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Auditor Report of Kalyani Steels Ltd.

Mar 31, 2016

Report on the Standalone Financial Statements

We have audited the accompanying standalone financial statements of Kalyani Steels Limited ("the Company"), which comprise the
Balance Sheet as at 31st March, 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 of the assets of the Company and for preventing and detecting frauds and other irregularities; selection
and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design,
implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy
and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a
true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor''s Responsibility

Our responsibility is to express an opinion on these standalone financial statements based on our audit. We have taken into
account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the
audit report under the provisions of the Act and the Rules made thereunder.

We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. 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. An audit
also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates
made by the Company''s Directors, as well as evaluating the overall presentation of the financial statements. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone
financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone
financial statements give the information required by the Act in the manner so required and give a true and fair view in
conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at 31st March,
2016, and its profit and its cash flows for the year ended on that date.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2016 issued by the Central Government of India in terms of sub-section
(11) of Section 143 of the Act, we give in the Annexure ''A'', 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 Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statement dealt with by this Report are in agreement
with the books of account;

(d) In our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section
133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014;

(e) In our opinion there are no financial transactions or matters which have any adverse effect on the functioning of the
Company;

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

(g) 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'';

(h) With respect to the other matters to be included in the Auditor''s Report in accordance with Rule 11 of the Companies (Audit
and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us :

i. The Company has disclosed the impact of pending litigations on its financial position in its financial statements - Refer
Note ''28'' to the financial statements;

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

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

(Referred to in our above report of even date)

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

(b) As explained to us, considering the nature of the fixed assets, the same have been physically verified by the management at
reasonable intervals during the year as per the verification plan adopted by the Company, which, in our opinion, is reasonable
having regard to the size of the Company and the nature of its assets. According to the information and explanations given to us
and the records produced to us for our verification, the discrepancies noticed during such physical verification were not
material and the same have been properly dealt with in the books of account.

(c) The title deeds of immovable properties are held in the name of the Company.

(ii) The physical verification of inventory has been conducted at reasonable intervals by the management and no material
discrepancies were noticed during such verification.

(iii) The Company has not granted any loans, secured or unsecured to companies, firms, Limited Liability Partnerships or other
parties covered in the register maintained under Section 189 of the Companies Act, 2013.

(iv) According to the information and explanations given to us, the Company has not given any loans or made investments or given
any guarantee or security in respect of which the provisions of Section 185 and 186 of the Companies Act, 2013 were required to
be complied with.

(v) In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits. As
informed to us, no order has been passed against the Company by the Company Law Board, the National Company Law Tribunal, RBI, or
any court or any tribunal.

(vi) The Company is maintaining cost records as prescribed under Section 148(1) of the Companies Act, 2013. However, we have not
verified the same for completeness or accuracy.

(vii) (a) According to the records of the Company, the Company is regular in depositing undisputed statutory dues including
provident fund, employees'' state insurance, income tax, sales tax, service tax, duty of customs, duty of excise, value added tax,
cess and any other statutory dues to the appropriate authorities and there were no arrears of outstanding statutory dues as on
the last day of the financial year concerned for a period of more than six months from the date they became payable.

(b) According to the records of the Company, there are no dues of income tax or sales tax or service tax or duty of customs or
excise duty or value added tax which have not been deposited on account of any dispute except :

Name of the Nature of dues Amount Period to Forum
Statute (Rs,) which the
amount
relates

Service Tax Demand received
for 1,182,269 2005-06 Tribunal
various cases

Excise Duty Demand received
for 9,425,387 2014-15 Tribunal

Cenvat Availment 1,55,434 2013-14 Tribunal


(viii) Based on our audit procedures and on the information and explanations given by the management, we are of the opinion that
the Company has not defaulted in repayment of loans or borrowing to a financial institution, bank, Government or dues to
debenture holders.


(ix) The Company has not raised any moneys by way of initial public offer or further public offer (including debt instruments)
and term loans during the year.

(x) Based upon the audit procedures performed and information and explanations given by the management, we report that no fraud
by the Company or any fraud on the Company by its officers or employees has been noticed or reported during the year.

(xi) Managerial remuneration for the year has been paid or provided in accordance with the requisite approvals mandated by the
provisions of Section 197 read with Schedule V to the Companies Act, 2013.

(xii) The Company is not a Nidhi Company.

(xiii) Based upon the audit procedures performed and information and explanations given by the management, all transactions with
the related parties are in compliance with Sections 177 and 188 of Companies Act, 2013 wherever applicable and the details have
been disclosed in the Financial Statements etc., as required by the applicable accounting standards.

(xiv) The Company has not made any preferential allotment or private placement of shares or fully or partly convertible
debentures during the year under review.

(xv) Based upon the audit procedures performed and information and explanations given by the management, the Company has not
entered into any non-cash transactions with directors or persons connected with them within the meaning of the provisions of
Section 192 of Companies Act, 2013.

(xvi) The Company is not required to be registered under Section 45-IA of the Reserve Bank of India Act, 1934.

ANNEXURE ''B'' TO THE AUDITOR''S REPORT

Report on the Internal Financial Controls under Clause (i) of sub-section 3 of Section 143 of the Companies Act, 2013 ("the Act")

We have audited the internal financial controls over financial reporting of Kalyani Steels Limited ("the Company") as of 31st
March, 2016 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date.

Management''s Responsibility for Internal Financial Controls

The Company''s management is responsible for establishing and maintaining internal financial controls based on the internal
control over financial reporting criteria established by the Company considering the essential components of internal control
stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered
Accountants of India (''ICAI''). These responsibilities include the design, implementation and maintenance of adequate internal
financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including
adherence to Company''s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy
and completeness of the accounting records and the timely preparation of reliable financial information, as required under the
Companies Act, 2013.

Auditor''s Responsibility

Our responsibility is to express an opinion on the Company''s internal financial controls over financial reporting based on our
audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls over Financial
Reporting (the "Guidance Note") and the Standards on Auditing, issued by ICAI and deemed to be prescribed under Section 143(10)
of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls, both applicable to an audit of
Internal Financial Controls and both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance
Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether
adequate internal financial controls over financial reporting was established and maintained and if such controls operated
effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system
over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting
included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material
weakness exists and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.
The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the
financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the
Company''s internal financial controls system over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A Company''s internal financial control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A Company''s internal financial control over financial reporting includes those policies
and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that
receipts and expenditures of the Company are being made only in accordance with authorisations of management and directors of the
Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or
disposition of the Company''s assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls over Financial Reportin Because of the inherent limitations of internal
financial controls over financial reporting, including the possibility of collusion or improper management override of controls,
material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal
financial controls over financial reporting to future periods are subject to the risk that the internal financial control over
financial reporting may become inadequate because of changes in conditions or that the degree of compliance with the policies or
procedures may deteriorate.

Opinion

In our opinion, the Company has, in all material respects, an adequate internal financial controls system over financial
reporting and such internal financial controls over financial reporting were operating effectively as at 31st March, 2016, based
on the internal control over financial reporting criteria established by the Company considering the essential components of
internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the
Institute of Chartered Accountants of India.

For M/s. P. G. BHAGWAT

Chartered Accountants

Firm Registration No.101118W


Mar 31, 2014

We have audited the accompanying financial statements of Kalyani Steels 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 ("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.

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 Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India :

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

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

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

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, 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;

f. Since the Central Government has not issued any notification as to the rate at which the cess is to be paid under Section 441A of the Companies Act, 1956 nor has it issued any Rules under the said Section, prescribing the manner in which such cess is to be paid, no cess is due and payable by the Company.

ANNEXURE TO THE AUDITOR''S REPORT :

(Referred to in our above report of even date)

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

(b) As explained to us, considering the nature of the Fixed Assets, the same have been physically verified by the management at reasonable intervals during the earlier year as per the verification plan adopted by the Company, which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. According to the information and explanations given to us and the records produced to us for our verification, the discrepancies noticed during such physical verification were not material and the same have been properly dealt with in the books of account in that year.

(c) During the year, the Company has not disposed off major part of the Fixed Assets.

2. (a) The inventory has been physically verified during the year by the management, which, is in our opinion, at reasonable intervals.

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

(c) On the basis of our examination of the records of inventory, we are of the opinion that the Company is maintaining proper records of inventory. No material discrepancies were noticed on verification between the physical stock and the book records.

3. (a) The Company has not granted any loans to companies, firms and other parties covered in the Register maintained under Section 301 of the Companies Act, 1956, during the year.

(b) The Company has not taken any loans from companies, firms and other parties covered in the Register maintained under Section 301 of the Companies Act, 1956, during the year.

4. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business with regard to purchases of inventory, fixed assets and with regard to the sale of goods and services. During the course of our audit, no major weakness has been noticed in the internal control system.

5. (a) Based on the audit procedures applied by us and according to the information and explanations provided by the management, there have been no contracts or arrangements referred to in Section 301 of the Act that need to be entered in the register required to be maintained under that Section.

(b) In view of the above, we have no comments to make under this clause.

6. In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits from the public within the provisions of Sections 58A and 58AA of the Companies Act, 1956, and the rules framed there under.

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

8. The Company is maintaining cost records as prescribed under Section 209(1)(d) of the Companies Act, 1956. However, we have not verified the same for completeness or accuracy.

9. (a) According to the records of the Company, the Company is regular in depositing undisputed statutory dues with the appropriate authorities. There were no amounts payable in respect of the statutory dues outstanding, as at the Balance Sheet date for a period of more than six months from the date they became payable.

According to the information and explanations given to us, no undisputed amounts payable in respect of Sale Tax, Income Tax, Customs Tax / Wealth Tax, Excise Duty / Cess and Service Tax were outstanding, as at the balance sheet date for a period of more than six months from the date they became payable.

(b) According to the records of the Company, there are no dues of Sales Tax, Income Tax, Customs Duty / Wealth Tax, Excise Duty / Cess and Service Tax which have not been deposited on account of any dispute, except :

Name of the Nature of dues Amount Period to Forum

Statute (Rs.) which

amount relates

Service Tax Demand received for 1,182,269 2005-06 Tribunal

various cases

Central Excise Demand received for 155,434 2013-14 Tribunal

Cenvat Availment

10. The Company has no accumulated losses as on the Balance Sheet date. The Company has not incurred cash losses during the financial year covered by our audit nor during the immediately preceding financial year.

11. Based on our audit procedures and on the information and explanations given by the management, we are of the opinion that the Company has not defaulted in repayment of dues to any financial institution, bank or debenture holders.

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

13. The provisions of any special statute applicable to chit funds are not applicable to the Company.

14. The Company is not dealing or trading in shares, securities, debentures and other investments.

15. As informed to us, the Company has not given any guarantee for loans taken by others from bank or financial institutions.

16. As informed to us, the term loans raised during the year have been used for the purpose they were raised.

17. The funds raised on short term basis have not been used for long term investment.

18. The Company has not made preferential allotment of shares during the year.

19. No money has been raised by debenture issues during the year.

20. No money has been raised by public issues during the year.

21. Based upon the audit procedures performed and information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.

For M/s. P. G. BHAGWAT

Chartered Accountants

Firm Registration No.101118W

Sanjay Athavale

Partner

Membership No.83374

Pune

29th May, 2014


Mar 31, 2013

Report on the Financial Statements

We have audited the accompanying financial statements of Kalyani Steels 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 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 ("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.

The financial statements of the Company for the year ended 31st March, 2012 were audited by other independent auditor whose report dated 26th May, 2012, expressed an unqualified opinion on those statements. The audited balances as on 31st March, 2012, have been considered as opening balances for the purpose of these financial statements.

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 Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India :

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

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

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

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.

f. Since the Central Government has not issued any notification as to the rate at which the cess is to be paid under Section 441A of the Companies Act, 1956 nor has it issued any Rules under the said Section, prescribing the manner in which such cess is to be paid, no cess is due and payable by the Company.

ANNEXURE TO THE AUDITORS'' REPORT :

(Referred to in our above report of even date)

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

(b) As explained to us, considering the nature of the Fixed Assets, the same have been physically verified by the management at reasonable intervals during the earlier year as per the verification plan adopted by the Company, which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. According to the information and explanations given to us and the records produced to us for our verification, the discrepancies noticed during such physical verification were not material and the same have been properly dealt with in the books of account in that year.

(c) During the year, the Company has not disposed off major part of the Fixed Assets.

2. (a) The inventory has been physically verified during the year by the management, which, is in our opinion, at reasonable intervals.

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

(c) On the basis of our examination of the records of inventory, we are of the opinion that the Company is maintaining proper records of inventory. No material discrepancies were noticed on verification between the physical stock and the book records.

3. (a) The Company has not granted any loans to companies, firms and other parties covered in the Register maintained under Section 301 of the Companies Act, 1956, during the year.

(b) The Company has not taken any loans from companies, firms and other parties covered in the Register maintained under Section 301 of the Companies Act, 1956, during the year.

4. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business with regard to purchases of inventory, fixed assets and with regard to the sale of goods and services. During the course of our audit, no major weakness has been noticed in the internal control system.

5. (a) Based on the audit procedures applied by us and according to the information and explanations provided by the management, there have been no contracts or arrangements referred to in Section 301 of the Act that need to be entered in the register required to be maintained under that Section.

(b) In view of the above, we have no comments to make under this clause.

6. In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits from the public within the provisions of Sections 58A and 58AA of the Companies Act, 1956, and the rules framed there under.

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

8. The Company is maintaining cost records as prescribed under Section 209(1)(d) of the Companies Act, 1956. However, we have not verified the same for completeness or accuracy.

9. (a) According to the records of the Company, the Company is regular in depositing undisputed statutory dues with the appropriate authorities. There were no amounts payable in respect of the statutory dues outstanding, as at the Balance Sheet date for a period of more than six months from the date they became payable.

According to the information and explanations given to us, no undisputed amounts payable in respect of Sale Tax, Income Tax, Customs Tax / Wealth Tax, Excise Duty / Cess and Service Tax were outstanding, as at the balance sheet date for a period of more than six months from the date they became payable.

10. The Company has no accumulated losses as on the Balance Sheet date. The Company has not incurred cash losses during the financial year covered by our audit nor during the immediately preceding financial year.

11. Based on our audit procedures and on the information and explanations given by the management, we are of the opinion that the Company has not defaulted in repayment of dues to any financial institution, bank or debenture holders.

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

13. The provisions of any special statute applicable to chit funds are not applicable to the Company.

14. The Company is not dealing or trading in shares, securities, debentures and other investments.

15. As informed to us, the Company has not given any guarantee for loans taken by others from bank or financial institutions.

16. As informed to us, the term loans raised during the year have been used for the purpose they were raised.

17. The funds raised on short term basis have not been used for long term investment.

18. The Company has not made preferential allotment of shares during the year.

19. No money has been raised by debenture issues during the year.

20. No money has been raised by public issues during the year.

21. Based upon the audit procedures performed and information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.

For M/s. P. G. BHAGWAT

Chartered Accountants

Firm Registration No.101118W

Sanjay Athavale

Partner

Membership No.83374

Pune 24th May, 2013


Mar 31, 2012

1. We have audited the attached Balance Sheet of Kalyani Steels Limited (the "Company") as at 31st March, 2012 and the related Statement of Profit and Loss and Cash Flow Statement for the year ended on that date annexed thereto, which we have signed under reference to this report. 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 auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by Management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor's Report) Order, 2003, as amended by the Companies (Auditor's Report) (Amendment) Order, 2004 (together the "Order"), issued by the Central Government of India in terms of sub-section (4A) of Section 227 of 'The Companies Act, 1956' of India (the 'Act') and on the basis of such checks of the books and records of the Company as we considered appropriate and according to the information and explanations given to us, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

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

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

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

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

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

(e) On the basis of written representations received from the directors, as on 31st March, 2012 and taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2012 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Act;

(f) In our opinion and to the best of our information and according to the explanations given to us, the said financial statements together with the notes thereon and attached thereto give, in the prescribed manner, the information required by the Act, and give a true and fair view in conformity with the accounting principles generally accepted in India :

(i) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2012;

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

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

ANNEXURE TO THE AUDITORS' REPORT :

Referred to in paragraph 3 of the Auditors' Report of even date to the members of KALYANI STEELS LIMITED on the financial statements as of and for the year ended 31st March, 2012

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

(b) The fixed assets are physically verified by the Management according to a phased programmer designed to cover all the items over a period of three years which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. Pursuant to the programmer, a portion of the fixed assets has been physically verified by the Management during the year and no material discrepancies between the book records and the physical inventory have been noticed.

(c) In our opinion, and according to the information and explanations given to us, a substantial part of fixed assets has not been disposed off by the Company during the year.

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

(b) In our opinion, the procedures of physical verification of inventory followed by the Management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) On the basis of our examination of the inventory records, in our opinion, the Company is maintaining proper records of inventory. The discrepancies noticed on physical verification of inventory as compared to book records were not material.

3. (a) The Company has not granted any loans, secured or unsecured, to companies, firms or other parties covered in the register maintained under Section 301 of the Act.

(b) The Company has not taken any loans, secured or unsecured, from companies, firms or other parties covered in the register maintained under Section 301 of the Act.

4. In our opinion, and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business for the purchase of inventory and fixed assets and for the sale of goods and services. Further, on the basis of our examination of the books and records of the Company and according to the information and explanations given to us, we have neither come across, nor have been informed of, any continuing failure to correct major weaknesses in the aforesaid internal control system.

5. According to the information and explanations given to us, there have been no contracts or arrangements referred to in Section 301 of the Act during the year to be entered in the register required to be maintained under that Section. Accordingly, the question of commenting on transactions made in pursuance of such contracts or arrangements does not arise.

6. In our opinion, and according to the information and explanations given to us, the Company has complied with the provisions of Sections 58A and 58AA or any other relevant provisions of the Act and the 'Companies (Acceptance of Deposits) Rules, 1975' with regard to the deposits accepted from the public. According to the information and explanations given to us, no order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal on the Company in respect of the aforesaid deposits.

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

8. We have broadly reviewed the books of account maintained by the Company in respect of products where, pursuant to the rules made by the Central Government of India, the maintenance of cost records has been prescribed under clause (d) of sub-section (1) of Section 209 of the Act, and are of the opinion that, prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the records with a view to determine whether they are accurate or complete.

9. (a) According to the information and explanations given to us and the records of the Company examined by us, in our opinion, the Company is regular in depositing the undisputed statutory dues, including provident fund, investor education and protection fund, employees' state insurance, income tax, sales tax, wealth tax, service tax, customs duty, excise duty and other material statutory dues, as applicable, with the appropriate authorities.

(b) According to the information and explanations given to us and the records of the Company examined by us, the particulars of dues of income tax, sales tax, wealth tax, service tax, customs duty and excise duty as at 31st March, 2012 which have not been deposited on account of a dispute, are as follows :

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

Sales Tax - - - -

Income Tax - - - -

Wealth Tax - - - -

Service Tax Demand received for 1,182,269 2005-06 Tribunal various cases.

Customs Duty - - - -

10. The Company has no accumulated losses as at 31st March, 2012 and it has not incurred any cash losses in the financial year ended on that date or in the immediately preceding financial year.

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

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

13. In our opinion, the Company has maintained proper records of transactions and contracts relating to dealing or trading in shares, securities, debentures and other investments during the year and timely entries have been made therein. Further, such securities have been held by the Company in its own name.

14. In our opinion, and according to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions during the year.

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

16. On the basis of an overall examination of the balance sheet of the Company, in our opinion, and according to the information and explanations given to us, there are no funds raised on a short-term basis which have been used for long-term investment.

17. The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Act during the year.

18. The Company has created security / charge in respect of debentures outstanding at the year-end. The details of security are disclosed in Note 4 to the Financial Statements.

19. The Company has not raised any money by public issues during the year.

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

21. Considering the nature of the business, Clause (xiii) of paragraph 4 of the Companies (Auditor's Report) Order, 2003, as amended by the Companies (Auditor's Report) (Amendment) Order, 2004, is not applicable in the case of the Company for the current year, hence in our opinion there is no matter which arises to be reported in the aforesaid Clause of the Order.

For Dalal & Shah Firm Registration No.102021W Chartered Accountants

Anish Amin

Pune Partner

26th May, 2012 Membership No.40451

 
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