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Auditor Report of Kennametal India Ltd.

Jun 30, 2015

1. We have audited the accompanying financial statements of Kennametal India Limited ("the Company"), which comprise the Balance Sheet as at June 30,2015, the Statement of Profit and Loss and the Cash Flow Statement for the year then ended, and a summary of the significant accounting policies and other explanatory information

Management's Responsibility for the Financial Statements

2. The Company's Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these financial statements to give a true and fair view of the financial position,financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditors' Responsibility

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

4. We have taken into account the provisions of the Act and the Rules made thereunder including the Accounting Standards and matters,which are required to be included in the audit report.

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

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

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

Opinion

8. In our opinion and to the best of our information and according to the explanations given to us, the aforesaid 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 June 30,2015,and its profit and its cash flows for the year ended on that date.

Report on Other Legal and Regulatory Requirements

9. As required by 'the Companies (Auditor's Report) Order, 2015', issued by the Central Government of India in terms of sub- section (II) of Section 143 of the Act (hereinafter referred to as the "Order"), and on the basis of such checks of the books and records of the Company as we considered appropriate and according to the information and explanations given to us, we give in the Annexure a statement on the matters specified in paragraphs 3 and 4 of the Order.

10. As required by Section 143(3) of theAct,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 financial statements comply with the Accounting Standards specified under Section 133 of theAct, read with Rule 7 of the Companies (Accounts) Rules,20l4.

(e) On the basis of the written representations received from the directors as on June 30,2015, taken on record by the Board of Directors, none of the directors is disqualified as on June 30, 2015 from being appointed as a director in terms of Section 164 (2) of theAct.

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

i. The Company has disclosed the impact of pending litigations as at June 30,2015 on its financial position in its financial statements - Refer Note 26.

ii. The Company has long-term contracts as at June 30,2015 for which there were no material foreseeable losses.There are no long-term derivative contracts.

iii. There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company during the year ended June 30,2015.

Annexure to Independent Auditors' Report

Referred to in paragraph 9 of the Independent Auditors' Report of even date to the members of Kennametal India Limited on the financial statements as of and for the year ended June 30,2015

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

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

ii. (a) The inventory has been physically verified by the Management during the year. 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.

iii. The Company has not granted any loans, secured or unsecured, to companies, firms or other parties covered in the register maintained under Section 189 of the Act.Therefore, the provisions of Clause 3(iii), (iii)(a) and (iii)(b) of the Order are not applicable to the Company.

iv. 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.

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

vi. 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 specified under sub-section (1) of Section 148 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.

vii (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, employees' state insurance, income tax, sales tax, wealth tax, service tax, duty of customs, duty of excise, value added tax, cess and other material statutory dues,as applicable, with the appropriate authorities.

(b) According to the information and explanations given to us and the records of the Company examined by us, there are no dues of duty of customs and wealth tax, which have not been deposited on account of any dispute.The particulars of dues of income tax, sales tax, service tax and duty of excise, as at June 30,2015, which have not been deposited on account of a dispute,are as follows:

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

The Central Excise Excise duty/ 52,450 January 1998 to Act, 1944 Service tax September 2011



851,264 February 1992 to August 1993

4,610.113 (* 1) April 2006 to June 2013

The Finance Act, Service tax 576,157 (*2) April 2007 to March 1994 2008

237,458 September 2005 to November 2009

The Andhra Pradesh Sales tax 5,872,886 (*3) April 2003 to March General Sales Tax 2004 Act, 1957

The Delhi Sales Tax Sales tax 78.550 (*4) April 2004 to March Act, 1975 2005

The Central Sales Sales tax 5,711,151 April 2006 to March Tax Act, 1956 2010

The Karnataka Value Sales tax 820,124 April 2005 to March Added Tax Act, 2010 2003

The Karnataka Tax Entry tax Nil (*5) April 2010 to June on Entry of Goods 2014 Act, 1979

The Uttar Pradesh Sales tax Nil (*6) May 2011 Value Added Tax Act, 2008

The Karnataka Value Sales Tax Nil (*7) April 2005 to March Added Tax Act, 2006 2003

Sales Tax Nil (*8) April 2011 to March 2012

Sales Tax Nil (*9) April 2012 to March 2013

Sales Tax 50,535,366 (* 10) April 2013 to March 2014

Name of the Forum where statute the dispute is pending

The Central Excise The Customs, Excise & Act, 1944 Service Tax Appellate Tribunal (CESTAT), Bangalor

The Supreme Court of India

CESTAT, Bangalore

The Finance Act, CESTAT, Bangalore 1994

CESTAT, Bangalore

The Andhra Pradesh The Sales Tax Appellate General Sales Tax Tribunal, Hyderabad Act, 1957

The Delhi Sales Tax The Joint Commissioner Act, 1975 (Appeals), Delhi

The Central Sales The High Court of Tax Act, 1956 Karnataka

The Karnataka Value The High Court of Added Tax Act, Karnataka 2003

The Karnataka Tax The Commissioner of on Entry of Goods Commercial Taxes, Act, 1979 Bangalore

The Uttar Pradesh The Joint Commissioner of Value Added Tax Appeals, Sonabhadhra, Uttar Act, 2008 Pradesh

The Karnataka Value The Joint Commissioner of Added Tax Act, Commercial taxes 2003 (Appeals), Bangalore

The Joint Commissioner of Commercial taxes (Appeals), Bangalore

The Joint Commissioner of Commercial taxes (Appeals), Bangalore

The Joint Commissioner of Commercial taxes (Appeals), Bangalore

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

The Income Tax Income tax 2,198,066 (*1 1) Aprill 1993 to March Act, 1961 1994; and April 1999 to March 2001

Nil (*12) April 1999 to March 2001

Nil (*I3) April 2006 to March 2007 Tribunal.

Nil (*14) April 2007 to March 2008

Nil(*l5) April 2008 to March 2009

Nil *16) April 2009 to March 2010

50,842,950 April 2010 to March 2011

Nil (* 17) April 2012 to March 2013

Name of the Forum where the statute dispute is pending

The Income Tax The Supreme Court Act, 1961 of India

The Commissioner of Income Tax (Appeals), Bangalore

The Income Tax Appellate Bangalore

The Commissioner of Income Tax (Appeals) LTU, Bangalore

The Commissioner of Income Tax (Appeals) LTU, Bangalore

The Commissioner of Income Tax (Appeals) LTU, Bangalore

The Commissioner of Income Tax (Appeals) LTU, Bangalore

The Commissioner of Income Tax (Appeals) LTU, Bangalore

(*l) Net of Rs.5,094,915 paid "under protest".

(*2) Net of Rs.576,227 paid "under protest".

(*3) Net of Rs.5,872,886 paid "under protest".

(*4) Net of Rs.78,550 paid "under protest".

(*5) Net of Rs.7,529,692 paid "under protest".

(*6) Net of Rs.404,400 paid "under protest".

(*7) Net of Rs.370,607 paid "under protest".

(*8) Net of Rs.2,141,073 paid "under protest".

(*9) Net of Rs.5,345,294 paid "under protest".

(*I0) Net of Rs.5,000,000 paid "under protest".

(*11) Net of Rs.750,375 paid "under protest".

(*12) Net of Rs.27,667,829 paid "under protest".

(*I3) Net of Rs.69,776,571 paid "under protest".

(*I4) Net of Rs.54,009,650 paid "under protest".

(*I5) Net of Rs.50,365,440 paid "under protest".

(*16) Net of Rs.53,038,036 paid "under protest".

(*I7) Net of Rs.215,466 paid "under protest".

c) There are no amounts required to be transferred by the Company to the Investor Education and Protection Fund i accordance with the provisions of the Companies Act, 1956 and the rules made thereunder.

viii. The Company has no accumulated losses as at the end of the financial year and it has not incurred any cash losses in the financial year ended on that date or in the immediately preceding financial year.

ix. As the Company does not have any borrowings from any financial institution or bank nor has it issued any debentures as at the balance sheet date, the provisions of Clause 3(ix) of the Order are not applicable to the Company.

x. 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. Accordingly, the provisions of Clause 3(x) of the Order are not applicable to the Company.

xi. The Company has not raised any term loans. Accordingly, the provisions of Clause 3(xi) of the Order are not applicable to the Company.

xii. 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 com 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.

For Price Waterhouse & Co Bangalore LLP Firm Registration Number (FRN): 007567S/S-200012 Chartered Accountants (Formerly, Price Waterhouse & Co., Bangalore, FRN: 007567S)

Shivakumar Hegde Place: Bangalore Partner Date: August 21,2015 Membership Number: 204627






Jun 30, 2014

1. We have audited the accompanying financial statements of Kennametal India Limited (the "Company"), which comprise the Balance Sheet as at June 30, 2014, and the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of signifcant accounting policies and other explanatory information, which we have signed under reference to this report.

Management''s Responsibility for the Financial Statements

2. The Company''s Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards notifed under the Companies Act, 1956 (the "Act") read with the General Circular 15/2013 dated September 13, 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditors'' Responsibility

3. 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.

4. An audit involves performing procedures to obtain audit evidence, about the amounts and 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 auditors consider 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.

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

Opinion

6. In our opinion, and to the best of our information and according to the explanations given to us, the accompanying 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 June 30, 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

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

8. 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 dealt with by this report comply with the Accounting Standards notifed under the Companies Act, 1956 read with the General Circular 15/2013 dated September 13, 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013; and

(e) On the basis of written representations received from the directors as on June 30, 2014, and taken on record by the Board of Directors, none of the directors is disqualified as on June 30,2014, from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Act.

ANNEXURE TO INDEPENDENT AUDITORS'' REPORT

Referred to in paragraph 7 of the Independent Auditors'' Report of even date to the members of Kennametal India Limited on the financial statements for the period ended June 30, 2014.

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

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

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

ii. (a) The inventory excluding stocks with third parties has been physically verifed by the Management during the year. In respect of inventory lying with third parties, these have substantially been confrmed by them. In our opinion, the frequency of verifcation is reasonable.

(b) In our opinion, the procedures of physical verifcation 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 verifcation of inventory as compared to book records were not material.

iii. (a) The Company has not granted any loans, secured or unsecured, to companies, frms or other parties covered in the register maintained under Section 301 of the Act. Therefore, the provisions of Clause 4(iii)[(b),(c) and (d)] of the Order are not applicable to the Company.

(e) The Company has not taken any loans, secured or unsecured, from companies, frms or other parties covered in the register maintained under Section 301 of the Act. Therefore, the provisions of Clause 4(iii) [(f) and (g)] of the Order are not applicable to the Company.

iv. 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.

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

vi. The Company has not accepted any deposits from the public within the meaning of Sections 58A and 58AA of the Act and the rules framed there under.

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

viii. 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.

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 regular in depositing 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.

ix. (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, service tax and excise duty as at June 30, 2014, which have not been deposited on account of a dispute, are as follows:

Name of the statute Nature of dues Amount (RsRs.) The Central Excise Act,1944 Excise duty/ 52,450 Service tax 851,264 4,610,113(1)

The Finance Act,1994 Service tax 576,157(2) 237,458

The Andhra Pradesh General Sales tax 5,827,114(3) Sales Tax Act, 1957

The Delhi Sales Tax Act,1975 Sales tax 78,550(4)

The Central Sales Tax Act,1956 Sales tax 5,711,151

The Karnataka Value Added Tax Act, 2003 Sales tax 820,124

The Karnataka Tax on Entry of Goods Act,1979 Entry tax Nil(5)

The Uttar Pradesh Value Added Tax Act,2008 Sales tax Nil(6)

The Karnataka Value Added Tax Act, 2003 Sales Tax Nil(7)

The Income Tax Act, 1961 Income tax 2,198,066(8)

Nil (9)

Nil (10)

Nil (11)

25,165,440(12) 53,038,036

Name of the statute Period to which the Forum where the amount relates dispute is pending

The Central Excise January 1998 to The Customs, Excise Act,1944 September 2011 & Service Tax AppellateTribunal, Bangalore

February 1992 to The Supreme Court of August 1993 India

April 2006 to June The Customs,Excise & 2013 Service Tax Appellate Tribunal, Bangalore

The Finance Act, 1994 April 2007 to March The Customs, Excise & 2008 Service Tax Appellate Tribunal, Bangalore



September 2005 to The Customs, Excise November 2009 & Service Tax Appellate Tribunal, Bangalore

The Andhra Pradesh April 2003 to March The Sales Tax Appellate General Sales Tax Act1957 2004 Tribunal, Hyderabad

The Delhi Sales Tax April 2004 to The Joint Commissioner Act,1975 March 2005 Appeals, Delhi

The Central Sales Tax April 2006 to March The High Court of Act, 1956 Karnataka 2010

The Karnataka Value Added April 2005 to March The High Court of Tax Act, 2003 Karnataka 2010

The Karnataka Tax on April 2010 to June The Commissioner of Entry of Goods Act, 1979 2014 Commercial Taxes, Bangalore

The Uttar Pradesh Value May 2011 The Joint Commissioner Added Tax Act, 2008 of Appeals, Sonabhadhra, Uttar Pradesh

The Karnataka Value Added April 2005 to March The Joint Commissioner of Tax Act, 2003 2006 Appeals, Bangalore

The Income Tax Act, 1961 April 1993 to March The Supreme Courtof India 1994 and April 1999 to March 2001

April 1999 to March The Commissioner Income 2001 Tax (Appeals), Bangalore

April 2006 to March The Income Tax Appellate 2007 Tribunal, Bangalore

April 2007 to March The Commissioner Income 2008 Tax (Appeals) LTU, Bangalore

April 2008 to March The Commissioner Income 2009 Tax (Appeals) LTU, Bangalore

April 2009 to March The Commissioner Income 2010 Tax(Appeals) LTU, Bangalore

(*1) Net of Rs. 5,094,915 paid "under protest". (*2) Net of Rs. 576,227 paid "under protest". (*3) Net of Rs. 5,872,886 paid "under protest". (*4) Net of Rs. 78,550 paid "under protest". (*5) Net of Rs. 5,632,692 paid "under protest".

(*6) Net of Rs 404,400 paid "under protest".

(*7) Net of Rs 370,000 paid "under protest".

(*8) Net of Rs 750,375 paid "under protest".

(*9) Net of Rs 27,667,829 paid "under protest".

(*10) Net of Rs 69,776,571 paid "under protest".

(*11) Net of Rs 54,009,650 paid "under protest".

(*12) Net of Rs 25,200,000 paid "under protest".

x. The Company has no accumulated losses as at the end of the financial year and it has not incurred any cash losses in the financial year ended on that date or in the immediately preceding financial year.

xi. As the Company does not have any borrowings from any financial institution or bank nor has it issued any debentures as at the balance sheet date, the provisions of Clause 4(xi) of the Order are not applicable to the Company.

xii. The Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities. Therefore, the provisions of Clause 4(xii) of the Order are not applicable to the Company.

xiii. As the provisions of any special statute applicable to chit fund/ nidhi/ mutual benefit fund/ societies are not applicable to the Company, the provisions of Clause 4(xiii) of the Order 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 Order are not applicable to the Company.

xv. 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. Accordingly, the provisions of Clause 4(xv) of the Order are not

applicable to the Company.

xvi. The Company has not raised any term loans. Accordingly, the provisions of Clause 4(xvi) of the Order are not applicable to the Company.

xvii. The Company has not raised any loans on short term basis. Accordingly, the provisions of Clause 4(xvii) of the Order are not applicable to the Company.

xviii. 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. Accordingly, the provisions of Clause 4(xviii) of the Order are not applicable to the Company.

xix. The Company has not issued any debentures during the year and does not have any debentures outstanding as at the beginning of the year and at the year end. Accordingly, the provisions of Clause 4(xix) of the Order are not applicable to the Company.

xx. The Company has not raised any money by public issues during the year. Accordingly, the provisions of Clause 4(xx) of the Order are not applicable to the Company.

xxi. 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.

For Price Waterhouse & Co., Bangalore Firm Registration Number:007567S Chartered Accountants Shivakumar Hegde Bangalore Partner August 12, 2014 Membership Number: 204627


Jun 30, 2013

Report on the Financial Statements

1. We have audited the accompanying fnancial statements of Kennametal India Limited (the "Company"), which comprise the Balance Sheet as at June 30, 2013, and the Statement of Proft and Loss and Cash Flow Statement for the year then ended, and a summary of signifcant accounting policies and other explanatory information, which we have signed under reference to this report.

Management''s Responsibility forthe Financial Statements

2. The Company''s Management is responsible for the preparation of these fnancial statements that give a true and fair view of the fnancial position, fnancial performance and cash fows of the Company in accordance with the Accounting Standards referred to in sub-section (3C) of section 211 of ''the Companies Act, 1956'' of India (the "Act"). This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the fnancial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditors'' Responsibility

3. Our responsibility is to express an opinion on these fnancial 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 fnancial statements are free from material misstatement.

4. An audit involves performing procedures to obtain audit evidence, about the amounts and disclosures in the fnancial statements. The procedures selected depend on the auditors'' judgment, including the assessment of the risks of material misstatement of the fnancial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the Company''s preparation and fair presentation of the fnancial 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 fnancial statements.

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

Opinion

6. In our opinion, and to the best of our information and according to the explanations given to us, the accompanying fnancial 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 June 30, 2013;

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

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

Report on Other Legal and Regulatory Requirements

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

8. 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 Proft 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 Proft 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 June 30, 2013, and taken on record by the Board of Directors, none of the directors is disqualifed as on June 30, 2013, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Act.

ANNEXURE TO INDEPENDENT AUDITORS'' REPORT

Referred to in paragraph 7 of the Independent Auditors'' Report of even date to the members of Kennametal India Limited on the fnancial statements for the period ended June 30, 2013

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

(b) The fxed assets are physically verifed by the Management according to a phased programme designed to cover all the items over a period of three years which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. Pursuant to the programme, a portion of the fxed assets has been physically verifed by the Management during the year and no material discrepancies have been noticed on such verifcation.

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

ii. (a) The inventory excluding stocks with third parties has been physically verifed by the Management during the year. In respect of inventory lying with third parties, these have substantially been confrmed by them. In our opinion, the frequency of verifcation is reasonable.

(b) In our opinion, the procedures of physical verifcation 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 verifcation of inventory as compared to book records were not material.

iii. (a) The Company has not granted any loans, secured or unsecured, to companies, frms or other parties covered in the register maintained under Section 301 of the Act. Therefore, the provisions of Clause 4(iii)[(b),(c) and (d)] of the Order are not applicable to the Company.

(e) The Company has not taken any loans, secured or unsecured, from companies, frms or other parties covered in the register maintained under Section 301 of the Act. Therefore, the provisions of Clause 4(iii) [(f) and (g)] of the Order are not applicable to the Company.

iv. 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 fxed 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.

v. According to the information and explanations given to us, there have been no contracts or arrangements that need to be entered in the register maintained under Section 301 of the Act

vi. 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.

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

viii. 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.

ix.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 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.

(*1) Net of Rs.4,135,113 paid "under protest". (*2) Net of Rs.5,872,886 paid "under protest". (*3) Net of Rs.78,550 paid "under protest". (*4) Net of Rs.5,716,692 paid "under protest".

(*5) Net of Rs. 404,400 paid "under protest". (*6) Net of Rs. 370,000 paid "under protest". (*7) Net of Rs. 750,375 paid "under protest". (*8) Net of Rs. 27,667,829 paid "under protest". (*9) Net of Rs. 69,776,571 paid "under protest". (*10) Net of Rs. 54,009,650 paid "under protest". (*11) Net of Rs. 25,200,000 paid "under protest".

x. The Company has no accumulated losses as at the end of the fnancial year and it has not incurred any cash losses in the fnancial year ended on that date or in the immediately preceding fnancial year.

xi. As the Company does not have any borrowings from any fnancial institution or bank nor has it issued any debentures as at the balance sheet date, the provisions of Clause 4(xi) of the Order are not applicable to the Company.

xii. The Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities. Therefore, the provisions of Clause 4(xii) of the Order are not applicable to the Company.

xiii. As the provisions of any special statute applicable to chit fund/ nidhi/ mutual beneft fund/ societies are not applicable to the Company, the provisions of Clause 4(xiii) of the Order 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 Order are not applicable to the Company.

xv. 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 fnancial institutions during the year. Accordingly, the provisions of Clause 4(xv) of the Order are not applicable to the Company.

xvi. The Company has not raised any term loans. Accordingly, the provisions of Clause 4(xvi) of the Order are not applicable to the Company.

xvii. The Company has not raised any loans on short term basis. Accordingly, the provisions of Clause 4(xvii) of the Order are not applicable to the Company.

xviii.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. Accordingly, the provisions of Clause 4(xviii) of the Order are not applicable to the Company.

xix. The Company has not issued any debentures during the year and does not have any debentures outstanding as at the beginning of the year and at the year end. Accordingly, the provisions of Clause 4(xix) of the Order are not applicable to the Company.

xx. The Company has not raised any money by public issues during the year. Accordingly, the provisions of Clause 4(xx) of the Order are not applicable to the Company.

xxi. 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.

For Price Waterhouse & Co.,

Bangalore Firm Registration Number: 007567S

Chartered Accountants

Shivakumar Hegde

Bangalore Partner

August 16, 2013 Membership Number: 204627


Jun 30, 2012

1. We have audited the attached Balance Sheet of Kennametal India Limited (the "Company") as at June 30, 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 forouropinion.

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, 1 956' 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 ail the information and explanations which, to the best of our knowledge and belief, were n ecessary fo r the pu rposes of ou r a udit;

(b) In our opinion, proper books of account as required by taw 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 oftheAct;

(e) On the basis of written representations received from the directors, as on June 30, 2012, and taken on record by the Board of Directors, none of the directors is disqualified as on June 30, 2012 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 oftheAct;

(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 ofthe Balance Sheet, of the state of affairs of the Company as at June 30,2012;

(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 yearended on that date.

Annexure to Auditors' Report

Referred to in paragraph 3 of the Auditors' Report of even date to the members of Kennametal India Limited on the financial statements as of and for the year ended June 30, 2012

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

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

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

ii. (a) The inventory excluding stocks with third parties 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.

iii. (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. Therefore,the provisions of Clause 4(iii)(b), (c) and (d) of the Order are not applicable to the Company.

(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. Therefore, the provisions of Clause 4(iii)(f) and (g) of the Order are not applicable to the Company.

iv. 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.

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

vi. 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.

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

viii. 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.

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 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 th e appropriate a uthorities.

ix. (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, and excise duty as at June 30, 2012, which have not been deposited on account of a dispute, are as follows:

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

The Central Excise 52450 January 1998 to The Customs, Excise & Excise and Salt duty/ September 2011 Service Tax Appellate Act, 1944 Service Tribunal. Bangalore tax 851264 February 1992 to The Supreme Court of August 1993 India

4738908 April 2006 to The High Court of September 2010 Karnataka

1496814 September 2006 The Commissioner to June 2007 (Appeals) LTU, Bangalore

The Finance Act, Service 1901458 June 2007 to The Additional 1994 tax March 2011 Commissioner (Excise) LTU. Bangalore

237458 September 2005 The Customs, Excise & to November 2009 Service Tax Appellate Tribunal, Bangalore

The Andhra Sales tax 5827114 (*1) April 2003 to The Sales Tax Pradesh General March 2004 Appellate Tribunal, Sales Tax Act, Hyderabad 1957

The Delhi Sales Sales tax 78550 (*2) April 2004 to The Joint Tax Act, 1975 March 2005 Commissioner Appeals, Delhi

The Central Sales tax 2427840 (*3) April 2006 to The Joint Sales Tax Act, March 2010 Commissioner Appeals, 1956 Bangalore

The Karnataka Sales tax Nil (*4) April 2005 to The Joint Value Added Tax March 2010 Commissioner Appeals, Act, 2003 Bangalore

The Karnataka Entry tax Nil (*5) April 2005 to June The High Court of Tax on Entry of 2012 Karnataka Goods Act. 1979

The Uttar Sales tax Nil (*6) May 2011 The Joint Pradesh Value Commissioner of Added Tax Act, Appeals, Sonabhadhra, 2008 U.P.

The Income Tax Income 2198066 (*7) April 1993 to The Supreme Court of Act, 1961 tax March 1994; and India April 1999 to March 2001

Nil (*8) April 1999 to The Commissioner March 2001 Income Tax (Appeals), Bangalore

Nil (*9) April 2006 to The Income Tax March 2007 Appellate Tribunal, Bangalore

Nil (*10) April 2007 to The Commissioner March 2008 Income Tax (Appeals) LTU, Bangalore

(*1) Net of Rs.5872886 paid "under protest".

(*2) Net of Rs.78550 paid "under protest".

(*3} Net of Rs.4810532 paid "under protest".

(*4) Net of Rs.6901382 paid "under protest".

(*5) Net of Rs.4153486 paid "under protest".

(*6) Net of Rs.404400 paid "under protest".

(*7) Net of Rs.750375 paid "under protest".

(*8) Net of Rs.27667829 paid "under protest".

(*9) Net of Rs.69776571 paid "under protest".

(*10) Net ofRs.54009650 paid "under protest".

x. The Company has no accumulated losses as at the end of the financial year and it has not incurred any cash losses in the financial year ended on that date or in the immediately preceding financial year.

xi. As the Company does not have any borrowings from any financial institution or bank nor has it issued any debentures as at the balance sheet date, the provisions of Clause 4(xi) of the Order are not appl icable to the Com pany.

xii. The Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities. Therefore, the provisions of Clause 4(xii) of the Order are not applicable to the Company.

xiii. As the provisions of any special statute applicable to chit fund / nidhi / mutual benefit fund / societies are not applicable to the Company, the provisions of Clause 4(xiii) of the Order 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 Order are not applicable to the Company.

xv. 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 orfinancial institutions during the year. Accordingly, the provisions of Clause 4(xv) of the Order are not applicable to the Company.

xvi. The Company has not raised any term loans. Accordingly, the provisions of Clause 4(xvi) of the Orderare notapplicable to the Company.

xvii. The Company has not raised any loans on short term basis. Accordingly, the provisions of Clause 4{xvii) of the Order are not applicable to the Company.

xviii.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. Accordingly, the provisions of Clause 4{xviii) of the Order are not applicable to the Company.

xix. The Company has not issued any debentures during the year and does not have any debentures outstanding as at the beginning of the year and at the year end. Accordingly, the provisions of Clause 4(xix) of the Order are not ' applicable to the Company.

xx. The Company has not raised any money by public issues during the year. Accordingly, the provisions of Clause 4(xx) of the Order are not applicable to the Company.

xxi. 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 fraud on or by the Company, noticed or reported during the year, nor have we been informed of any such case by the Management.

For Price Waterhouse & Co.

Firm Registration Number: 007567S

Chartered Accountants

Shivakumar Hegde

Partner

Membership Number 204627

Bangalore

August 13, 2012

 
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