the said subsidiary has been continuously incurring losses and its net worth has been fully eroded and there is substantial doubt whether the said subsidiary would be able to repay its liabilities or realize its assets.

(11)In our opinion, the term loans are being applied for the purpose for which they 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 Deepak Maru & Co.

Chartered Accountants

ICAI Firm Registration No. 115678W

Jaymin P. Shah

Place: Mumbai Membership No. 118113

Date: May 30, 2015 Partner


Mar 31, 2014

We have audited the accompanying financial statements of Euro Ceramics 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 the significant accounting policies and other explanatory information.

Management''s Responsibility for the Financial Statements

The Company''s Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards notified under the Companies Act, 1956 (the Act) read with the General Circular 15/2013 dated 13th September, 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013 and in accordance with the accounting principles generally accepted in India. 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.

Auditors'' 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 the 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 the internal control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company''s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by the 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.

Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the matters illustrated and described in the Basis for Qualified Opinion herein below, 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 March31,2014;

b) in the case of the Statement of Profit and Loss, of the loss 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.

Basis for Qualified Opinion

1. The attention is invited to the fact that the Company''s financial facilities/arrangements have expired and the same are overdue for repayment as under:

Sr. Name of the Bank Over due Since No.

i State Bank of India December2012

ii TheCosmosCo.-Op.BankLtd. April 2012

iii ICICI Bank Ltd. October 2012

iv Bank Of lndia April 2012

v Indusind Bank October 2012

The Company is unable to renegotiate, restructure or obtain replacement of financing arrangements and the banks have initiated legal proceedings for the recovery from the Company u/s. 19 of the Debt Recovery Tribunal (DRT) and u/s. 13(2) of the Securitization & Reconstruction of Financial Assets & Enforcement of Security (Second) Interest (SARFAESI) Act, 2002. In addition to this, the Company has been continuously incurring substantial losses since past few years and as on March 31, 2014, the Company''s current liabilities exceed its current assets by Rs. 40,519.46 lacs. Further, the net worth of the Company has fully eroded and during the year the Company has filed for registration u/s. 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985, before the Hon''ble Board for Industrial & Financial Reconstruction.

All the above events indicate a material uncertainty that casts a significant doubt on the Company''s ability to continue as a going concern and therefore it may be unable to realize its assets and discharge its liabilities in the normal course of business. The financial results do not disclose the fact that the fundamental accounting assumption of going concern has not been followed.

2. The Company on the basis of registration filed u/s. 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985, before the Hon''ble Board for Industrial & Financial Reconstruction, and the hearings for which are in process for determination of sickness; has not provided for interest on financing facilities amounting to 6,426.05 lacs for the year ending March 31, 2014. Had the same been provided, the loss for the year ending March 31, 2014, would have increased by Rs. 6,426.05 lacs. The corresponding liabilities would also have increased byRs.Rs. 6,426.05 lacs as at March 31,2014.

3. The Company has not provided for impairment or diminishing value of its assets/investment as per ‘Accounting Standard 28 - Accounting for Impairment of Assets'' as notified under the Companies (Accounting Standards) Rules, 2006 read with the General Circular 15/2013 dated 13th September, 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013. The effect of such Impairment or diminishing value has not been quantified by the management and hence the same is not ascertainable.

4. As on March 31,2014, the Company has investment in equity shares of wholly owned subsidiary Euro Merchandise (India) Limited amounting to 142.50 lacs and also an outstanding of Rs. 146.29 lacs. The Company has also issued corporate guarantee to Bank amounting to Rs. 1620 lacs in respect of the said subsidiary Company (as enlisted in contingent liabilities in note no.22 to accounts). As per the latest audited financial statements of Euro Merchandise (India) Limited the net worth of the company has fully eroded, it has been continuously incurring heavy losses and the cash flows are under severe stress. No provision has been made in the financial statements of the company for depletion in value of investment and the amount receivable by the company both totaling to Rs. 288.79 lacs.

All the above events indicate a material uncertainty that casts a significant doubt on the Subsidiary Company''s ability to continue as a going concern and therefore it may be unable to realize its assets and discharge its liabilities in the normal course of business

The Company in its financial statements has not provided for the same. Had such provision been made, the profits before tax for the year would have been lower to that extent. The effect of the same has not been quantified by the management and hence the same is not ascertainable.

Report on Other Legal and Regulatory Requirements

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

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

a) We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the 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, Statement of Profit and Loss, and the Cash Flow Statement dealt with by this Report are in agreement with the books of account;

d) In our opinion, the Balance Sheet, Statement of Profit and Loss, and the Cash Flow Statement comply with the Accounting Standards notified under the Act read with the General Circular 15/2013 dated 13th September, 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013.

e) On the basis of the written representations received from the directors as on March 31, 2014 taken on record by the Board of Directors, all the directors are disqualified as on March 31, 2014 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Act.

(referred to in Paragraph 1 under the heading " Report on other legal and regulatory requirements" of Our Report of Even Date)

(1) In respect of Fixed Assets:

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

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

c) In our opinion, the Company has not disposed off a substantial part of its fixed assets during the year.

(2) In respect of its Inventories:

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

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

c) In our opinion and according to the information and explanations given to us, the Company has maintained proper records of its inventories. The discrepancies noticed on verification between the physical stocks and the book records were not material.

(3) In respect of loans, secured or unsecured, taken or granted by the Company from/to companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956:

a) According to the information and explanation given to us, the Company has taken unsecured loans from twenty two parties covered in the register maintained under section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs. 2,567.12 lacs and the year end balance of loans taken from such parties was Rs. 2,408.17 lacs.

b) According to the information and explanation given to us, the Company has granted loans to one party covered in the register maintained under section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs. 7,770.02 lacs and the year-end balance of loans given to such parties was Rs. 7,765.70 lacs.

c) In our opinion, the rate of interest and other terms and conditions on which loans mentioned above have been taken/granted are not, prima facie, prejudicial to the interest of the Company.

d) There are no stipulations made regarding repayment of principal amount. However the payment of interest is overdue.

(4) In respect of contracts or arrangements referred to in section 301 of the Companies Act, 1956:

a) In our opinion, and according to information and explanations given to us, the transactions made in pursuance of contracts or arrangements that need to be entered in the register maintained under section 301 of the Companies Act, 1956, have been so entered.

b) In our opinion, and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and aggregating during the year to Rs. 5 Lacs or more in respect of each party, have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

(5) The company during the year has not accepted deposits within the meaning of public deposits under the provisions of section 58A or section 58AA read with Companies (Acceptance of Deposits) Rules, 1975.

(6) 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 regards to purchases of inventory, fixed assets and with regards to the sale of goods and services. During the course of our audit, no major weakness has been noticed in the internal control system in respect of these areas.

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

(8) We have broadly reviewed the cost records maintained by the Company pursuant to the Companies (Cost Accounting Records) Rules, 2011 prescribed by the Central Government under section 209(1)(d) of the Companies Act, 1956 and are of the opinion that prima facie, the prescribed cost records have been made and maintained. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

(9) In respect of Statutory Dues:

a) According to the information and explanation given to us, the Company during the year has been facing liquidity stress due to which there were delays in payment of various statutory dues with appropriate authorities including undisputed statutory dues such as Income tax, Sales tax, VAT, Wealth tax, Custom duty, Excise Duty, Tax deducted/collected at source, Provident Fund, Employees'' State Insurance, Profession Tax, Cess and other material statutory dues applicable to it and there are no arrears outstanding as at the year end for a period of more than six months from the date they became payable except Service Tax payable amounting to Rs. 9.70 lacs.

b) According to the information and explanation given to us, there are no dues of Income tax, Sales Tax, VAT, Wealth tax, Customs duty, Excise duty and cess, which have not been deposited on account of any dispute.

(10) The Company has accumulated losses at the end of financial year and also had the same at the end of the immediately preceding financial year. Further the Company has incurred cash losses during the financial year covered by our audit and also during the immediately preceding financial year. The accumulated losses of the Company have exceeded its net worth.

(11) In our opinion and according to the information and explanations given to us the Company has defaulted in repayment of loans and interests dues to the banks and financial institution. The principal outstanding of Term Loans and Cash Credit facilities amount to Rs. 45,475.67 lacs and overdue interest amounts to Rs. 9,286.46 lacs as at March 31, 2014, subject to reconciliation with the banks. The period of default ranges around 24 months.

(12) According to the information and explanations given to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

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

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

(15) According to the information and explanations given to us, the Company has given the guarantee for loans taken by its subsidiary from bank. The terms and conditions of the same are not prejudicial to the interest of the Company. However in our opinion the said subsidiary has been continuously incurring losses and its net worth has been fully eroded and there is substantial doubt whether the said subsidiary would be able to repay its liabilities or realize its assets.

(16) In our opinion, the term loans are being applied for the purpose for which they were obtained.

(17) According to the information and explanations given to us and on an overall examination of the balance sheet of the Company and after placing reliance on the reasonable assumptions made by the company for classification of long term and short term usages of funds, we are of the opinion that, prima facie funds raised on short-term basis have been utilized for long-term investment.

(18) According to the information and explanations given to us, the Company has not made preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Act.

(19) The Company has not issued any debentures during the year and hence creation of security also does notarise.

(20) The Company has not raised any money by way of public issues during the year.

(21) 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 Deepak Maru & Co. Chartered Accountants ICAI Firm Regn. No:115678W

Jaymin P. Shah Partner Mem.No.118113

Place: Mumbai Date: May 30,2014


Mar 31, 2013

Report on the Financial Statements

We have audited the accompanying financial statements of Euro Ceramics 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 the significant accounting policies and other explanatory information.

Management''s Responsibility for the Financial Statements

The Company''s 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.

Auditors'' 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 the 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 the 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 the 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:

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 loss 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.

Report on Other Legal and Regulatory Requirements

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

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

a) We have obtained all the information and explanations which to the best of our knowledge and belief w&re 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, Statement of Profit and Loss, and the Cash Flow Statement dealt with by this Report are in agreementwith the books of account;

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

e) On the basis of the written representations received from the directors as on March 31, 2013 taken on record by the Board of Directors, all the directors are disqualified as on March 31, 2013 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Act.

f) As mentioned in Note ''A'' of the significant accounting policies of the Company that the financial statements of the Company having been prepared on a going concern basis, notwithstanding the fact that its net worth has eroded. The appropriateness of the said basis is inter-alia dependent on the Company''s ability to infuse requisite funds for meeting its obligations, rescheduling of debts.

g) As on March 31, 2013, the Company has investment in equity shares of wholly owned subsidiary Euro Merchandise (India) Limited amounting to 71,42,50,000/- and also an outstandingof 72,66,31,649/-. The Company has also issued corporate guarantee to Bank amounting to 716,20,00,000/-. As per ''the latest audited financial statements of Euro Merchandise (India) Limited the net worth of the company has completely eroded and the cash flows are under stress. No provision has been made in the financial statements of the company for depletion in value of investment and the amount receivable by the company totaling to Rs. 4,08,81,649/-. Had the provision for the same been made, the profits before tax for the year would have been lower to that extent.

Annexure to the Auditor''s Report

(referred to in Paragraph 3 of Our Report of Even Date)

(1) In respect of Fixed Assets:

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

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

c) In our opinion, the Company has not disposed off a substantial part of its fixed assets during the year.

(2) In respectof its Inventories:

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

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

c) In our opinion and according to the information and explanations given to us, the Company has maintained proper records of its inventories. The discrepancies noticed on verification between the physical stocks and the book records were not material.

(3) In respect of loans, secured or unsecured, taken or granted by the Company from / to companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956:

a) According to the information and explanation given to us, the Company has taken unsecured loans from eighteen parties covered in the register maintained under section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs. 23,48,45,315/- and the year end balance of loans taken from such parties was Rs. 21,80,80,315/-.

b) According to the information and explanation given to us, the Company has granted loans to one party covered in the register maintained under section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs.72,64,85,400/- and the year-end balance of loans given to such parties wasRs.70,79,02,861/-.

c) In our opinion, the rate of interest and other terms and conditions on which loans mentioned above have been taken / granted are not, prima facie, prejudicial to the interest of the Company.

d) In the absence of stipulations in respect of the terms of payment of principal amount and interest for the loans taken/granted, it is not possible to comment whether the principal and interest payments are regular.

(4) In respect of contracts or arrangements referred to in section 301 of the Companies Act, 1956:

a) In our opinion, and according to information and explanations given to us, the transactions made in pursuance of contracts or arrangements that need to be entered in the register maintained under section 301 of the Companies Act, 1956, have been so entered.

b) In our opinion, and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and aggregating during the year to Rs. 5 Lacs or more in respect of each party, have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

(5) The company during the year has accepted deposits within the meaning of public deposits under the provisions of section 58A read with Companies (Acceptance of Deposits) Rules, 1975 in the nature of unsecured loans. In our opinion, there has been non- compliance to the provisions of section 58A with respect to maintenance of liquid assets, maximum permissible rate of interest allowed to be paid / payable (in some of the cases) and filing of return as required under the said rules. The Company has not accepted deposits within the meaning of public deposits underthe provisions of section 58AA.

(6) 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 regards to purchases of inventory, fixed assets and with regards to the sale of goods and services. During the course of our audit, no major weakness has been noticed in the internal control system in respect of these areas.

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

(8) We have broadly reviewed the cost records maintained by the Company pursuant to the Companies (Cost Accounting Records) Rules, 2011 prescribed by the Central Government under section 209(1 )(d) of the Companies Act, 1956 and are of the opinion that prima facie, the prescribed cost records have been made and maintained. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

(9) InrespectofStatutoryDues:

a) According to the information and explanation given to us, the Company during the year has been facing liquidity stress due to which there were delays in payment of various statutory dues with appropriate authorities including undisputed statutory dues such as Income tax, Sales tax, VAT, Wealth tax, Custom duty, Excise Duty, Tax deducted/collected at source, Provident Fund, Employees'' State Insurance, Profession Tax, Cess and other material statutory dues applicable to it and there are no arrears outstanding as at the year end for a period of more than six months from the date they became payable except Service Tax payable amounting to Rs. 9,69,839/-.

b) According to the information and explanation given to us, there are no dues of Income tax, Sales Tax, VAT, Wealth tax, Customs duty, Excise duty and cess, which have not been deposited on account of any dispute.

(10) The Company has accumulated losses at the end of financial year and also had the same at the end of the immediately preceding financial year. Further the Company has incurred cash losses during the financial year covered by our audit and also during the immediately preceding financial year. The accumulated losses of the Company have exceeded 50% of its net worth.

(11) In our opinion and according to the information and explanations given to us the Company has defaulted in repayment of loans and interests dues to the banks and financial institution. Estimated unpaid overdues in respect of principal outstanding amount to Rs. 2,35,87,725/- and overdue interest amounts to Rs. 30,91,89,985/- as at March 31,2013.

(12) According to the information and explanations given to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

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

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

(15) According to the information and explanations given to us, the Company has given the guarantee for loans taken by its subsidiary from banks. The terms and conditions are not prejudicial to the interest of the Company.

(16) In our opinion, the term loans are being applied for the purpose for which they were obtained.

(17) According to the information and explanations given to us and on an overall examination of the balance sheet of the Company and after placing reliance on the reasonable assumptions made by the company for classification of long term and short term usages of funds, we are of the opinion that, prima facie funds raised on short-term basis have been utilized for long-term investment.

(18) According to the information and explanations given to us, the Company has not made preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Act.

(19) According to the information and explanations given to us, during the year covered by our audit report, the Company has issued Compulsorily Convertible Debentures (CCDs) to two of its Bankers according to the approved scheme of Corporate Debt Restructuring (CDR) to be converted into even number of Equity Shares within eighteen months from the date of issue. The Company has issued 51,59,705 CCDs with a Face Value of Rs. 24.42/- each aggregating to Rs.12,59,99,997/-. However no security has been created against the said Debentures.

(20) The Company has not raised any money by way of public issues during the year.

(21) 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 DEEPAK MARU & CO.

Chartered Accountants

Firm Regn No:115678W



(CA JAYMIN P. SHAH)

Place: Mumbai Mem. No:118113

Date: May 30, 2013


Mar 31, 2012

1) We have audited the attached Balance Sheet of Euro Ceramics Limited as at March 31,2012, the Statement of Profit and Loss and the Cash Flow Statement for the year ended on that date annexed thereto (all together referred to as the 'financial statements'). 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 have conducted our audit in accordance with the 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 from material misstatements. 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 presentation of the financial statement. We believe that our audit provides a reasonable basis for ouropinion.

3) As required by the Companies (Auditor's Report) Order, 2003 as amended by the Companies (Auditor's Report) (Amendment) Order, 2004 issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said order.

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

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

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

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

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

e. On the basis of written representations received from the Directors, and taken on record by the Board of Directors, as on March 31,2012, we report that none of the Directors is disqualified as on 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;

f. Without qualifying attention is drawn to the following:

(i) Regarding the financial statements of the Company having been prepared on a going concern basis, the appropriateness of which is inter-alia dependent on successful implementation of the scheme approved by the Corporate Debt Restructuring Cell as envisaged in Note no.22 of the financial statements and as also that in the opinion of the management, no impairment provision is considered necessary.

(ii) Note no.30 of the financial statements in respect of Net Deferred Tax Liability recognized in the earlier years of Rs 15,23,92,056/- being carried forward in the Balance Sheet and expected to reverse in foreseeable future, on the basis of management's view regarding future profits and the Restructuring Scheme approved by the CDR Cell. However, we are unable to express an opinion as to when and to what extent the aforesaid net deferred tax liability would reverse in the near future.

(iii) Note no.9 of the financial statements on the financial statements, regarding investment in a subsidiary, carried at Rs 1,42,50,000/- which may require provisioning for the other-than-temporary diminution in the value of investments in the subsidiary in accordance with Accounting Standard 13 - Accounting for Investment is yet to be quantified and determined by the Management particularly when such subsidiary has negative net worth. We are, therefore, unable to comment on the adequacy, or otherwise, of the provision for the other-than-temporary diminution in the value of investment in the subsidiary as at March 31, 2012, and the consequential effects on the reported amounts under carrying value of investments, profit before tax, balance in profit and loss account and earnings per share in the financial statements.

g. In our opinion and to the best of our information and according to the explanations given to us, the said accounts read with significant accounting policies and notes thereon give the information required by the Companies Act, 1956, in the manner so required and present 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 31,2012;

ii) in the case of the Statement of Profit and Loss, of the loss of the company for the year ended on that date; and

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

Annexure To The Auditor's Report

(referred to in Paragraph 3 of Our Report of Even Date)

(1) In respect of Fixed Assets:

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

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

c) In our opinion, the Company has not disposed off a substantial part of its fixed assets during the year.

(2) In respect of its Inventories:

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

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

c) In our opinion and according to the information and explanations given to us, the Company has maintained proper records of its inventories. The discrepancies noticed on verification between the physical stocks and the book records were not material.

(3) In respect of loans, secured or unsecured, taken or granted by the Company from / to companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956:

a) According to the information and explanation given to us, the Company has taken unsecured loans from eleven parties covered in the register maintained under section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs 35,23,60,664/- and the year end balance of loans taken from such parties was Rs 24,17,93,373/-.

b) According to the information and explanation given to us, the Company has granted loans to four parties covered in the register maintained under section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs 73,95,43,809/- and the year-end balance of loans given to such parties was Rs 73,76,93,809/-.

c) In our opinion, the rate of interest and other terms and conditions on which loans mentioned above have

been taken / granted are not, prima facie, prejudicial to the interest of the Company.

d) In the absence of stipulations in respect of the terms of ' payment of principal amount and interest for the loans taken/granted, it is not possible to comment whether the principal and interest payments are regular.

(4) In respect of contracts or arrangements referred to in section 301 of the Companies Act, 1956:

a) In our opinion, and according to information and explanations given to us, the transactions made in pursuance of contracts or arrangements that need to be entered in the register maintained under section 301 of the Companies Act, 1956, have been so entered.

b) In our opinion, and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and aggregating during the year toRs 5 Lacs or more in respect of each party, have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

(5) The company during the year has accepted deposits within the meaning of public deposits under the provisions of section 58A read with Companies (Acceptance of Deposits) Rules, 1975 in the nature of unsecured loans. In our opinion, there has been non-compliance to the provisions of section 58A with respect to maintenance of liquid assets, maximum permissible rate of interest allowed to be paid / payable (in some of the cases), rate of brokerage allowed to be paid / payable (in some of the cases) and filing of return as required under the said rules. The Company has not accepted deposits within the meaning of public deposits under the provisions of section 58AA.

(6) 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 regards to purchases of inventory, fixed assets and with regards to the sale of goods and services. During the course of our audit, no major weakness has been noticed in the internal control system in respect of these areas.

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

(8) We have broadly reviewed the cost records maintained by the Company pursuant to the Companies (Cost Accounting Records) Rules, 2011 prescribed by the Central Government under section 209(1 )(d) of the Companies Act, 1956 and are of the opinion that prima facie, the prescribed cost records have been made and maintained. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

(9) In respect of Statutory Dues: '

a) According to the information and explanation given to us, the Company during the year has been facing liquidity stress due to which there were delays in payment of various statutory dues with appropriate authorities including undisputed statutory dues such as Income tax, Sales tax, VAT, Wealth tax, Custom duty, Excise Duty, Tax deducted/collected at source, Provident Fund, Employees' State Insurance, Profession Tax, Cess and other material statutory dues applicable to it and there are no arrears outstanding as at the year end for a period of more than six months from the date they became payable except Service Tax payable amounting to Rs 9,69,839/.

b) According to the information and explanation given to us, there are no dues of Income tax, Sales Tax, VAT, Wealth tax, Customs duty, Excise duty and cess, which have not been deposited on account of any dispute, except the following:

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

Income Tax Income 4,82,210/- F.Y. Commissioner Act-1961 Tax 2007-08 of Income Tax (Appeals)-39, Mumbai

(10) The Company has accumulated losses at the end of financial year but did not have the same at the end of the immediately preceding financial year. Further the Company has incurred cash losses during the financial year covered by our audit but not in the immediately preceding financial year. The accumulated losses of the Company have exceeded 50% of its net worth.

(11) There have been defaults in repayment of dues to the banks during the year, which have been subsequently either rescheduled by way of Corporate debt restructuring package (CDR) or repaid upto the date of our report except certain loan ofRs 5,12,16,379/-including overdue interest of Rs 12,16,379/- (defaults for the period exceeding six months) to certain bank who did not opt for CDR scheme. The management, as explained, is negotiating with the bank and confident of an amicable restructuring/settlement.

(12) According to the information and explanations given to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

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

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

(15) According to the information and explanations given to us, the Company has given the guarantee for loans taken by its subsidiary from banks. The terms and conditions are not prejudicial to the interest of the Company.

(16) In our opinion, the term loans are being applied for the purpose for which they were obtained.

(17) According to the information and explanations given to us and on an overall examination of the balance sheet of the Company and after placing reliance on the reasonable assumptions made by the company for classification of long term and short term usages of funds, we are of the opinion that, prima facie funds raised on short-term basis have been utilized for long-term investment.

(18) According to the information and explanations given to us, the Company has not made preferential allotment of shares to parties and companies covered in the register maintained under section 301 of theAct.

(19) According to the information and explanations given to us, during the year covered by our audit report, the Company has not issued any Debentures.

(20) The Company has not raised any money by way of public issues during the year.

(21) 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 DEEPAK MARU & CO. CHARTERED ACCOUNTANTS Firm Regn. No.115678W

JAYMIN P. SHAH

Place: MUMBAI (Partner)

Date: August 27, 2012 M.NO. 118113


Mar 31, 2011

1) We have audited the attached Balance Sheet of Euro Ceramics Limited as at March 31,2011 and also the Profit and Loss Account for the year ended on that date and the Cash Flow Statement for the year ended on that date annexed thereto (all together referred to as the 'financial statements'). 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 have conducted our audit in accordance with the 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 from material misstatements. 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 presentation of the financial statement. We believe that our audit provides a reasonable basis for our opinion.

3) As required by the Companies (Auditor's Report) Order, 2003 as amended by the Companies (Auditor's Report) (Amendment) Order, 2004 issued by the Central Government of India in terms of Sub- Section (4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4) Further to our comments in the Annexure referred to in paragraph 3 above, we report as follows:

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

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

c. The Balance Sheet and Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books ofaccount;

d. In our opinion, the Balance Sheet and 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;

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

f. In our opinion and to the best of our information and according to the explanations given to us, the said accounts read with significant accounting policies, notes to accounts give the information required by the Companies Act, 1956, in the manner so required and present 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 31,2011;

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

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

Annexure To The Auditor's Report (Referred to in paragraph 3 of our report of even date)

(1) In respect of Fixed Assets:

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

b) As explained to us, the management during the year at reasonable interval has physically verified the assets and no material discrepancies were noticed on such verification.

c) The Company has not disposed off any substantial part of the fixed assets during the year.

(2) In respect of its Inventories:

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

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

c) In our opinion and according to the information and explanations given to us, the Company has maintained proper records of its inventories. The discrepancies noticed on verification between the physical stocks and the book records were not material.

(3) In respect of Loans Taken/Granted:

a) According to the information and explanation given to us, the Company has taken unsecured loans from sixteen parties covered in the register maintained undersection 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs. 2,840.24 Lacs and the year end balance of loans taken from such parties was Rs. 1,006.84 Lacs.

b) According to the information and explanation given to us, the Company has granted loans to six parties covered in the register maintained undersection 301 of the Companies Act, 1956 The maximum amount involved during the year was Rs. 1,701.69 Lacs and the year end balance of loans given to such parties was Rs. 419.14 Lacs.

c) In our opinion, the rate of interest and other terms and conditions on which loans mentioned above have been taken / granted are not, prima facie, prejudicial to the interest of the Company.

d) In the absence of stipulations in respect of the terms of payment of principal amount and interest for the loans taken/granted! it is not possible to comment whether the principal and interest payments are regular.

(4) lnrespectofregistermaintainedu/s.301 of the Companies Act, 1956:

a) In our opinion and according to information and explanations given to us, the particulars of contracts or arrangements referred to in section 301 of the Companies Act, 1956 have been so entered in the register required to be maintained underthatsection.

b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and aggregating during the year to Rs. 5 Lacs or more in respect of each party, have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

(5) In our opinion the company has complied with the provisions of section 58Aand section 58AAread with Companies (Acceptance of Deposits) Rules, 1975 in respect of deposits accepted in the nature of unsecured loans taken, amounting to Rs. 2,833.00 Lacs raised by the company during the year and the Company has filed the copy of Statement in lieu of Advertisement and necessary particulars as required with the Registrar of Companies Mumbai.

(6) In our opinion and according to the information and explanations given to us, there is an adequate internal control procedure commensurate with the size of the Company and the nature of its business with regards to purchases of inventory, fixed assets and with regards to the sale of goods. During the course of our audit, no major weakness has been noticed in the internal control system in respect of these areas.

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

(8) We have broadly reviewed the books of account maintained by the Company pursuant to the Rules made by the Central Government for the maintenance of cost records under section 209(1 )(d) of the Companies Act, 1956 for its Aluminium Division and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained.

(9) In respect of Statutory Dues:

a) The Company is generally regular in depositing with appropriate authorities undisputed statutory dues including Income tax, Sales tax, VAT, Wealth tax, Custom duty, Excise Duty, Tax deducted/collected at source, Provident Fund, Employees' State Insurance, Profession Tax, Cess and other material statutory dues applicable to it and there are no arrears outstanding as at the year end for a period of more than six months from the date they became payable, except for some instances of delays in depositing them with the appropriate authorities during the year which were not material.

b) According to the information and explanation given to us, there are no dues of Income tax, Sales Tax, VAT, Wealth tax, Customs duty, Excise duty and cess, which have not been deposited on account of any dispute, except the following:

Name of Nature of Amount Period to Forum where the Statute the dues (Rs.) which the the dispute amount is pending relates

Income Tax Income Tax 4.82 Lacs F.Y. 2007-08 Commissioner of Act-1961 Income Tax (Appeals)-39, Mumbai

(10) The Company neither has any accumulated losses at the end of financial year nor did it have the same at the end of the immediately preceding financial year. Further the Company has not incurred any cash losses during the financial year covered by our audit but the Company had incurred cash loss to the tune of Rs.1,856.83 Lacs in the immediately preceding financial year.

(11) In our opinion and according to the information and explanations given to us, there has been delay in repayment of the loans and interest which were outstanding as on March 31, 2011, due to the lenders amounting to Rs. 1234.52 Lacs, paid by the Company subsequently.

An amount of Rs. 658.30 Lacs outstanding as on March 31, 2011, in respect of loans and interest due to the lenders, are not paid till date.

(12) According to the information and explanations given to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

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

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

(15) According to the information and explanations given to us, the Company has given following guarantees for loans taken by its subsidiary Euro Merchandise (India) Ltd. from banks, however the terms of issue of said guarantee are not prejudicial to the interest of the Company:

Sr. Date of Guarantee Amount Guarantee on No. Guarantee Favouring (Rs.) Account of

1. 13-09-2007 The Cosmos 3,220 Lacs Working Capital, Co-op. Bank Term Loan and Ltd. Letter of Credit limit.

2. 30-01-2010 ABN Amro 30 Lacs Business Term Loan BankN.V.

TOTAL 3,250 Lacs

(16) In our opinion, the term loans are being applied for the purpose for which they were obtained.

(17) According to the information and explanations given to us and on an overall examination of the balance sheet of the Company and after placing reliance on the reasonable assumptions made by the company for classification of long term and short term usages of funds, we are of the opinion that, prima facie no funds raised on short- term basis have been utilized for long-term investment.

(18) According to the information and explanations given to us, the Company has not made preferential allotment of shares to parties and companies covered in the register maintained under section 301 of theAct.

(19) According to the information and explanations given to us, during the year covered by our audit report, the Company has not issued any Debentures.

(20) The Company has not raised any money by way of public issues during the year.

(21) 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 ouraudit.

For Deepak Maru & Co. Chartered Accountants FirmRegn.No.115678W

Jaymin P. Shah (Partner) M.No. 118113

Place : Mumbai Date : August 12, 2011


Mar 31, 2010

1) We have audited the attached Balance Sheet of Euro Ceramics Limited as at March 31, 2010 and also the Profi t and Loss Account for the year ended on that date and the Cash Flow Statement for the year ended on that date annexed thereto (all together referred to as the financial statements) . These fi nancial 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 have conducted our audit in accordance with the auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free from material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the fi nancial statements. An audit also includes assessing the accounting principles used and signifi cant estimates made by management, as well as evaluating the overall presentation of the fi nancial statement. We believe that our audit provides a reasonable basis for our opinion.

3) As required by the Companies (Auditors Report) Order, 2003 as amended by the Companies (Auditors Report) (Amendment) Order, 2004 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 specifi ed in paragraphs 4 and 5 of the said Order.

4) Further to our comments in the Annexure referred to in paragraph 3 above, we report as follows:

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

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

c. The Balance Sheet and Profi t and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account;

d. In our opinion, the Balance Sheet and Profi t 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;

e. On the basis of written representations received from the directors, and taken on record by the Board of Directors, as on 31st March, 2010, we report that none of the directors is disqualifi ed as on 31st March, 2010 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956;

f. In our opinion and to the best of our information and according to the explanations given to us, the said accounts read with Signifi cant accounting policies, notes to accounts give the information required by the Companies Act, 1956, in the manner so required and present 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, 2010;

ii) in the case of the Profi t and Loss Account, of the loss of the company for the year ended on that date; and

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

Annexure To The Auditors Report (Referred to in paragraph 3 of our report of even date)

1) In respect of Fixed Assets:

a The Company has maintained proper records showing full particulars including quantitative details and situation of its fi xed assets.

b As explained to us, the management during the year at reasonable interval has physically verifi ed the assets and no material discrepancies were noticed on such verifi cation.

c The Company has not disposed off any substantial part of the fi xed assets during the year.

2) In respect of its Inventories:

a The inventory has been physically verifi ed during the year by the management. In our opinion, the frequency of such verifi cation is reasonable.

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

c In our opinion and according to the information and explanations given to us, the Company has maintained proper records of its inventories. The discrepancies noticed on verifi cation between the physical stocks and the book records were not material.

3) In respect of Loans Taken / Granted:

a According to the information and explanation given to us, the Company has taken unsecured loans from eleven parties covered in the register maintained under section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs.49,81,96,976/- and the yearend balance of loans taken from such parties was Rs.9,82,33,102/-.

b According to the information and explanation given to us, the Company has granted loans to four parties covered in the register maintained under section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs.30,02,74,609/- and the year-end balance of loans given to such parties was Rs.14,18,19,409/-.

c In our opinion, the rate of interest and other terms and conditions on which loans mentioned above have been taken / granted are not, prima facie, prejudicial to the interest of the Company.

d In the absence of stipulations in respect of the terms of payment of principal amount and interest for the loans taken/granted, it is not possible to comment whether the principal and interest payments are regular.

4) In respect of register maintained u/s. 301 of the Companies Act, 1956:

a In our opinion, and according to information and explanations given to us, the particulars of contracts or arrangements referred to in section 301 of the Companies Act, 1956 have been so entered in the register required to be maintained under that section.

b In our opinion, and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and aggregating during the year to Rs. 5,00,000/- or more in respect of each party, have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

5) In our opinion the company has complied with the provisions of section 58A and section 58AA read with Companies (Acceptance of Deposits) Rules, 1975 in respect of deposits accepted in the nature of unsecured loans taken, amounting to Rs.18,69,00,000/- raised by the company during the year and the Company has fi led the copy of Statement in lieu of Advertisement and necessary particulars as required with the Registrar of Companies Mumbai.

6) In our opinion and according to the information and explanations given to us, there is an adequate internal control procedure commensurate with the size of the Company and the nature of its business with regards to purchases of inventory, fi xed assets and with regards to the sale of goods. During the course of our audit, no major weakness has been noticed in the internal control system in respect of these areas.

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

8) We have broadly reviewed the books of account maintained by the Company pursuant to the Rules made by the Central Government for the maintenance of cost records under section 209(1)(d) of the Companies Act, 1956 for its Aluminium Division and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained.

9) In respect of Statutory Dues:

a The Company is generally regular in depositing with appropriate authorities undisputed statutory dues including Income tax, Sales tax, VAT, Wealth tax, Custom duty, Excise Duty, Tax deducted/collected at source, Provident Fund, Employees State Insurance, Cess and other material statutory dues applicable to it and there are no arrears outstanding as at the year end for a period of more than six months from the date they became payable, except for some few instances of delays in depositing them with the appropriate authorities during the year which were not material.

b According to the information and explanation given to us, there are no dues of Income tax, Sales Tax, VAT, Wealth tax, Customs duty, Excise duty and cess, which have not been deposited on account of any dispute.

10) The Company neither has any accumulated losses at the end of fi nancial year nor did it have the same at the end of the immediately preceding fi nancial year but has incurred cash losses during the fi nancial year covered by our audit to the tune of Rs.18,56,82,497/- and to the tune of Rs.1,65,75,992/- in the immediately preceding fi nancial 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 any of the banks or fi nancial institutions during the year.

12) According to the information and explanations given to us, the Company has not granted loans and advances on the basis or security by way of pledge of shares, debentures and other securities.

13) The company is not a chit fund or a nidhi/ mutual benefi t fund/society. Hence the provisions of clause 4(xiii) of the Companies (Auditors Report) Order, 2003 are not applicable to the Company.

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

15) According to the information and explanations given to us, the Company has given following guarantees for loans taken by its subsidiary Euro Merchandise (I) Ltd. from banks, however the terms of issue of said guarantee are not prejudicial to the interest of the Company:

Sr. Date of Guarantee Guarantee on No. Amount (Rs.) Guarantee Favouring account of

The Cosmos Co-op. Bank Working Capital, Term Loan 13-09-2007 32.2 crores Ltd. and Letter of Credit limit.

Business Term Loan 2 30-01-2010 ABN Amro Bank N.V. 0.3 crores

TOTAL 32.5 crores

16) In our opinion, the term loans are being applied for the purpose for which they were obtained.

17) According to the information and explanations given to us and on an overall examination of the balance sheet of the Company and after placing reliance on the reasonable assumptions made by the company for classifi cation of long term and short term usages of funds, we are of the opinion that, prima facie no funds raised on short-term basis have been utilized for long- term investment.

18) According to the information and explanations given to us, the Company has not made preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Act.

19) According to the information and explanations given to us, during the year covered by our audit report, the Company has not issued any Debentures.

20) The Company has not raised any money by way of public issues during the year.

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

For DEEPAK MARU & CO.

CHARTERED ACCOUNTANTS

Firm Regn. No.115678W

JAYMIN P. SHAH

(Partner)

M.NO. 118113

Place: MUMBAI

Date: October 29, 2010.

 
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