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Auditor Report of ISMT Ltd.

Mar 31, 2016

INDEPENDENT AUDITORS'' REPORT

TO THE MEMBERS OF ISMT LIMITED

Report on the Standalone Financial Statements

We have audited the accompanying Standalone Financial Statements of ISMT LIMITED ("the company"), which comprise the Balance Sheet as at March 31, 2016, 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 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

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 there under. We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditors'' 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.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion on the standalone financial statements.

Basis for Qualified Opinion

1] The Company has outstanding Minimum Alternate Tax (MAT) entitlement of Rs. 82.05 Crore as on March 31, 2016. Taking into consideration the loss during the current financial year and carried forward losses under the Income Tax Act, 1961 in our opinion, there is no convincing evidence that the MAT entitlement can be adjusted within the specified period against the future taxable profits under the provisions of Income Tax Act 1961. In view of the same, in our opinion, the MAT entitlement cannot be continued to be recognized as an asset in terms of "Guidance note on accounting for credit available in respect of MAT under the Income Tax Act, 1961". Non-writing off of the same has resulted in understatement of loss for the year and overstatement of the reserves by Rs. 82.05 Crore and its consequential effect on the Earnings per Share of the company.

2] The company, through its subsidiary, has invested Rs. 48.43 Crore in Struc to Hydraulics AB, Sweden (SHAB). Net receivable, after taking into consideration the provision made against the same, to the company from SHAB against the supplies made is Rs. 10.09 Crore and Rs. 16.58 crore is receivable from SHAB due to invocation of Bank Guarantee and outstanding Bank Guarantee given by the company in respect of loans availed by SHAB is Rs. 16.58 Crore. SHAB has been incurring cash losses and its net worth is also eroded. No provision for diminution in value of investment and net receivable is made by the company as explained in Note No. 3.18 forming part of the financial statements. We are unable to comment on the same and ascertain its impact, if any, on the financial statements in respect of the above matters.

3] The company had recognized claim in earlier year, of which outstanding balance as on March 31, 2016 is Rs. 39.53 Crore, against Maharashtra State Electricity Distribution Company Ltd. (MSEDCL) for non-implementation of Energy Banking Agreement. The company had appealed to Appellate Tribunal (APTEL) against the order passed by Maharashtra Electricity Regulatory Commission (MERC) and the same has been dismissed by the APTEL. Based on legal advice, the company is in the process to file an appeal against the order of APTEL in the Supreme Court. The realization of this claim is contingent and dependent upon the outcome of the decision of the Supreme Court. In our opinion, the recognition of above claim, being contingent asset in nature, is not in conformity with AS-29, Provisions, Contingent Liabilities and Contingent Assets. Recognition of the above claim has resulted in overstatement of Reserves by Rs. 39.53 Crore. Refer Note No. 3.2 (ii) forming part of the financial statements.

Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matters described in the Basis for Qualified Opinion paragraph above, 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.

Emphasis of Matters

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

The company has accumulated losses and its net worth has been fully eroded, the company has incurred a net cash loss during the current and previous years and the company''s current liabilities exceeded its current assets as at the balance sheet date. These conditions indicate the existence of a material uncertainty about the company''s ability to continue as a going concern. However, the financial statements of the company have been prepared on a going concern basis for the reasons stated in the Note No. 3.19 forming part of the financial statements.

Note No. 1.24 regarding remuneration to the Managing Director and Executive Director of the company amounting to Rs. 1.02 Crore provided for in the financial statements is subject to approval of the Central Government.

Our opinion is not qualified in respect of these matters.

Report on Other Legal and Regulatory Requirements

1. As required by The Companies (Auditor''s Report) Order, 2016 issued by the Central Government of India (Ministry of Corporate Affairs) in terms of sub section (11) of Section 143 of the Companies Act, 2013, we give in Annexure A, a statement on the matters specified in paragraphs 3 and 4 of the Order.

2. As required by Section 143(3) of the Act, we report that:

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

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

(c) The company has no branch offices whose accounts are audited by branch auditors.

(d) 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.

(e) In our opinion, except for the effects of the matters described in the Basis for Qualified Opinion paragraph above, 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.

(f) The matters described in the Basis for Qualified Opinion paragraph above, in our opinion, may have an adverse effect on the functioning of the company.

(g) 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.

(h) The qualifications relating to maintenance of accounts and other matters connected therewith are as stated in the Basis for Qualified Opinion paragraph above.

(i) 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

(j) 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 Refer Note No. 3.1(i) (a) on Contingent Liabilities disclosing the impact of pending litigation on the financial position of the company.

ii. The company does not have any long-term contracts including derivative contracts, having any material foreseeable losses, for which provision was required.

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the company.

Annexure to the Independent Auditors'' Report

Referred to in paragraph 1 under the heading "Report on Other legal and Regulatory Requirements" of our report on even date:

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

b) These fixed assets have been physically verified by the management at regular intervals considering the size of the company and nature of asset. As informed to us, no material discrepancies have been noticed on such verification.

c) According to the information and explanations given to us and on the basis of our examination of the records of the company, the title deeds of immovable properties are held in the name of the Company.

(ii) a) As explained to us, the inventories including majority of the goods lying with third parties have been physically verified by the management at reasonable intervals during the year.

b) In our opinion and according to the information and explanation given to us, the discrepancies noticed on physical verification between physical stock and the book records were not material and have been properly dealt with in the books of account.

(iii) As per the records of the company, it has not granted any loans, secured or unsecured to companies, firms, Limited Liability Partnerships or other parties covered in the register maintained under section 189ofthe Act.

(iv) 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 Act, with respect to the loans, investments, guarantees and securities.

(v) The company has not accepted any Deposit from the public.

(vi) 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 sub-section (1) of section 148 of the Companies Act, 2013 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 records with a view to determine whether they are accurate and complete.

(vii) a) According to the records of the company, the company

is not regular in depositing undisputed statutory dues including Provident Fund, Income Tax, Sales Tax, Value added Tax, Custom Duty, Excise Duty, Value added tax, Cess and any other statutory dues with the appropriate authorities. According to the information and explanations given to us, there are no undisputed amounts payable in respect of such statutory dues which have remained outstanding as at March 31,

2016 for a period of more than six months from the day they become payable.

b) The disputed statutory dues that have not been deposited on account of disputes pending before the appropriate authorities are as mentioned in the Annexure-1 to this report.

(viii) According to the information and explanation given to us, the company has defaulted in repayment of dues to banks and Governments. Details of defaults are mentioned in Annexure- II. The Company does not have any debenture holders.

(ix) The company did not raise any money by way of initial public offer or further public offer (including debt instruments) and according to the information and explanations given to us, the term loans taken by the company during the year have been utilized for the purpose for which the said loans were obtained.

(x) Based upon the audit procedures performed by us and according to the information and explanations given to us, no fraud on or by the company by its officers or employees has been noticed or reported during the year.

(xi) According to the information and explanations given to us and based on our examination of the records of the company, 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 except to the extent referred in Annexure III to this report.

(xii) In our opinion and according to the information and explanations given to us, the company is not a Nidhi company. Accordingly, paragraph 3(xii) of the Order is not applicable.

(xiii) According to the information and explanations given to us and based on our examination of the records of the company, transactions with the related parties are in compliance with sections 177 and 188 of the Act wherever applicable and details of such transactions have been disclosed in the financial statements as required by the applicable Accounting Standards.

(xiv) According to the information and explanations give to us and based on our examination of the records of the company, the company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year.

(xv) According to the information and explanations given to us and based on our examination of the records of the company, the company has not entered into non-cash transactions with directors or persons connected with him. Accordingly, paragraph 3(xv) of the Order is not applicable.

(xvi) The company is not required to be registered under section 45-IA of the Reserve Bank oflndia Act, 1934.

Annexure - I

Particulars of dues of Sales Tax / Excise Duty / Income Tax not deposited on account of disputes:

Rs. in Crore

Nature of Statue

Nature of Dues

Amount Disputed

Forum where dispute is pending

Central Sales Tax Act, 1956

Sales Tax

0.09

Tribunal

6.41

Dy. Commissioner (Appeals)

0.01

High Court, Bombay

0.19

Joint Commissioner

Maharashtra Sales Tax Act, 1959

Sales Tax

0.03

Tribunal

0.47

High Court, Bombay

5.76

Dy. Commissioner (Appeals)

Central Excise Act, 1944

Excise Duty

12.25

CESTAT

6.80

High Court, Bombay

1.06

Commissioner

0.06

Joint Commissioner

0.08

Asst. Commissioner

1.48

Add. Commissioner

Customs Act,1962

Custom Duty

1.49

Dy. Commissioner

0.77

Asst. Commissioner

1.73

CESTAT

Income Tax Act, 1961

Income Tax

0.70

ITAT Mumbai

3.75

CIT, Pune


Annexure II

a) Delay in repayment of installments due including interest during the year:

Name of the Lenders/ Government

0-30 Days

31-60 Days

61-90 Days

More than 91 Days

Total

Bank of Baroda

2.38

-

2.54

10.08

15.00

Bank of India

0.08

8.36

19.67

3.71

31.82

Bank of Maharashtra

3.70

0.30

0.30

-

4.30

Central Bank of India

9.69

3.46

-

-

13.15

ICICI Bank Limited

-

-

2.17

-

2.17

IDBI Bank Limited

-

1.25

0.18

-

1.43

IKB Deutsche Industries Bank AG

-

-

0.84

0.15

0.99

Indian Overseas Bank

0.03

0.20

5.97

15.43

21.63

State Bank of India

0.08

0.03

-

-

0.11

Maharashtra Sales Tax Department

3.54

-

-

-

3.54

TOTAL

19.50

13.60

31.67

29.37

94.14

b) Installments due including interest outstanding as at March 31, 2016:

Rs. in Crore

Name of the Lenders/ Government

0-30 Days

31-60 Days

61-90 Days

More then 91 Days

Total

Andhra Bank

4.36

1.58

-

16.82

22.76

Bank of Baroda

10.17

4.05

0.04

25.23

39.49

Bank of India

5.33

11.81

-

42.95

60.09

Bank of Maharashtra

3.83

8.66

3.44

34.67

50.60

Central Bank of India

3.81

0.67

3.03

2.47

9.98

ICICI Bank Limited

7.06

0.92

12.81

20.79

IDBI Bank Limited

3.21

1.33

1.37

8.51

14.42

IKB Deutsche Industries Bank AG

-

-

-

18.82

18.82

Indian Overseas Bank

1.81

4.80

-

5.97

12.58

State Bank of India

0.87

1.71

30.31

3.33

36.22

TOTAL

40.45

35.53

38.19

171.58

285.75

Annexure III

Details of Managerial Remuneration paid / provided in excess of requisite approval:

_Rs. in Crore

Designation

Amount paid / provided

Amount paid / provided in excess of the limit prescribed

Amount due as recoverable from Balance Sheet

Steps taken for recovery

Managing Director Remuneration: Paid

1.26

-

Nil

-

Provided

0.08

0.08

-

-

Executive Director

Remuneration:

Paid

0.62

0.62

0.62

-

Provided

0.32

0.32

-

-

Total

2.28

1.02

0.62

-

- Pending for approval of Shareholders and the Central Government.

- pending for approval of the Central Government.

SECURITY

i) Term Loans of Rs. 771.60 Crore (including current maturities of Rs.143.90 Crore)(Previous Year Rs 720.19 Crore including current maturities of Rs. 74.06 Crore) are stipulated to be secured by a first charge ranking pari passu on the Company''s immovable properties and movable fixed assets both present and future with other term lenders, excluding term loan lenders where exclusive charge on movable fixed assets as mentioned in clause (iii) has been stipulated and assets of Captive Power Project of the Company located at Chandrapur district as mentioned in clause (iv). These loans are further stipulated to be secured by a second charge ranking pari passu by way of hypothecation with other term lenders on the current assets of the Company on which the first pari passu charge is stipulated to be covered in favour of consortium of banks as mentioned in Note No. 1.6.

ii) Term Loans of Rs. 141.33 Crore ( including current maturities of Rs.57.11 Crore ) (Previous Year Rs. 177.99 Crore including current maturities of Rs. 68.18 Crore) are stipulated to be secured by a first charge ranking pari passu on the Company''s immovable properties and movable fixed assets both present and future with other term lenders, excluding term loans lenders where exclusive charge on movable fixed assets as mentioned in clause (iii) has been stipulated and assets of Captive Power Project of the Company located at Chandrapur district as mentioned in clause (iv).

iii) Term Loans of Rs. 93.69 Crore (including current maturities of Rs. 46.37 Crore ) (Previous Year Rs. 114.20 Crore including current maturities of Rs.45.38 Crore) are stipulated to be secured by exclusive charge on the equipment financed. Out of above, term loan of Rs.76.95 Crore is further stipulated to be secured with the land appurtenant thereto.

iv) Term Loans of Rs. 103.88 Crore (including current maturities of Rs. 70.74 Crore ) (Previous Year Rs. 106.98 Crore including current maturities of Rs. 34.92 Crore) are stipulated to be secured by first charge ranking pari passu on the Company''s immovable properties and movable fixed assets relating to Captive Power Projects of the Company located in Chandrapur district.

v) Term Loan of Rs. Nil Crore ( including current maturities of Rs. Nil) ( Previous Year Rs. 39.49 Crore including current maturities of Rs. Nil) is secured by first charge ranking pari passu by hypothecation in respect of current assets of the Company present and future and are further secured by a second pari passu charge on the Company''s immovable properties and all movable fixed assets both present and future as referred in Note No.(i) above.

vi) Further out of the above term loans from banks, loans amounting to Rs.405.50 Crore are secured by unencumbered properties located at Ahmednagar and Jejuri and also guaranteed by the Managing Director of the Company.

vii) Maturity Schedule

For MRM ASSOCIATES

COMPANY SECRETARIES

CS M B KASODEKAR

PARTNER

Membership No. F 2756

C. P. No: 1681 Unique Code of Partnership

Firm: P2001MH006700


Mar 31, 2015

We have audited the accompanying standalone financial statements of ISMT 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

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 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

Our responsibility is to express an opinion on these standalone financial statements based on our audit. We have taken into account the provisions of the Act, the Accounting and Auditing Standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made thereunder. We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the company’s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on whether the company has in place an adequate internal financial 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.

Basis for Qualified Opinion

1] The company has outstanding Minimum Alternate Tax (MAT) entitlement of Rs.91.44 Crore as on March 31, 2015. Taking into consideration the loss during the current financial year and carried forward losses under the Income Tax, in our opinion there is no convincing evidence that the MAT entitlement can be adjusted within the specified period against the future taxable profits under the provisions of Income Tax Act 1961. In view of the same, in our opinion, the MAT entitlement cannot be continued to be recognised as an asset in terms of “Guidance note on accounting for credit available in respect ofMAT under the Income Tax Act, 1961”. Non-writing off of the same has resulted in understatement of loss for the year and overstatement of the reserves by Rs.91.44 Crore and its consequential effect on the Earnings per Share of the company.

2] The company, through its subsidiary, has invested Rs. 48.43 Crore in Structo Hydraulics AB Sweden (SHAB). Net receivable, after taking into consideration the provision made against the same, to the company from SHAB against the supplies made is Rs. 8.38 Crore and guarantee given by the company in respect of loans availed by SHAB is Rs. 31.30 Crore. SHAB has been incurring cash losses and its net worth is also eroded. No provision for diminution in value of investment and net receivable is made by the company as explained in Note Number 3.20 forming part of the financial statements. We are unable to comment on the same and ascertain its impact, if any, on the financial statements in respect of the above matters.

3] The company has recognized claim in earlier year, of which outstanding balance as on March 31, 2015 is Rs. 40.83 Crore, against Maharashtra State Electricity Distribution Company Limited (MSEDCL) for non- implementation of Energy Banking Agreement. The realization of this claim is contingent and dependent upon the outcome of the decision of the petition filed with Appellate Tribunal (APTEL) Delhi. In our opinion the recognition of above claim, being contingent asset in nature, is not in conformity with AS-29, Provisions, Contingent liabilities and Contingent assets. Recognition of the above claim has resulted in overstatement of Reserves by Rs. 40.83 Crore. Refer Note Number 3.2(ii) forming part the financial statements.

Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matters described in the Basis for Qualified Opinion paragraph above, 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.

Emphasis of Matter

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

Note No. 3.3 explaining the accounting treatment given for write back of depreciation amounting to Rs. 103.71 Crore consequent to change in the method of depreciation as well as adoption of useful lives of the Fixed Assets from the date of acquisition.

Note No. 1.24 regarding remuneration to the Managing Director and Executive Director amounting to Rs. 0.91 Crore, provided for in the financial statements is subject to approval of Central Government.

Our opinion is not qualified in respect of these matters.

Report on Other Legal and Regulatory Requirements

1. As required by The Companies (Auditor’s Report) Order, 2015 issued by the Government of India (Ministry of Corporate Affairs) in terms of sub section (11) of Section 143 of the Companies Act, 2013, we give in Annexure a statement on the matters specified in paragraphs 3 and 4 of the Order.

2. As required by Section 143 (3) of the Act, we report that:

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

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

(c) The company has no branch offices whose accounts are audited by branch auditors.

(d) 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.

(e) In our opinion, except for the effects of the matters described in the Basis for Qualified Opinion paragraph above, 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.

(f) The matters described in the Basis for Qualified Opinion paragraph above, in our opinion, may have an adverse effect on the functioning of the company.

(g) 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 a director in terms of Section 164 (2) of the Act.

(h) The qualifications relating to maintenance of accounts and other matters connected therewith are as stated in the Basis for Qualified Opinion paragraph above.

(i) 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. Refer Note No. 3.1(i) (a) on Contingent Liabilities disclosing the impact of pending litigation on the financial position of the company in its financial statements.

ii. The company does not have any long-term contracts including derivative contracts, having any material foreseeable losses, for which provision was required.

iii. There are minor delays in amounts required to be transferred to the Investor Education and Protection Fund by the company as follows:

a) Rs. 0.28 Crore, 3 days delay

b) Rs.0.28 Crore, 9 days delay

Referred to in paragraph 1 under the heading, “Report on Other legal and Regulatory Requirements” of our report on even date:

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

b) These fixed assets have been physically verified by the management at regular interval considering the size of the company and nature of asset. As informed to us, no material discrepancies have been noticed on such verification. 2) a) As explained to us, the inventories including majority of the goods lying with third parties have been physically verified by the management at reasonable intervals during the year.

b) In our opinion and according to the information and explanation 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 explanation given to us, the company has maintained proper records of its inventories and the discrepancies noticed on such physical verification between physical stock and the book records were not material and have been properly dealt with in the books of account.

3) As per the records of the company, it has not granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under section 189 of the Companies Act.

4) In our opinion and according to the information and explanation given to us, there are adequate internal control systems commensurate with the size of the company and nature of its business with regard to purchase of inventory and fixed assets and for sale of goods and services. During the course of audit, we have not observed any continuing failure to correct major weakness in internal control systems.

5) The company has not accepted / nor there are any outstanding Fixed Deposit from the 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 sub- section (l) of Section 148 of the Companies Act, 2013 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 records with a view to determine whether they are accurate and complete.

7) a) According to the records of the company, the company is not regular in depositing undisputed statutory dues including Provident Fund, Income Tax, Sales Tax, Wealth Tax, Custom Duty, Excise Duty, Cess and other statutory dues with the appropriate authorities. According to the information and explanation given to us, there are no undisputed amounts payable in respect of such statutory dues which have remained outstanding as March 31,2015 for a period of more than six months from the day they become payable.

b) The disputed statutory dues that have not been deposited on account of disputes pending before the appropriate authorities are as mentioned in the Annexure- I to this report.

c) According to the information and explanation given to us, the amounts 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 there under have been so transferred. However there is minor delay of 3 days in transferring Rs. 0.28 Crore and 9 days in transferring Rs. 0.28 Crore.

8) The accumulated losses of the company exceed 50% of its Net Worth. The company has incurred cash loss during the year as well as in the immediately preceding financial year.

9) According to the information and explanation given to us, the company has defaulted in repayment of dues to banks. Details of defaults are mentioned in Annexure- II.

10) According to the information and explanations given to us, the company has given guarantees on behalf of its subsidiaries for loans taken by them from banks. The terms and conditions whereof, in our opinion, based on the management representation, are not prima-facie prejudicial to the interest of the company.

11) According to the information and explanation given to us, the term loans taken by the company during the year have been utilised for the purpose for which the said loans were obtained.

12) Based upon the audit procedures performed by us and according to the information and explanations given to us, no fraud on or by the company has been noticed or reported during the year.

For M/s P. G. Bhagwat For J. K. Shah & Co. Firm’s Registration No. 101118W Firm’s Registration No. 109606W Chartered Accountants Chartered Accountants

Sandeep Rao J.K. Shah Partner Partner Membership No. 47235 Membership No. 3662 Pune: May 30, 2015 Mumbai: May 30, 2015


Mar 31, 2014

We have audited the accompanying Financial Statements of ISMT Limited, which comprise the Balance Sheet as at March 31, 2014, and the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management''s Responsibility for the Financial Statements

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards 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, but not for the purpose of expressing an opinion on the effectiveness of the entity''s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

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

Basis for Qualified Opinion

1] The Company has outstanding MAT Credit entitlement of Rs.91.44 Crore as on March 31, 2014, which in the opinion of the management, based on the projected future taxable profits, will be utilized within the stipulated time period prescribed as per the provisions of Income Tax Act, 1961. Considering the uncertainties around the assumptions used for projections of future taxable profits and its consequential effect on utilization of MAT Credit entitlement, we are unable to comment on the recoverability of Mat Credit entitlement outstanding as at March 31, 2014 and its consequential impact on the Statement of Profit and Loss for the year ended March 31, 2014 and on the Reserves of the Company as on that date. Refer Note No. 3.21 forming part the financial statements.

2] The Company, through its subsidiary, has invested Rs. 48.43 Crore in Structo Hydraulics AB Sweden (SHAB). Net receivable to the Company from SHAB against supplies made is Rs 53.85 Crore and guarantee given by the Company in respect of loans availed by SHAB is Rs. 18.03 Crore. The Company has been incurring cash losses and the net worth of the Company is also eroded. In the opinion of the management the investment is strategic and long term and the debtors are collectible and no provisioning is required against the same. We are unable to comment on the same and ascertain its impact, if any, on the financial statements in respect of the above matters. Refer Note No. 3.20 forming part the financial statements.

3] The Company has recognized claim made of Rs. 20.03 Crore (Cumulative up to March 31, 2014 Rs. 49.97 Crore) against Maharashtra State Electricity Distribution Company Ltd. (MSEDCL) for non-implementation of Energy Banking Agreement. The realization of this claim is contingent and dependent upon the outcome of the decision of the petition filed with Maharashtra Electricity Regulatory Commission, Mumbai (MERC). In our opinion the recognition of above claim, being contingent asset in nature, is not in conformity with AS-29, Provisions, Contingent liabilities and Contingent assets. Recognition of the above claim has resulted in understatement of loss for the year by Rs. 20.03 Crore and overstatement of Reserves by Rs. 49.97 Crore. Refer Note Number 3.2(ii) forming part the financial statements.

Qualified Opinion

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

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

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

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

Emphasis of matter

Without qualifying our opinion, we draw attention to the following matter referred to in the notes forming part of the financial statements:

Note No 1.24 regarding remuneration paid to Executive Directors for the year amounting to Rs. 1.40 Crore (Cumulative Rs. 3.12 Crore) is subject to approval of Central Government.

Report on Other Legal and Regulatory Requirements

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

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

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

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

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

d. Except for the effects of the matter described in the Basis For Qualified Opinion Paragraph, in our opinion, the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement comply with the Accounting Standards referred to in subsection (3C) of section 211 of the Companies Act, 1956;

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

Annexure to the Auditor''s Report

(As referred to in paragraph 1 of 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) These fixed assets have been physically verified by the management at regular interval considering the size of the Company and nature of asset. As informed to us, no material discrepancies have been noticed on such verification.

c) No disposal of a substantial part of fixed assets of the Company has taken place during the year.

2. a) As explained to us, the inventories including majority of the goods lying with third parties have been physically verified by the management at reasonable intervals during the year.

b) In our opinion and according to the information and explanation 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 explanation given to us, the Company has maintained proper records of its inventories and the discrepancies noticed on such physical verification between physical stock and the book records were not material and have been properly dealt with in the books of account.

3. a) As per the records of the Company, it has not granted any loans secured / unsecured to Companies, firms or other parties covered in the register maintained u/s 301 of the Companies Act, 1956.

b) As per the records of the Company, it has not taken any loans secured / unsecured from Companies, firms or other parties covered in the register maintained u/s 301 of the Companies Act, 1956.

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

5. To the best of our knowledge and belief and according to the information and explanations given to us, in our opinion there were no contracts or arrangements whose particular are needed to be entered in the register maintained in pursuance of Section 301 of the Companies Act, 1956.

6. The Company has not accepted / nor there are any outstanding Fixed Deposit from the public.

7. The Company has an internal audit department to carry out its internal audit function. In our opinion, the internal audit system is commensurate with the size of the Company 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 and are of the opinion that prima facie the prescribed accounts and records have generally been maintained. We have not, however, made a detailed examination of the records with view to determine whether they are accurate or complete.

9. a) According to the records of the Company, the Company is generally regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Income Tax, Sales Tax, Wealth Tax, Custom Duty, Excise Duty, Cess and other statutory dues with the appropriate authorities. According to the information and explanation given to us, there are no undisputed amounts payable in respect of such statutory dues which have remained outstanding as at March 31, 2014 for a period of more than six months from the day they become payable.

b) The disputed statutory dues that have not been deposited on account of disputes pending before the appropriate authorities are as mentioned in the Annexure - I to this report.

10. The accumulated losses of the Company do not exceed 50% of its Net Worth. The Company has incurred cash loss during the year as well as in the immediately preceding financial year.

11. According to the information and explanation given to us, the Company has defaulted in repayment of dues to banks. Details of defaults are mentioned in Annexure- II .

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

13. In our opinion, the Company is not a Chit Fund or a Nidhi or Mutual benefit Fund / Society.

14. The Company is not dealing in or trading in Shares, Securities, Debenture, or other investments and hence, provision of clause 4 (xiv) of the Companies (Auditor Report) Order, 2003 is not applicable to the Company.

15. According to the information and explanations given to us, the Company has given guarantees on behalf of its subsidiaries for loans taken by them from banks. The terms and conditions whereof, in our opinion, based on the management representation, are not prima-facie prejudicial to the interest of the Company.

16. According to the information and explanation given to us, the term loans taken by the Company during the year have been utilised for the purpose for which the said loans were obtained.

17. In our opinion and according to information and explanation given to us and on overall examination of the Balance Sheet of the Company as at March 31, 2014, we report that Short Term funds of Rs. 137.65 Crore have been used for Long Term Investment.

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

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

20. The Company has not made any Public Issue during the year to raise money.

21. To the best our knowledge and belief and according to the information and explanations given to us, no fraud on or by the Company was noticed or reported during the course of our audit that causes the financial statement to be materially misstated.

For M/S P. G. BHAGWAT For J. K. SHAH & CO Firm''s Registration Number 101118W Firm''s Registration Number 109606W Chartered Accountants Chartered Accountants

Sandeep Rao J. K. Shah Partner Partner Membership Number 47235 Membership Number 3662 Pune: May 28, 2014 Mumbai: May 28, 2014


Mar 31, 2013

Report on the Finanacial Statements

We have audited the accompanying financial statements of ISMT Limited, which comprise the Balance Sheet as at March 31, 2013, and the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information. Management''s Responsibility for the Financial Statements Management is responsible^or 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:

(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 for the year ended on that date; and

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

Emphasis of matter

Without qualifying our opinion, we draw attention to the

following matters referred to in the notes forming part of the financial statements :

(a) Note No 3.20 regarding investment, receivables and guarantees given to subsidiaries whose net worth is eroded. In the opinion of the management, the investment made in the subsidiary is strategic and long term and hence no provision for diminution in value of investment as well as receivables is considered necessary.

(b) Note No 1.25 regarding remuneration to Executive Director and Non-Executive Directors totalling to Rs.1.84 Crore is subject to approval of Central Government.

(c) Note No.3.2 (iv) regarding accrual of claim for refund of electricity charges amounting to Rs. 29.94 Crore from Maharashtra State Electricity Distribution Company Limited based on Interim order of Maharashtra Electricity Regulatory Commission, Mumbai, duly supported by legal opinion.

(d) Note No.3.2(ii) regarding recoverability of balance amount of Rs. 2.45 Crore against insurance claim recognized in previous year.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2003 issued by the Central Government of India in terms of sub-section (4A) of section 227 of the 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 sub-section (3C) of section 211 of the Companies Act, 1956;

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

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

b) These fixed assets have been physically verified by the management at regular interval considering the size of the company and nature of asset. As informed to us, no material discrepancies have been noticed on such verification.

c) No disposal of a substantial part of fixed assets of the company has taken place during the year.

2) a) As explained to us, the inventories including majority of the goods lying with third parties have been physically verified by the management at reasonable intervals during the year.

b) In our opinion and according to the information and explanation 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 explanation given to us, the company has maintained proper records of its inventories and the discrepancies noticed on such physical verification between physical stock and the book records were not material and have been properly dealt with in the books of account.

3) a) As per the records of the company, it has not granted any loans secured / unsecured to companies, firms or other parties covered in the register maintained u/s 301 of the Companies Act, 1956.

b) As per the records of the company, it has not taken any loans secured / unsecured from companies, firms or other parties covered in the register maintained u/s 301 of the Companies Act, 1956.

4) In our opinion and according to the information and explanation given to us, there are adequate internal control systems commensurate with the size of the company and nature of its business with regard to purchase of inventory and fixed assets and for sale of goods and services. During the course of audit, we have not observed any continuing failure to correct major weakness in internal control systems.

5) To the best of our knowledge and belief and according to the information and explanations given to us, in our opinion there were no contracts or arrangements whose particular are needed to be entered in the register maintained in pursuance of Section 301 of the Companies Act, 1956.

6) The company has not accepted / nor there are any outstanding Fixed Deposit from the public.

7) The company has an internal audit department to carry out its internal audit function. In our opinion, the internal audit system is commensurate with the size of the company 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 and are of the opinion that prima facie the prescribed accounts and

¦ records have generally been maintained. We have not, however, made a detailed examination of the records with view to determine whether they are accurate or complete.

9) a) According to the records of the company, the company

is generally regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Income Tax, Sales Tax, Wealth Tax, Custom Duty, Excise Duty, Cess and other statutory dues with the appropriate authorities. According to the information and explanation given to us, there are no undisputed amounts payable in respect of such statutory dues which have remained outstanding as at March 31, 2013 for a period of more than six months from the day they become payable.

b) The disputed statutory dues that have not been deposited on account of disputes pending before the appropriate authorities are as mentioned in the Annexure I to this report.

10) The company has no accumulated losses as at March 31, 2013. It has incurred cash loss during the year but has not incurred cash loss in the immediately preceding financial year.

11) According to the information and explanation given to us, the company has not defaulted in repayment of dues to financial institutions, banks and debenture holders.

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

13) In our opinion, the company is not a Chit Fund or a Nidhi or Mutual benefit Fund / Society.

14) The company is not dealing in or trading in Shares, Securities, Debenture, or other investments and hence, provision of clause 4 (xiv) of the Companies (Auditor Report) Order, 2003 is not applicable to the company.

15) According to the information and explanations given to us, the company has given guarantees for loans taken by others

from banks. The terms and conditions whereof, in our opinion, based on the management representation, are not prima-facie prejudicial to the interest of the company.

16) According to the information and explanation given to us, the term loans taken by the company during the year have been utilised for the purpose for which the said loans were obtained.

17) In our opinion and according to the information and explanation given to us and on an overall examination of the Balance Sheet of the company as at March 31, 2013, we report that, on consideration of the nature of current maturities of long term debt, classified as current liability, as a Long Term Fund and tie up of Long Term Funds subsequent to Balance Sheet date, Short Term Funds raised amounting to Rs. 27.69 Crore have been used for Long Term Investments.

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

19) The company did not have any outstanding debentures during the year.

20) The company has not made any Public Issue during the year to raise money.

21) To the best our knowledge and belief and according to the information and explanations given to us, no fraud on or by the company was noticed or reported during the course of our audit that causes the financial statement to be materially misstated.

For M/s P.G. Bhagwat For J.K.Shah & Co.

Firm Registration No. 109606W Firm Registration No. 109606W

Chartered Accountants Chartered Accountants

Sandeep Rao Sanjay Dhruva

Partner Partner

Membership No. 47235 Membership No. 38480

Pune, May 28,2013 Pune, May 28,2013


Mar 31, 2012

1. We have audited the attached Balance Sheet of ISMT Limited as at March 31, 2012, the Statement of Profit and Loss and also Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with the accounting standards generally accepted in India. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor's Report) Order, 2003 issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956, and on the basis of the information and explanation given to us and the books and records examined by us in the normal course of audit and to the best of our knowledge and belief, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4. Attention is invited to Note No. 3.2(ii) regarding recognizing insurance claim of Rs. 14.98 Crore

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

a) We have obtained all the information and explanation, 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, the Statement of Profit and Loss and the Cash Flow Statement dealt with by this report are in agreement with the books of account;

d) In our opinion, the Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statement 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;

e) On the basis of written representation 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 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) In our opinion and to the best of our information and according to the explanation given to us, the said accounts, read together with notes there on, 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;

i) In the case of Balance Sheet, of the state of affairs of the company as at March 31,2012;

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

iii) In the case of Cash Flow statement, of the cash flow for the year ended on the that date.

Annexure to the Auditor's Report

(as referred to in paragraph 3 of 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) These fixed assets have been physically verified by the management at regular interval considering the size of the company and nature of asset. As informed to us, no material discrepancies have been noticed on such verification.

c) No disposal of a substantial part of fixed assets of the company has taken place during the year.

2) a) As explained to us, the inventories including majority of the goods lying with third parties have been physically verified by the management at reasonable intervals during the year.

b) In our opinion and according to the information and explanation 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 explanation given to us, the company has maintained proper records of its inventories and the discrepancies noticed on such physical verification between physical stock and the book records were not material and have been properly dealt with in the books of account.

3) As per the records of the company, it has not granted any loans secured/ unsecured to companies, firms or other parties covered in the register maintained/s 301 of the Companies Act, 1956.

4) As per the records of the company, it has not taken any loans secured / unsecured from companies, firms or other parties covered in the register maintained u/s 301 of the Companies Act, 1956.

5) In our opinion and according to the information and explanation given to us, there are adequate internal control systems commensurate with the size of the company and nature of its business with regard to purchase of inventory and fixed assets and for sale of goods and services. During the course of audit, we have not observed any continuing failure to correct major weakness in internal control systems.

6) To the best of our knowledge and belief and according to the information and explanations given to us, in our opinion there were no contracts or arrangements whose particular are needed to be entered in the register maintained in pursuance of Section 301 of the Companies Act, 1956.

7) The company has not accepted / nor there are any outstanding Fixed Deposit from the public.

8) The company has an internal audit department to carry out its internal audit function. In our opinion, the internal audit system is commensurate with the size of the company and nature of its business.

9) 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 and are of the opinion that prima facie the prescribed accounts and records have generally been maintained. We have not, however, made a detailed examination of the records with a view to determine whether they are accurate or complete.

10) a) According to the records of the company, the company is generally regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Income Tax, Sales Tax, Wealth Tax, Custom Duty, Excise Duty, Cess and other statutory dues with the appropriate authorities. According to the information and explanation given to us, there are no undisputed amounts payable in respect of such statutory dues which have remained outstanding as at March 31, 2012 for a period of more than six months from the day they become payable.

b) The disputed statutory dues that have not been deposited on account of disputes pending before the appropriate authorities are as mentioned in the Annexure I to this report.

11) The company has no accumulated losses as at March 31,2012 and it has not incurred cash loss during the year or in the immediately preceding financial year.

12) According to the information and explanation given to us, the company has not defaulted in repayment of dues to financial institutions, banks and debenture holders.

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

14) In our opinion, the company is not a Chit Fund or a Nidhi or Mutual benefit Fund /Society.

15) The company is not dealing in or trading in Shares, Securities, Debenture, or other investments and hence, provision of clause 4 (xiv) of the Companies (Auditor Report) Order, 2003 is not applicable to the company.

16) According to the information and explanations given to us, the company has given guarantees for loans taken by others from banks. The terms and conditions whereof, in our opinion, based on the management representation, are not prima-facie prejudicial to the interest of the company.

17) According to the information and explanation given to us, the term loans taken by the company during the year have been utilised for the purpose for which the said loans were obtained.

18) According to the Cash Flow Statement and other records examined by us and on the basis of information and explanation given to us, on an overall basis, funds raised on Short Term basis have, prima facie, not been used during the year for Long Term Investment.

19) The company has not made any preferential allotment of shares to parties and companies covered in the register maintained under section301 of the Companies Act, 1956.

20) The company did not have any outstanding debentures during the year.

21) The company has not made any Public Issue during the year to raise money.

22) To the best our knowledge and belief and according to the information and explanations given to us, no fraud on or by the company was noticed or reported during the course of our audit that causes the financial statement to be materially misstated.

Annexure I

Particulars of dues of Sales Tax/Excise Duty/Income Tax not deposited on account of disputes:

Rs. in Crore

Name of Statue Nature of Dues Amount Disputed Forum Where Dispute is Pending

Central Sales Tax Act, 1956 Sales Tax 0.09 Tribunal

6.53 Dy. DCST (Appeals)

0.01 High Court, Bombay

Maharashtra Sales Tax Act, 1959 Sales Tax 0.02 Tribunal

0.40 High Court, Bombay

5.65 Dy. DCST (Appeals)

Purchase Tax 0.01 Tribunal

Turnover Tax 0.08 High Court, Bombay

Penalty & Interest

Central Excise Act, 1944 Excise Duty 27.58 CEGAT

0.16 High Court, Bombay

0.53 Commissioner (Appeals)

5.44 Commissioner (Adjudication)

0.18 Joint Commissioner

1.13 Asst. Commissioner

1.00 Add. Commissioner

Income Tax Act, 1961 Income Tax 0.20 ITAT Mumbai



For M/s P.G.BHAGWAT For J.K.SHAH & CO.

Firm Registration No. 101118W Firm Registration No. 109606W

Chartered Accountants Chartered Accountants

Sandeep Rao Sanjay Dhruva

Partner Partner

Membership No. 47235 Membership No. 38480

Pune, May 28,2012 Pune,May 28,2012


Mar 31, 2011

1. We have audited the attached Balance Sheet of ISMT Limited as at March 31, 2011, the Profit and Loss account and also Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with the accounting standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor's Report) Order, 2003 as amended by 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, and on the basis of the information and explanation given to us and the books and records examined by us in the normal course of audit and to the best of our knowledge and belief, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4. Further to our comment in the Annexure referred to above, we report that:

a) We have obtained all the information and explanation, 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, profit and loss account and cash flow statement dealt with by this report are in agreement with the books of account;

d) In our opinion, the balance sheet, profit and loss account and cash flow statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 to the extent applicable;

e) On the basis of written representation received from the directors, as on March 31, 2011 and taken on record by the Board of Directors, 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 explanation given to us, the said accounts, read together with notes thereon, 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 ;

i) In the case of Balance Sheet, of the state of affairs of the Company as at March 31, 2011;

ii) In the case of Profit and Loss account, of the Profit for the year ended on that date; and

iii) In the case of Cash Flow statement, of the cash flow for the year ended on that date.

Annexure to the Auditor's Report (as referred to in paragraph 3 of 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) These fixed assets have been physically verified by the management at regular interval considering the size of the company and nature of asset. As informed to us, no material discrepancies have been noticed on such verification.

c) No disposal of a substantial part of fixed assets of the company has taken place during the year.

2) a) As explained to us, the inventories including majority of the goods lying with third parties have been physically verified by the management at reasonable intervals during the year.

b) In our opinion and according to the information and explanation 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 explanation given to us, the Company has maintained proper records of its inventories and the discrepancies noticed on such physical verification between physical stock and the book records were not material and have been properly dealt with in the books of account.

3) As per the records of the company, it has not granted any loans secured / unsecured to companies, firms or other parties covered in the register maintained u/s 301 of the Companies Act, 1956.

4) As per the records of the Company, it has not taken any loans secured / unsecured from companies, firms or other parties covered in the register maintained u/s 301 of the Companies Act, 1956.

5) In our opinion and according to the information and explanation given to us, there are adequate internal control systems commensurate with the size of the Company and nature of its business with regard to purchase of inventory and fixed assets and for sale of goods and services. During the course of audit, we have not observed any continuing failure to correct major weakness in internal control systems.

6) To the best of our knowledge and belief and according to the information and explanations given to us, in our opinion there were no contracts or arrangements whose particular are needed to be entered in the register maintained in pursuance of section 301 of the Companies Act, 1956.

7) The company has not accepted / nor there are any outstanding Fixed Deposit from the public.

8) The Company has an internal audit department to carry out its internal audit function. In our opinion, the internal audit system is commensurate with the size of the Company and nature of its business.

9) 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 and are of the opinion that prima facie the prescribed accounts and records have generally been maintained. We have not, however, made a detailed examination of the records with a view to determine whether they are accurate or complete.

10) a) According to the records of the company, the company is regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Income Tax, Sales Tax, Wealth Tax, Custom Duty, Excise Duty, Cess and other statutory dues with the appropriate authorities. According to the information and explanation given to us, there are no undisputed amounts payable in respect of such statutory dues which have remained outstanding as at March 31, 2011 for a period of more than six months from the day they become payable.

b) The disputed statutory dues that have not been deposited on account of disputes pending before the appropriate authorities are as mentioned in the Annexure I to this report.

11) The Company has no accumulated losses as at 31st March, 2011 and it has not incurred cash loss during the year or in the immediately preceding financial year.

12) According to the information and explanation given to us, the company has not defaulted in repayment of dues to financial institutions, banks and debenture holders.

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

14) In our opinion, the Company is not a Chit Fund or a Nidhi or Mutual benefit Fund / Society, Therefore, the provision of clause 4 (xiii) of the Companies (Auditor Report) Order, 2003 is not applicable to the Company.

15) The Company is not dealing in or trading in Shares, Securities, Debenture, or other investments and hence, provision of clause 4 (xiv) of the Companies (Auditor Report) Order, 2003 is not applicable to the Company.

16) According to the information and explanations given to us, the Company has given guarantees for loans taken by others from banks. The terms and conditions whereof, in our opinion, based on the management representation, are not prima-facie prejudicial to the interest of the Company.

17) According to the information and explanation given to us, the term loans taken by the Company during the year have been utilised for the purpose for which the said loans were obtained.

18) According to the Cash Flow Statement and other records examined by us and on the basis of information and explanation given to us, on an overall basis, funds raised on Short Term basis have, prima facie, not been used during the year for Long Term investment.

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

20) The company did not have any outstanding debentures during the year.

21) The Company has not made any Public Issue during the year to raise money. Accordingly the provision of clause 4 (xx) of the Companies (Auditor Report) Order, 2003 is not applicable.

22) To the best of our knowledge and belief and according to the information and explanations given to us, no fraud on or by the Company was noticed or reported during the course of our audit that causes the financial statement to be materially misstated.

Rs. in Crore

Name of Statue Nature of Dues Amount Disputed Forum Where Dispute is Pending

Central Sales Tax Act, 1956 Sales Tax 0.10 Tribunal

6.53 Deputy Commissioner of Sales Tax (Appeals)

Maharashtra Sales Tax Act, 1959 Sales Tax 0.02 Tribunal

0.48 High Court

5.65 Deputy Commissioner of Sales Tax (Appeals)

Purchase Tax 0.01 Tribunal

Central Excise Act, 1944 Excise Duty 23.11 CEGAT

0.16 High Court, Bombay

1.51 Commissioner (Appeal)

2.47 Commissioner (Adjud.)

0.21 Joint Commissioner

1.34 Asst. Commissioner

Income Tax Act, 1961 Income Tax 0.09 ITAT (Mumbai)





For M/s P.G. BHAGWAT For J.K. SHAH & CO.

Firm Registration No. 101118W Firm Registration No. 109606W

Chartered Accountants Chartered Accountants

Sandeep Rao Sanjay Dhruva

Partner Partner

Membership No. 47235 Membership No. 38480


Mar 31, 2010

1. We have audited the attached Balance Sheet of ISMT Limited as at March 31, 2010, the Profit and Loss account and also Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with the accounting 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 also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor’s Report) Order, 2003 as amended by 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, and on the basis of the information and explanation given to us and the books and records examined by us in the normal course of audit and to the best of our knowledge and belief, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4. Further to our comment in the Annexure referred to above, we report that:

a) We have obtained all the information and explanation, 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, profit and loss account and cash flow statement dealt with by this report are in agreement with the books of account;

d) In our opinion, the balance sheet, profit and loss account and cash flow statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 to the extent applicable;

e) On the basis of written representation received from the directors, as on March 31, 2010 and taken on record by the Board of Directors, we report that none of the directors is disqualified as on March 31, 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 explanation given to us, the said accounts, read together with notes thereon, 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 ;

i) In the case of Balance Sheet, of the state of affairs of the

Company as at March 31, 2010; ii) In the case of Profit and Loss account, of the Profit for the year ended on that date; and iii) In the case of Cash Flow statement, of the cash flow for the year ended on that date.

Annexure to the Auditors Report (as referred to in paragraph 3 of 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) These fixed assets have been physically verified by the management at regular interval considering the size of the company and nature of asset. As informed to us, no material discrepancies have been noticed on such verification.

c) No disposal of a substantial part of fixed assets of the company has taken place during the year.

2) a) As explained to us, the inventories including majority of the goods lying with third parties have been physically verified by the management at reasonable intervals during the year.

b) In our opinion and according to the information and explanation 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 explanation given to us, the Company has maintained proper records of its inventories and the discrepancies noticed on such physical verification between physical stock and the book records were not material and have been properly dealt with in the books of account.

3) As per the records of the company, it has not granted any loans secured / unsecured to companies, firms or other parties covered in the register maintained u/s 301 of the Companies Act, 1956.

4) As per the records of the Company, it has not taken any loans secured / unsecured from companies, firms or other parties covered in the register maintained u/s 301 of the Companies Act, 1956.

5) In our opinion and according to the information and explanation given to us, there are adequate internal control systems commensurate with the size of the Company and nature of its business with regard to purchase of inventory and fixed assets and for sale of goods and services. During the course of audit, we have not observed any continuing failure to correct major weakness in internal control systems.

6) To the best of our knowledge and belief and according to the information and explanations given to us, in our opinion there were no contracts or arrangements whose particular are needed to be entered in the register maintained in pursuance of section 301 of the Companies Act, 1956.

7) The company has not accepted / nor there are any outstanding Fixed Deposit from the public.

8) The Company has an internal audit department to carry out its internal audit function. In our opinion, the internal audit system is commensurate with the size of the Company and nature of its business.

9) 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 and are of the opinion that prima facie the prescribed accounts and records have generally been maintained. We have not, however, made a detailed examination of the records with a view to determine whether they are accurate or complete.

10) a) According to the records of the company, the company is regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Income Tax, Sales Tax, Wealth Tax, Custom Duty, Excise Duty, Cess and other statutory dues with the appropriate authorities. According to the information and explanation given to us, there are no undisputed amounts payable in respect of such statutory dues which have remained outstanding as at March 31, 2010 for a period of more than six months from the day they become payable. b) The disputed statutory dues that have not been deposited on account of disputes pending before the appropriate authorities are as mentioned in the Annexure I to this report.

11) The Company has no accumulated losses as at 31st March, 2010 and it has not incurred cash loss during the year or in the immediately preceding financial year.

12) According to the information and explanation given to us, the company has not defaulted in repayment of dues to financial institutions, banks and debenture holders.

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

14) In our opinion, the Company is not a Chit Fund or a Nidhi or Mutual benefit Fund / Society, Therefore, the provision of clause 4 (xiii) of the Companies (Auditor Report) Order, 2003 is not applicable to the Company.

15) The Company is not dealing in or trading in Shares, Securities, Debenture, or other investments and hence, provision of clause 4 (xiv) of the Companies (Auditor Report) Order, 2003 is not applicable to the Company.

16) According to the information and explanations given to us, the Company has given guarantees for loans taken by others from banks. The terms and conditions whereof, in our opinion, based on the management representation, are not prima-facie prejudicial to the interest of the Company.

17) According to the information and explanation given to us, the term loans taken by the Company during the year have been utilised for the purpose for which the said loans were obtained.

18) According to the Cash Flow Statement and other records examined by us and on the basis of information and explanation given to us, on an overall basis, funds raised on Short Term basis have, prima facie, not been used during the year for Long Term investment.

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

20) The company did not have any outstanding debentures during the year.

21) The Company has not made any Public Issue during the year to raise money. Accordingly the provision of clause 4 (xx) of the Companies (Auditor Report) Order, 2003 is not applicable.

22) To the best of our knowledge and belief and according to the information and explanations given to us, no fraud on or by the Company was noticed or reported during the course of our audit that causes the financial statement to the materially misstated.

Annexure I

Particulars of dues of Sales Tax/Excise Duty/Income Tax not deposited on account of disputes:

Rs. in Crore

Name of Statue Nature of Dues Amount Disputed Forum Where Dispute is Pending

Central Sales Tax Act, 1956 Sales Tax 0.10 Tribunal 6.53 Deputy Commissioner of Sales Tax (Appeals)

Maharashtra Sales Tax Act, 1959 Sales Tax 0.02 Tribunal

0.40 High Court

5.65 Deputy Commissioner of Sales Tax (Appeals) Purchase Tax 0.01 Tribunal

Turnover Tax, penalty and interest 0.08 Deputy Commissioner of Sales Tax (Appeals)

Central Excise Act, 1944 Excise Duty 11.18 CEGAT

0.13 High Court, Bombay

0.51 Commissioner (Appeal)

4.27 Commissioner (Adjud.)

0.21 Joint Commissioner

0.01 Supreme Court

0.73 Asst. Commissioner

0.08 Additional Commissioner

3.43 Commissioner, Mumbai

Income Tax Act, 1961 Income Tax 0.09 ITAT (Mumbai)



For M/s P.G. BHAGWAT For J.K. SHAH & CO.

Firm Registration No. 101108W Firm Registration No. 109606W

Chartered Accountants Chartered Accountants

Sandeep Rao Sanjay Dhruva

Partner Partner

Membership No. 47235 Membership No. 38480

Pune, September 28, 2010

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