Auditor Report of Karma Industries Ltd.

Mar 31, 2012

We have audited the accompanying financial statements of KARMA INDUSTRIES LIMITED, which comprise the Balance Sheet as at 31 March 2012, and the statement of Profit & Loss for the year ended on that date, Cash Flow Statement for the year ended on that date, and a summary of significant accounting policies and other explanatory information annexed thereto.

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 of the company in accordance with the accounting principles generally accepted in India including 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 company'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 Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India except the following:

"Company has not paid dividend of 99,00,000 till date which was approved by shareholders in Annual General Meeting for FY 2010-11."

a. In the case of the Balance sheet, of the state of affairs of the company as at 31st March 2012.

b. In the case of the Statement of profit and loss, of the profit for the year ended on that date.

c. In the case of Cash Flow Statement, of the cash flow for the year ended on that date.

Report on other legal and regulatory requirements

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

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

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

b. In our opinion proper books of accounts 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 is in agreement with the books of accounts.

d. In our opinion, the Balance Sheet, Statement of Profit and Loss comply with the accounting standards referred to in subsection (3C) of the section 211 of the Companies Act, 1956.

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 subsection (1) of section 274 of the Companies Act, 1956.

ANNEXURE TO PARA '1' OF OUR REPORT OF EVEN DATE FOR THE YEAR ENDED 31st MARCH, 2012.

i) (a) The company has maintained proper records showing full particulars, including quantitative details

and situation of fixed assets.

(b) All the assets have not been physically verified by the management during the year but there is a regular program of verification which in our opinion is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification.

(c) The Company has not disposed off any substantial part of Fixed Assets during the year, so as to affect its going concern.

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

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

(c) The Company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book records were not material.

iii) (a) The company has taken unsecured interest free loan from 6 parties covered in the register maintain

Under Section 301 of the Companies Act, 1956. The maximum amount involved during the year is Rs.38,32,55,000/- and the year end balance of loan taken from such parties was Rs.30,10,75,000/- .

(b) In our opinion, and according to the information and explanations given to us, the terms and conditions of the aforesaid loans are prima facie not prejudicial to the interest of the Company.

(c) There is no stipulation as regards payment of principal amounts and hence nothing is reportable under this clause.

(d) The company has given unsecured interest free loan to 4 parties covered in the register maintain Under Section 301 of the Companies Act, 1956. The maximum amount involved during the year is Rs.2,45,71,800 /- and the year end balance of loan taken from such parties was Rs.67,21,800 /.

(e) In our opinion, and according to the information and explanations given to us, the terms and conditions of the aforesaid loans are prima facie not prejudicial to the interest of the Company.

(f) Since there is no stipulation regarding receipt principal amount and interest reporting under clause is not applicable.

(g) In respect of the said loans, since there is no stipulation as regards receipt of principal amount the question of overdue amount does not arise.

iv) In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the company and the nature of its business with regard to purchases of inventory, fixed assets and with regard to the sale of goods. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal controls.

v) (a) According to the information and explanations given to us, we are of the opinion that the transactions made in pursuance of contracts or arrangement that need to be entered into the register maintained under section 301 of the Companies Act, 1956 have been so entered.

(b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act,1956 and exceeding the value of rupees five lakhs in respect of any party during the year have been made at prices which are reasonable having regard to prevailing market prices at the relevant time.

vi) The company has not accepted any deposit during the year from the public and provisions of section 58-A and 58-AA of the companies Act, 1956 and the companies (Acceptance of Deposits) Rules, 1975 are not applicable. No order has been passed by the Company Law Board.

vii) The company does not have formal internal audit system. Internal audit is carried out by in house staff. In our opinion, there is scope for further improvement in the internal audit system.

viii) As explain to us, the Central Government has not prescribed maintenance or cost records under Section 209 (i) (d) of the Companies Act, 1956, for the products of the company.

ix) (a) The company is not regular in depositing with appropriate authority undisputed statutory dues including Income Tax, and other statutory dues applicable to it. There has been delay in payment of various statutory dues.

(b) There are no undisputed amounts payable in respect of Income Tax, wealth Tax, Sales Tax, Custom duty or excise duty as on the last day of the Financial year concerned for a period of more than six months from the date they became payable except Self Assessment Income Tax for A.Y 2011-12 Rs. 1,05,40,649/-, Central Sales Tax Rs. 5,70,877/-, Dividend Distribution Tax Rs.16,44,266/-, TDS on Expenses 5,76,196/-

x) In our opinion, the Company has not incurred cash losses during the financial year covered by our audit and the immediately preceding financial year.

xi) In our opinion and according to the information and explanations given to us, the company has not defaulted in repayment of dues to the Bank there are no dues payable to financial institutions.

xii) In our opinion and 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 and other securities.

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

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

xv) According to information and explanation given to us the company has not given any guarantee for loans taken by others from bank or financial institutions hence the provisions of terms and conditions prejudicial to the interest of the company are not applicable to the Company.

xvi) In our opinion, the company has not raised any term loan during the year under consideration.

xvii) According to the information and explanations given to us and on an overall examination of the balance sheet of the company, we report that the no funds raised on short-term basis have been used for long-term investment. No long term funds have been used to finance short term assets except permanent Working Capital.

xviii) According to information and explanation given to us the company has not allotted shares during the year hence the question of preferential allotment of shares to parties and Companies covered in the registered maintain under section 301 of the act does not arise.

xix) According to information and explanation given to us the company has not issued debentures hence question of creation of securities does not arise.

xx) According to information and explanation given to us the company has not raised money by way of public issues hence the question of disclosure of end use of money raised by public issues does not arise.

xxi) According to information and explanation given to us no fraud on or by the company has been noticed or reported during the year.

For AMD & CO.

Chartered Accountants

Firm Registration No. 130247W

Sd/-

Arvind M Darji

Partner

Membership No. 41748

Place : Mumbai

Date : 31St May, 2012

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Mar 31, 2010

We have audited the attached Balance Sheet of KARMA ISPAT LIMITED, as at 31st March 2010, and also the Profit and Loss Account and the Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit.

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.

As required by the Companies (Auditors Report) Order, 2003 issued by the Central Government of India in terms of sub section (4A) of section 227 of the Companies Act, 1956, we enclose in the Annexure, a statement on the matters specified in paragraphs 4 and 5 of the said Order.

Further to our comments in the Annexure referred to above, we report that:

(i) we have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purpose of our audit;

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

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

(iv)in our opinion, the Balance Sheet, the Profit and Loss Account 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;

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

(vi)in our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(a) in the case of the Balance Sheet, of the state of affairs of the company as at 31 March, 2010;

(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.

ANNEXURE TO THE AUDITORS REPORT

The Annexure referred to in the auditors report to the members of Karma Ispat Limited for the year ended 31st March, 2010. We report that:

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

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

(c) During the year, the company has not disposed off any part of the fixed assets.

(ii) (a) As explained to us, the inventories have been physically verified by the management at the end of the year. Considering the nature of the Companys business, the frequency of such verification is reasonable.

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

(c) The Company is maintaining proper records of inventory. There were no discrepancies between physical stock and book stocks.

(iii) (a) The Company has granted unsecured interest free loans to 2 parties listed in the register maintained under Section 301 of the Companies Act, 1956. The maximum amount outstanding during the year is Rs. 27,50,420 and the year end balance was Rs. 2,75,440.

(b)In our opinion, and according to the information and explanations given to us, the terms and conditions of the aforesaid loans are prima facie not prejudicial to the interest of the Company.

(c) There is no stipulation as regards payment of principal amounts.

(d)In respect of the said loans, since there is no stipulation as regards payment of principal amount, the question of overdue amounts does not arise.

(e)The Company has not taken any secured or unsecured loan from any party listed in the register under section 301 of the Companies Act, 1956.

(iv) In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the company and the nature of its business. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal control systems.

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

(b)In our opinion and according to the information and explanations given to us, the Company does not have any transaction made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and exceeding the value of rupees five lakhs in respect of any party during the year.

(vi) The company has not accepted any deposits under the provisions of Sections 58A and 58AA of the Act and the rules framed there under.

(vii) The Company does not have formal internal audit system. Internal audit is carried out by in house staff. In our opinion, there is a scope for further improvement in the internal audit system.

(viii)To the best of our knowledge and according to the information and explanations given to us, the Central Government has not prescribed any rules for the maintenance of cost records under section 209(l)(d) of the Companies Act, 1956.

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

(b) (i) According to the information and explanations given to us and the records of the Company examined by us, no undisputed statutory amounts payable were in arrears, as at 31s March 2010 for a period of more than six months from the date they became payable.

(ii) According to the information and explanations given to us, there are no statutory dues which have not been deposited on account of any dispute.

(x) The Company has no accumulated losses as at 31 March, 2010 and has not incurred any cash losses in the financial year ended on that date or in the immediately preceding financial year.

(xi) In our opinion and according to the information and explanations given to us, the company has not defaulted in repayment of dues to a financial institution, bank or debenture holders.

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

(xiii)In our opinion the Company is not a Chit Fund Company or Nidhi / Mutual Benefit Fund / Society. Therefore paragraph 4 (xiii) of the Order is not applicable to the Company.

(xiv)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.

(xv) 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.

(xvi)The Company has not raised any term loan during the year under consideration.

(xvii)According to the information and explanations given to us, and on an overall examination of the balance sheet of the company, we report that no fund raised on short basis have been used for long term investment during the year.

(xviii) According to the information and explanations given to us, the Company has not made preferential allotment of shares to parties and companies covered in the Register maintained under Section 301 of the Companies Act, 1956.

(xix)As per the information and explanations given to us, the Company has not issued any debenture during the year under review.

(xx) The company has not raised any money by public issue during the year, and hence paragraph 4(xx) of the Order is not applicable.

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

FOR ARVIND DARJI ASSOCIATES

Chartered Accountants

Firm Registration No. 100576W

Sd/-

ARVIND M DARJI

Proprietor

Membership No.: 41748

Place: MUMBAI

Date : 31st May, 2010