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Auditor Report of Kinetic Engineering Ltd.

Mar 31, 2015

We have audited the accompanying standalone financial statements of KINETIC ENGINEERING LIMITED ("the Company"), which comprise the Balance Sheet as at 31st March, 2015, the Statement of Profit and Loss, the Cash Flow Statement for the year then ended, and a summary of the significant accounting policies and other explanatory information.

Management's Responsibility for the Standalone Financial Statements

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

Auditors' Responsibility

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

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company's preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on whether the Company has in place an adequate internal financial controls system over financial reporting and the operating effectiveness of such controls. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company's Directors, as well as evaluating the overall presentation of the financial statements.

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

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, 2015, and its profit and its cash flows for the year ended on that date.

Emphasis of Matters

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

Refer Note No. A-22 relating to Managerial Remuneration, which is subject to approval of Central Govt.

Refer Note No. 19 describing the basis of company's ability to continue as a Going Concern.

Our opinion is not modified in respect of this matter.

Report on Other Legal and Regulatory Requirements

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

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

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

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

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

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

(e) ln 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.

(f) There are no observations and comments on financial transactions or other matters which have an adverse effect on the functioning of the Company.

(g) On the basis of the written representations received from the directors as on 31st March, 2015 taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2015 from being appointed as a director in terms of Section 164 (2) of the Act.

(h) There are no qualifications, reservations or adverse remarks relating to maintenance of accounts and other matters connected therewith.

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

i. Refer Note No.3 on Contingent Liabilities disclosing the impact of pending litigation on the financial position of the company in its financial statements.

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

iii. There are no amounts required to be transferred to the Investor Education and Protection Fund by the Company.

Annexure Re: KINETIC ENGINEERING LIMITED

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

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

(b) As informed to us, the fixed assets have been physically verified by the management at reasonable intervals and no material discrepancies were noticed on such verification.

(ii) (a) In our opinion and according to the information and explanations given to us, the procedure 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.

(b) In our opinion the procedures of physical verification of inventory followed by the management 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.

(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 Companies Act.

(iv) In our opinion and according to information and explanation 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. During the course of our audit we have not observed any major weaknesses or continuing failure to correct major weaknesses in internal control system.

(v) In our opinion and according to information and explanation given to us, the Company has not accepted deposits, hence the directives issued by the Reserve Bank of India and the provisions of sections 73 to 76 or any other relevant provisions of the Companies Act and the rules framed there under, are not applicable to it. According to information and explanation given to us, no order has been passed against the company by Company Law Board or National Company Law Tribunal or Reserve Bank of India or any court or any other tribunal.

(vi) As informed to us, the cost records, pursuant to the rules made by the Central Government for the maintenance of cost records under sub- section (I) of section 148 of the Companies Act, 2013, are under preparation.

(vii)(a) According to the records of the company, there are delays in depositing undisputed statutory dues of Provident Fund, Employees' State Insurance and Income Tax deducted at source and as such the company is not regular in depositing the same. According to the information and explanations given to us, undisputed Income Tax deducted at source amounting to Rs. 10.09 Lacs and Provident Fund amounting to Rs. 6.98 Lacs were in arrears as at 31st March, 2015 for a period of more than six months from the date they became payable.

(b) According to information and explanations given to us, following are the details of disputed dues of, income tax, sales tax, custom duty and excise duty, which have not been deposited and the forum where such dispute is pending.

Statement of disputed dues: (Rs. In Lacs)

Nature of dues Amount Forum where dispute is pending.

Income Tax, AY 2000-01 1.29 Income Tax Appellate Tribunal, Pune

Income Tax AY 2007-08 1455.65 CIT Appeals, Pune

Income Tax AY 2009-10 186.12 CIT Appeals, Pune

Income Tax AY 2011-12 62.11 CIT Appeals, Pune

West Bengal Sales Tax, Central Sales Tax AY 2001-02, 2002-03. 6.92 Deputy Commissioner of Sales Tax, Kolkata.

CST(Pune) 2005-06 65.35 Commissioner Sales Tax, Pune

CST 2006-07 9.50 Commissioner sales Tax, Pune

CST 1994-95, 99-2000, 2000-01, 2002-03,2003-04, 2008-09, 2007-08, 2009-10 105.76 Appellate Dy. Comm. Commercial Tax, Indore

CST 1998-99, 2001-02 27.27 Appellate Dy. Comm. Commercial Tax, Indore

Sales Tax Kolkatta 2001-02 0.60 Sales Tax Tribunal, Kolcutta

Entry Tax 1994-95, 95-96, 2007-08 8.41 Dy. Comm. Commercial Tax, Indore

MP Commercial Tax 1998-99 1.88 Appellate Dy. Comm. Commercial Tax, Indore

MP Commercial Tax 1999-00, 2007-08, 08-09 14.12 Appellate Dy. Comm. Commercial Tax, Indore

CST 2000-01,2001-02 41.44 Appellate Dy. Comm. Commercial Tax, Indore

Excise Duty 121.11 CESTAT Mumbai

Excise Duty 166.19 Appellate Tribunal

(c) According to the information and explanation given to us, there are no amounts required to be transferred to Investor Education and Protection Fund in accordance with the relevant provisions of the Companies Act, 1956 (1 of 1956) and rules made there under.

(viii) The Company's accumulated losses at the end of 31st March, 2015 are not less than 50% of its net worth. The Company has not incurred cash losses in the current financial year. The Company has incurred cash losses in the immediately preceding financial year.

(ix) According to the information and explanation given to us the company has not defaulted in repayment of dues to a financial institution or bank. The Company does not have any debenture holders.

(x) According to the information and explanation given to us the Company has not given any guarantee for loans taken by others from bank or financial institutions.

(xi) The Company has applied the term loans for the purpose for which the same was raised.

(xii) Based upon the audit procedures performed by us and according to the

For M/s P G Bhagwat Chartered Accountants Firm's Registration No.: 101118W

Sandeep Rao Partner Membership No. 47235

Pune: 22nd July, 2015




Mar 31, 2014

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

Management''s Responsibility for the Financial Statements

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

Auditor''s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity''s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

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

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

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

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

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

Emphasis of Matter

Without qualifying our opinion, we draw attention to following matters referred to in the Notes and Notes forming part of Accounts:

Note No. 19 describing the basis of the company''s ability to continue as a Going Concern.

Note No.A-22 relating to Managerial remuneration, which is subject to approval of Central Govt.

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 subsection (3C) of section 211 of the Companies Act, 1956;

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

ANNEXURE TO THE AUDITOR''S REPORT

(Referred to in paragraph 1 of our 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 informed to us, the fixed assets have been physically verified by the management at reasonable intervals and no material discrepancies were noticed on such verification.

(c) In our opinion, the company has not disposed off a substantial part of its Fixed Assets during the period so as to affect the going concern status of the company.

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

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

(c) 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 stocks and the book records.

(iii) (a) The Company has not granted any loan to Companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956.

(b) Clause (iii) (b) is not applicable as no loans have been granted to the parties covered under (iii) (a).

(c) Clause (iii) (c) is not applicable as no loans have been granted to the parties covered under (iii) (a).

(d) Clause (iii) (d) is not applicable as no loans have been granted to the parties covered under (iii) (a).

(e) The company has taken unsecured loans from three companies and two parties covered in the register maintained under section 301 of The Companies Act 1956. The details of the unsecured loans taken are as under:

(Rs. in Lakhs)

Opening Balance Accepted during Repaid during the Closing balance the period / period/Adjusted Transferred on during the year/ merger written back during the year

3302 797 7 4087

(f) In our opinion, the rate of interest wherever applicable and the other terms and conditions of the unsecured loans taken by the company from the companies and other parties covered in the register maintained under Section 301 of the Companies Act, 1956 are not, prima facie, prejudicial to the interest of the company.

(g) In respect of the above unsecured loans, we were informed that there are no specific stipulations for repayment of the principal amount and the payment of interest wherever applicable.

(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 with regard to purchase of inventory, fixed assets and for the sale of goods and services. We have not observed any continuing failure to correct major weaknesses in internal control system.

(v) (a) According to the information and explanations given to us and on the basis of our examination, we are of the opinion that the particulars of contracts or arrangements referred to in section 301 of the Companies Act 1956 have been entered in the register required to be maintained under that section.

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

(vi) According to the information and explanations given to us, during the period, the company has not accepted any deposits from the public to which the provisions of section 58A and 58AA or any other provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 apply. As informed to us, no order has been passed by the Company Law Board, National Company Law Tribunal, RBI, any court or any other Tribunal.

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

(viii) As informed to us, the Central Government has prescribed maintenance of cost records under section 209(1)(d) of the Companies Act, 1956 in respect of manufacturing activities of the company. We were informed that the maintenance of cost records is in process.

(ix) (a) According to the records of the company, there are delays in depositing undisputed statutory dues of Provident Fund, Employees'' State Insurance, Income-tax and Investor Education and Protection Fund with the appropriate authority and as such the company is not regular in depositing the same. According to the information and explanations given to us, undisputed statutory dues in respect of Income Tax deducted at source amounting to Rs.5.60 Lakhs, Provident Fund amounting to Rs.6.96 Lakhs and Investor Education Protection Fund amounting to Rs. 0.28 Lakhs (Rs. 0.28 Lakhs were deposited on 30th April 2014) were in arrears as at 31.03.2014 for a period of more than six months from the date they became payable.

(b) According to information and explanations given to us, following are the details of disputed dues of, income tax, sales tax, custom duty and excise duty, which have not been deposited and the forum where such dispute is pending.

Statement of disputed dues: (Rs. in Lakhs)

Nature of dues Amount Forum where dispute is pending.

Income Tax, AY 2000-01 1.29 Income Tax Appellate Tribunal, Pune

Income Tax AY 2007-08 1455.65 CIT Appeals, Pune

Income Tax AY 2009-10 186.12 CIT Appeals, Pune

West Bengal Sales Tax, 6.92 Deputy Commissioner of Sales Tax, CentralSales Tax AY Kolkata. 2001-02, 2002-03.

CST(Pune) 2005-06 65.35 Commissioner Sales Tax, Pune

CST (Supa Unit) 2002-03 83.21 Commissioner sales Tax, Nashik

CST (Supa Unit) 2003-04 32.96 Commissioner sales Tax, Nashik

CST (Supa Unit) 2004-05 21.46 Commissioner sales Tax, Nashik

CST 2006-07 9.50 Commissioner sales Tax, Pune

CST 1994-95, 99-2000, 105.76 Appellate Dy. Comm. Commercial Tax, 2000-01, 2002-03 Indore

CST 1998-99, 2001-02 27.27 MP Commercial Tax Tribunal, Bhopal

Sales Tax Kolkatta 0.60 Sales Tax Tribunal, Kolcutta 2001-02

Entry Tax 1994-95, 8.41 Dy. Comm. Commercial Tax, Indore 95-96, 2007-08

MP Commercial Tax 1.88 MP Commercial Tax Tribunal, Bhopal 1998-99

MP Commercial Tax 14.12 Appellate Dy. Comm. Commercial Tax, 1999-00, 2007-08, 08-09 Indore

CST 2000-01, 2001-02 41.44 MP Commercial Tax Tribunal, Bhopal

Excise Duty 308.05 CESTAT Mumbai

Excise Duty 166.37 Appellate Tribunal

(x) The accumulated losses of the company as at the end of the financial year are not less than 50% of its net worth. The company has incurred cash losses during the financial year covered by our audit and in the immediately preceding financial year.

(xi) During the period the company has not defaulted in repayment of dues to financial institutions, banks and 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 or a nidhi / mutual benefit fund / society. Therefore, the provisions of clause 4(xiii) 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. Therefore the provisions of clause 4(xiv) of the Companies (Auditor''s Report) Order, 2003 are not applicable to the company.

(xv) According to the information and explanations given to us, the company has not given any guarantee for loans taken by others from bank or financial institutions.

(xvi) The company has applied the Term Loan for the purpose for which the same was raised.

(xvii) According to the information and explanations given to us and on an overall examination of the Balance Sheet, we are of the opinion that the funds raised on short term basis amounting to Rs. 7129.87 Lakhs have been used for long term investments including losses.

(xviii) The company has not made preferential allotment of shares during the year.

(xix) During the period covered by our audit report, the company has not issued any secured debentures and there are no Debentures outstanding as on the date of Balance Sheet.

(xx) The company has not raised any money by public issues during the period.

(xxi) According to the information and explanations given to us, 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,

Sandeep Rao Partner Membership No. 47235 Firm Registration No. 101118W

Pune: 24th May, 2014.


Mar 31, 2013

Report on the Financial Statements

We have audited the accompanying financial statements of Kinetic Engineering 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 ("the Act"). This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor''s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

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

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

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

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

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

Emphasis of Matter

Without qualifying our opinion, we draw attention to following matters referred to in the Notes and Notes forming part of Accounts:

Note No. 21 describing the basis of the company''s ability to continue as a Going Concern.

Note No.3 relating to the diminution in value of investment. As explained in the said note, the diminution is not of permanent nature and hence no provision against the same is required as per AS -13 (Accounting for Investments)

Note No.A-22 relating to Managerial remuneration for which Central Govt. approval is awaited.

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 subsection (3C) of section 211 of the Companies Act, 1956;

e. On the basis of written representations received from the directors as on March 31, 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.

ANNEXURE TO THE AUDITOR''S REPORT

(Referred to in paragraph 1 of our 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 informed to us, the fixed assets have been physically verified by the management at reasonable intervals and no material discrepancies were noticed on such verification.

(c) In our opinion, the company has not disposed off a substantial part of its Fixed Assets during the period so as to affect the going concern status of the company.

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

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

(c) 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 stocks and the book records.

(iii) (a) The Company has not granted any loan to Companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956.

(b) Clause (iii) (b) is not applicable as no loans have been granted to the parties covered under (iii) (a).

(c) Clause (iii) (c) is not applicable as no loans have been granted to the parties covered under (iii) (a).

(d) Clause (iii) (d) is not applicable as no loans have been granted to the parties covered under (iii) (a).

(f) In our opinion, the rate of interest wherever applicable and the other terms and conditions of the unsecured loans taken by the company from the companies and other parties covered in the register maintained under Section 301 of the Companies Act, 1956 are not, prima facie, prejudicial to the interest of the company.

(g) In respect of the above unsecured loans, we were informed that there are no specific stipulations for repayment of the principal amount and the payment of interest wherever applicable.

(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 with regard to purchase of inventory, fixed assets and for the sale of goods and services. We have not observed any continuing failure to correct major weaknesses in internal control system.

(v) (a) According to the information and explanations given to us and on the basis of our examination, we are of the opinion that the particulars of contracts or arrangements referred to in section 301 of the Companies Act 1956 have been entered in the register required to be maintained under that section.

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

(vi) According to the information and explanations given to us, during the period, the company has not accepted any deposits from the public to which the provisions of section 58A and 58AA or any other provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 apply. As informed to us, no order has been passed by the Company Law Board, National Company Law Tribunal, RBI, any court or any other Tribunal.

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

(viii) As informed to us, the Central Government has prescribed maintenance of cost records under section 209(1)(d) of the Companies Act, 1956 in respect of manufacturing activities of the company. We were informed that the maintenance of cost records is in process.

(ix) (a) According to the records of the company, there are delays in depositing undisputed statutory dues of Provident Fund, Employees'' State Insurance, Income-tax and Investor Education and Protection Fund with the appropriate authority and as such the company is not regular in depositing the same. According to the information and explanations given to us, undisputed statutory dues in respect of Income Tax deducted at source amounting to Rs.11.34 Lakhs, Provident Fund amounting to Rs.6.96 Lakhs and Sales Tax deferral loan amounting to Rs. 53.87 Lakhs were in arrears as at 31.03.2013 for a period of more than six months from the date they became payable.

(x) The accumulated losses of the company as at the end of the financial year are not less than 50% of its net worth. The company has incurred cash losses during the financial year covered by our audit. The company has not incurred cash losses in the immediately preceding financial year.

(xi) During the period the company has not defaulted in repayment of dues to financial institutions, banks and 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 or a nidhi / mutual benefit fund / society. Therefore, the provisions of clause 4(xiii) 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. Therefore the provisions of clause 4(xiv) of the Companies (Auditor''s Report) Order, 2003 are not applicable to the company.

(xv) According to the information and explanations given to us, the company has not given any guarantee for loans taken by others from bank or financial institutions.

(xvi) The company has applied the Term Loan for the purpose for which the same was raised.

(xvii) According to the information and explanations given to us and on an overall examination of the Balance Sheet, we are of the opinion that the funds raised on short term basis amounting to Rs. 2956.56 Lakhs have been used for long term investments. Current Maturities of Long Term Debts of Rs. 11308.12 Lakhs have been considered as Long Term borrowings and not as current liabilities.

(xviii) The company has not made preferential allotment of shares during the year.

(xix) During the period covered by our audit report, the company has not issued any secured debentures. As informed to us, in respect of secured debentures issued in the previous year by the merged entity (KMCL), the pledge has been created in favour of debenture holder through an escrow agreement.

(xx) The company has not raised any money by public issues during the period.

(xxi) According to the information and explanations given to us, 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,

Sandeep Rao

Partner

Membership No. 47235

Firm Registration No. 101118W

Pune: 28th May, 2013.


Mar 31, 2012

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

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.

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

2. Further to our comments in the Annexure referred to in para 1 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 purposes 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, statement of Profit and Loss and Cash Flow Statement dealt with by this report are in agreement with the books of account;

(iv) 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 Companies Act, 1956;

(v) On the basis of written representations received from the directors, as on 31st March 2012 and taken on record by the Board of Directors, we report that 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 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, read together with the notes thereon, give the information required by the Companies Act, 1956, in the manner so required and subject to approval from Central Government, which is awaited, for managerial remuneration paid to Chairman, Vice Chairman and Managing Director, 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 31st March 2012;

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

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

ANNEXURE TO THE AUDITOR'S REPORT

(Referred to in paragraph 1 of our 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 informed to us, the fixed assets have been physically verified by the management at reasonable intervals and no material discrepancies were noticed on such verification.

(c) In our opinion, the company has not disposed off a substantial part of its Fixed Assets during the period so as to affect the going concern status of the company.

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

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

(c) 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 stocks and the book records.

(iii) (a) The Company has not granted any loan to Companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956.

(b) Clause (iii) (b) is not applicable as no loans have been granted to the parties covered under (iii) (a).

(c) Clause (iii) (c) is not applicable as no loans have been granted to the parties covered under (iii) (a).

(d) Clause (iii) (d) is not applicable as no loans have been granted to the parties covered under (iii) (a).

(e) The company has taken unsecured loans from three companies and two parties covered in the register maintained under section 301 of The Companies Act 1956. The details of the unsecured loans taken are as under:

(Rs. in Lakhs)

Opening Balance Accepted during Repaid during the period/Closing balance the period Adjusted during the year

1860 975 732 2103

(f) In our opinion, the rate of interest wherever applicable and the other terms and conditions of the unsecured loans taken by the company from the companies and other parties covered in the register maintained under Section 301 of the Companies Act, 1956 are not, prima facie, prejudicial to the interest of the company.

(g) In respect of the above unsecured loans, we were informed that there are no specific stipulations for repayment of the principal amount and the payment of interest wherever applicable.

(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 with regard to purchase of inventory, fixed assets and for the sale of goods and services. We have not observed any continuing failure to correct major weaknesses in internal control system.

(v) (a) According to the information and explanations given to us and on the basis of our examination, we are of the opinion that the particulars of contracts or arrangements referred to in section 301 of the Companies Act, 1956 have been entered in the register required to be maintained under that section.

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

(vi) According to the information and explanations given to us, during the period, the company has not accepted any deposits from the public to which the provisions of section 58A and 58AA or any other provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 apply. As informed to us, no order has been passed by the Company Law Board, National Company Law Tribunal, RBI, any court or any other Tribunal.

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

(viii) As informed to us, the Central Government has prescribed maintenance of cost records under section 209(1)(d) of the Companies Act, 1956 in respect of manufacturing activities of the company. We were informed that the maintenance of cost records is in process.

(ix) (a) According to the records of the company, there are delays in depositing undisputed statutory dues of Provident Fund, Employee's State Insurance, Income-tax and Investor Education and Protection Fund with the appropriate authority and as such the company is not regular in depositing the same. According to the information and explanations given to us, undisputed statutory dues in respect of Income Tax deducted at source amounting to Rs.18.20 Lakhs, Profession Tax Rs. 35.21 Lakhs and Investor Education and Protection Fund Rs. 0.68 Lakhs were in arrears as at 31.03.2012 for a period of more than six months from the date they became payable.

(b) According to information and explanations given to us, following are the details of disputed dues of income tax, sales tax, service tax, custom duty and excise duty, which have not been deposited and the forum where such dispute is pending.

Statement of disputed dues:

( Rs. in Lakhs)

Nature of dues Amount Forum where dispute is pending.

Income Tax, AY 2000-01 1.29 Income Tax Appellate Tribunal,Pune

Income TaxAY 2007-08 1455.65 CIT Appeals, Pune

Income TaxAY 2009-10 186.12 CIT Appeals, Pune

West Bengal Sales Tax, Central 6.92 Deputy Commissioner of Sales Tax, Kolkata. Sales Tax AY 2001-02, 2002-03.

CST(Pune) 2005-06 67.91 Sales Tax Tribunal (Mumbai)

CST (Supa Unit) 2002-03 83.21 Commissioner sales Tax, Nashik

CST (Supa Unit) 2003-04 32.96 Commissioner sales Tax, Nashik

CST (Supa Unit) 2004-05 21.46 Commissioner sales Tax, Nashik

Sales Tax 2001-02 92.54 Jt. Commissioner sales Tax, Pune

Excise Duty 301.73 CESTAT Mumbai

Custom Duty 6.32 CESTAT Mumbai.

(x) The accumulated losses of the company as at the end of the financial year are not less than 50% of its net worth. The company has not incurred cash losses during the financial year covered by our audit. The company has incurred cash losses in the immediately preceding financial year.

(xi) During the period the company has not defaulted in repayment of dues to financial institutions, banks and 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 or a nidhi/ mutual benefit fund / society. Therefore, the provisions of clause 4(xiii) 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. Therefore the provisions of clause 4(xiv) of the Companies (Auditor's Report) Order, 2003 are not applicable to the company.

(xv) According to the information and explanations given to us, the company has not given any guarantee for loans taken by others from bank or financial institutions.

(xvi) The company has not raised any Term Loan during the period.

(xvii) According to the information and explanations given to us and on an overall examination of the Balance Sheet, we are of the opinion that the funds raised on short term basis amounting to Rs. 108.78 Lakhs have been used for long term investments.

(xviii) The company has not made preferential allotment of shares during the year.

(xix) During the period covered by our audit report, the company has not issued any debentures.

(xx) The company has not raised any money by public issues during the period.

(xxi) According to the information and explanations given to us, 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, Sandeep Rao Partner Membership No. 47235 Firm Registration No. 101118W

Pune: 30th May, 2012.


Mar 31, 2011

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

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.

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

2. Further to our comments in the Annexure referred to in para 1 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 purposes 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 Cash Flow Statement dealt with by this report are in agreement with the books of account;

(iv) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956;

(v) On the basis of written representations received from the directors, as on 31st March 2011 and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March 2011 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, read together with the notes thereon, give the information required by the Companies Act, 1956, in the manner so required and subject to approval from Central Government, which is awaited, for managerial remuneration paid as mentioned in Note No.5 under Notes forming part of the accounts 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 st March 2011;

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

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

ANNEXURE TO THE AUDITOR'S REPORT (Referred to in paragraph 1 of our 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 informed to us, the fixed assets have been physically verified by the management at reasonable intervals and no material discrepancies were noticed on such verification.

(c) In our opinion, the Company has not disposed off a substantial part of its Fixed Assets during the period and the going concern status of the Company is not affected.

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

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

(c) 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 stocks and the book records.

(iii) (a) The Company has not granted any loans to companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956.

(b) Clause (iii) (b) is not applicable as no loans have been granted to the parties covered under (iii) (a).

(c) Clause (iii) (c) is not applicable as no loans have been granted to the parties covered under (iii) (a).

(d) Clause (iii) (d) is not applicable as no loans have been granted to the parties covered under (iii) (a).

(e) The Company has taken interest free unsecured loans from two companies and two parties covered in the register maintained under section 301 of The Companies Act 1956. The details of the unsecured loans taken are as under:

(Rs. Lakhs.)

Opening Balance Accepted during Repaid during the period/ Closing balance the period Adjusted during the year.

1933 50 123 1860

(f) During the year no interest is paid on any of the unsecured loans taken by the Company. In our opinion, the other terms and conditions of the unsecured loans taken by the Company from the companies and other parties covered in the register maintained under Section 301 of the Companies Act, 1956 are not, prima facie, prejudicial to the interest of the company.

(g) In respect of the above unsecured loans, we were informed that there are no specific stipulations for repayment of the principal amount.

(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 with regard to purchase of inventory, fixed assets and for the sale of goods and services. We have not observed any continuing failure to correct major weaknesses in internal control system.

(v) (a) According to the information and explanations given to us and on the basis of our examination, we are of the opinion that the particulars of contracts or arrangements referred to in section 301 of the Companies Act 1956 have been entered in the register required to be maintained under that section.

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

(vi) According to the information and explanations given to us, during the period, the Company has not accepted any deposits from the public to which the provisions of section 58A and 58AA or any other provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 apply. As informed to us, no order has been passed by the Company Law Board, National Company Law Tribunal, RBI, any court or any other Tribunal.

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

(viii) As informed to us, the Central Government has prescribed maintenance of cost records under section 209(1 )(d) of the Companies Act, 1956 in respect of manufacturing activities of the company. We were informed that the maintenance of cost records is in process.

(ix) (a) According to the records of the company, there are delays in depositing undisputed statutory dues of Provident Fund, Employees' State Insurance and Income-tax with the appropriate authority and as such the company is not regular in depositing the same. According to the information and explanations given to us, undisputed statutory dues in respect of Income Tax deducted at source amounting to Rs.9.60 Lakhs, Profession Tax Rs. 35.19 Lakhs and Provident Fund dues amounting to Rs. 0.39 Lakhs were in arrears as at 31.03.2011 for a period of more than six months from the date they became payable.

(b) According to information and explanations given to us, following are the details of disputed dues of, income tax, sales tax, service tax, custom duty and excise duty, which have not been deposited and the forum where such dispute is pending.

Statement of disputed dues: ( Rs. Lakhs)

Nature of dues Amount Forum where dispute is pending.

Income Tax, AY 2000-2001 1.29 Income Tax Appellate Tribunal, Pune

West Bengal Sales Tax, Central 6.92 Deputy Commissioner of Sales Tax, Kolkata. Sales Tax AY 2001 -02, 2002-03.

Entry Tax, Behrampur. 26.76 Asst. Commissioner Sales Tax, Behrampur. 1999-2000,2000-01,2001 -02.

CST (Supa Unit) 2006-07 31.46 Asst. Commissioner Sales Tax A.Nagar

CST(Pune) 2005-06 67.91 Sales Tax Tribunal (Mumbai)

CST (Supa Unit) 2002-03 83.21 Commissioner sales Tax, Nashik

CST (Supa Unit) 2003-04 32.96 Commissioner sales Tax, Nashik

CST (Supa Unit) 2004-05 21.46 Commissioner sales Tax, Nashik

Sales Tax 2001 -02 92.54 Jt. Commissioner sales Tax, Pune

Excise Duty 286.27 CESTAT Mumbai

Service Tax 57.02 CESTAT Mumbai.

Custom Duty 6.32 CESTAT Mumbai.

(x) The accumulated losses of the company as at the end of the financial year are not less than 50% of its net worth. The company has incurred cash losses during the financial year covered by our audit. The company has not incurred cash losses in the immediately preceding financial year.

(xi) During the period the company has not defaulted in repayment of dues to financial institutions and banks. As informed to us, in respect of repayment to debenture holders, two installments amounting to Rs. 10 Crores were due up to 31st March, 2011 which was not paid as the restructuring of repayment schedule with the debenture holders was under negotiation.

(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 or a nidhi / mutual benefit fund / society. Therefore, the provisions of clause 4(xiii) 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. Therefore the provisions of clause 4(xiv) of the Companies (Auditor's Report) Order, 2003 are not applicable to the company.

(xv) According to the information and explanations given to us, the company has not given any guarantee for loans taken by others from bank or financial institutions.

(xvi) The company has not raised any Term Loan during the period.

(xvii) According to the information and explanations given to us and on an overall examination of the Balance Sheet we are of the opinion that there are no funds raised on short term basis which have been used for long term investments.

(xviii) The company has not made preferential allotment of shares during the year.

(xix) During the period covered by our audit report, the company has not issued any debentures. As informed to us, the company has created security in respect of debentures issued in the earlier accounting year.

(xx) The company has not raised any money by public issues during the period.

(xxi) According to the information and explanations given to us, 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.GLBhagwat,

Chartered Accountants,

Sandeep Rao

Partner

Membership No. 47235

Pune: 30th May, 2011 Firm Registration No. 101118W










Mar 31, 2010

We have audited the attached Balance Sheet of KINETIC ENGINEERING LIMITED, as at 31st March 2010, the Profit and Loss account and also the Cash Flow statement for the 9 months period 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.

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

2. Further to our comments in the Annexure referred to in para 1 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 purposes 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 Cash Flow Statement dealt with by this report are in agreement with the books of account;

(iv)In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956;

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

(vi)In our opinion and to the best of our information and according to the explanations given to us, the said accounts, read together with the notes thereon, give the information required by the Companies Act, 1956, in the manner so required and subject to approval from Central Government, which is awaited, for managerial remuneration paid as mentioned in Note No.5 under Notes forming part of the accounts 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 31st March 2010;

( b ) in the case of the Profit and Loss account, of the Profit for the 9 months period ended on that date ; and

(c) in the case of Cash Flow Statement, of the cash flows for the 9 months period ended on that date.



ANNEXURE TO THE AUDITORS REPORT

(Referred to in paragraph 1 of our 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 informed to us, the fixed assets have been physically verified by the management at reasonable intervals and no material discrepancies were noticed on such verification.

(c) In our opinion, the company has not disposed off a substantial part of its Fixed Assets during the period and the going concern status of the company is not affected.

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

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

(c) 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 stocks and the book records.

(iii)(a) The Company has not granted any loan to Companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956.

(b) Clause (iii) (b) is not applicable as no loans have been granted to the parties covered under (iii) (a).

(c) Clause (iii) (c) is not applicable as no loans have been granted to the parties covered under (iii) (a).

(d) Clause (iii) (d) is not applicable as no loans have been granted to the parties covered under (iii) (a).

(e) The company had taken interest free unsecured loans from one company and two parties covered in the register maintained under section 301 of The Companies Act 1956. The details of the loans taken are as under:

(Rs. in Lakhs.)

Accepted during the period/ Repaid during the period/ Closing balance Opening Balance

Interest Credited / Transfered adjusted during the year

1845 418 330 1933

(f) During the year no interest is paid on any of the unsecured loans taken by the company. In our opinion, the other terms and conditions of the unsecured loans taken by the company from the company and other parties covered in the register maintained under Section 301 of the Companies Act, 1956 are not, prima facie, prejudicial to the interest of the company.

(g) In respect of the above unsecured loans, we were informed that there are no specific stipulations for repayment of the principal amount.

(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 with regard to purchase of inventory, fixed assets and for the sale of goods and services. We have not observed any continuing failure to correct major weaknesses in internal control system.

(v) (a) According to the information and explanations given to us and on the basis of our examination, we are of the opinion that the particulars of contracts or arrangements referred to in section 301 of the Companies Act 1956 have been entered in the register required to be maintained under that section.

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

(vi) According to the information and explanations given to us, during the period, the company has not accepted any deposits from the public to which the provisions of section 58A and 58AA or any other provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 apply. As informed to us, no order has been passed by the Company Law Board, National Company Law Tribunal, RBI, any court or any other Tribunal.

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

(viii) As informed to us, the Central Government has prescribed maintenance of cost records under section 209(1)(d) of the Companies Act, 1956 in respect of manufacturing activities of the company. We were informed that the maintenance of cost records is in process.

(ix)(a) According to the records of the company, there are delays in depositing undisputed statutory dues of Provident Fund, Investor Education and Protection Fund, Employees State Insurance and Income-tax with the appropriate authority and as such the company is not regular in depositing the same. According to the information and explanations given to us, undisputed statutory dues in respect of Income Tax deducted at source amounting to Rs.126.17 Lakhs, Profession Tax Rs. 22.26 Lakhs and Provident Fund dues amounting to Rs. 54.92 Lakhs were in arrears as at 31.03.2010 for a period of more than six months from the date they became payable.

(b) According to information and explanations given to us, following are the details of disputed dues of, income tax, sales tax, service tax, custom duty and excise duty, which have not been deposited and the forum where such dispute is pending.

Statement of disputed dues:

Nature of dues Amount Forum where dispute is pending.

Rs. Lakhs

Income Tax, AY 2000-2001 1.29 Income Tax Appellate Tribunal, Pune

West Bengal Sales Tax, Central Sales Tax AY 6.92 Deputy Commissioner of Sales Tax, 2001-02, 2002-03. Kolkata.

Entry Tax, Behrampur. 1999-2000, 2000-01, 2001-02. 26.76 Asst. Commissioner Sales Tax, Behrampur.

CST (Supa Unit) 2006-07 31.46 Asst. Commissioner Sales Tax A. Nagar CST(Pune) 2005-06 67.91 Sales Tax Tribunal (Mumbai)

CST (Supa Unit) 2002-03 83.21 Commissioner sales Tax, Nashik

CST (Supa Unit) 2003-04 32.96 Commissioner sales Tax, Nashik

CST (Supa Unit) 2004-05 21.46 Commissioner sales Tax, Nashik

Excise Duty 286.27 CESTAT Mumbai

Service Tax 57.02 CESTAT Mumbai.

Custom Duty 6.32 CESTAT Mumbai.

(x) The accumulated losses of the company as at the end of the financial year are not less than 50% of its net worth. The company has not incurred cash losses during the financial year covered by our audit. The company has incurred cash losses in the immediately preceding financial year.

(xi) During the period the company has not defaulted in repayment of dues to financial institutions, banks 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 or a nidhi / mutual benefit fund / society. Therefore, the provisions of clause 4(xiii) of the Companies (Auditors 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. Therefore the provisions of clause 4(xiv) of the Companies (Auditors Report) Order, 2003 are not applicable to the company.

(xv) According to the information and explanations given to us, the company has not given any guarantee for loans taken by others from bank or financial institutions.

(xvi) The company has not raised any Term Loan during the period.

(xvii) According to the information and explanations given to us and on an overall examination of the Balance Sheet we are of the opinion that there are no funds raised on short term basis which have been used for long term investments.

(xviii) The company has not made preferential allotment of shares during the period except shares were allotted pursuant to the Scheme of Arrangement approved by the High Court.

(xix) During the period covered by our audit report, the company has not issued any debentures. As informed to us, the company has created security in respect of debentures issued in the earlier accounting year.

(xx) The company has not raised any money by public issues during the period.

(xxi) According to the information and explanations given to us, 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,

Sandeep Rao

Partner

Membership No. 47235

Pune, 12th August, 2010 Firm Registration No. 101118W








Jun 30, 2009

We have audited the attached Balance Sheet of KINETIC ENGINEERING LIMITED, as at 30th June 2009, the Profit and Loss account and also the Cash Flow statement for the 15 months period 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.

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

2. Further to our comments in the Annexure referred to in para 1 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 purposes of ouraudit;

(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 Cash Flow Statement dealt with by this report are in agreement with the books of account;

(iv)ln our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956; Attention is drawn to the Note No. 2 (a) of the Notes forming part of the accounts regarding incorporating effect of the merger of Auto Division of erstwhile Jaya Hind SciakyLtd., having effective date of 10"August 2009, in the accounts for the 15 months ended 30th June 2009.

(v) On the basis of written representations received from the directors, as on 30th June 2009 and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 30th June 2009 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, read together with the notes thereon, give the information required by the Companies Act, 1956, in the manner so required and subject to approval from Central Government, which is awaited, for managerial remuneration paid as mentioned in Note No.5 under Notes forming part of the accounts 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 30th June 2009;

(b) in the case of the Profit and Loss account, of the Loss for the 15 months period ended on that date; and

(c) in the case of Cash Flow Statement, of the cash flows for the 15 months period ended on that date.

ANNEXURE TO THE AUDITORS REPORT

(Referred to in paragraph 1 of our 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 informed to us, the fixed assets have been physically verified by the management at reasonable intervals and no material discrepancies were noticed on such verification.

(c) In our opinion, the company has not disposed off a substantial part of its Fixed Assets during the period and the going concern status of the company is not affected.

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

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

(c) 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 stocks and the book records.

(iii)(a) The Company has not granted any loan to Companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956.

(b) Clause (iii) (b) is not applicable as no loans have been granted to the parties covered under (iii) (a).

(c) Clause (iii) (c) is not applicable as no loans have been granted to the parties covered under (iii) (a).

(d) Clause (iii) (d) is not applicable as no loans have been granted to the parties covered under (iii) (a).

(e) The company had taken unsecured loans from two companies covered in the register maintained under section 301 of The Companies Act 1956, out of which during the current financial year one of the companies is merged with the company. During the year company has taken loans from two parties covered in the register maintained under section 301 of The Companies Act 1956. The details of the loans taken are as under:

(Rs. in Lakhs.)

Opening Balance Accepted during the period/ Repaid during the period/ closing balance Interest Credited / Transfered adjusted during the year

5426 612 4193 1845

(f) During the year no interest is paid on any of the unsecured loans taken by the company. In our opinion, the other terms and conditions of the unsecured loans taken by the company from the companies and other parties covered in the register maintained under Section 301 of the Companies Act, 1956 are not, prima facie, prejudicial to the interest of the company.

(g) In respect of the above unsecured loans, we were informed that there are no specific stipulations for repayment of the principal amount.

(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 with regard to purchase of inventory, fixed assets and for the sale of goods and services. We have not observed any continuing failure to correct major weaknesses in internal control system.

(v) (a) According to the information and explanations given to us and on the basis of our examination, we are of the opinion that the particulars of contracts or arrangements referred to in section 301 of the Companies Act, 1956, have been entered in the register required to be maintained under that section.

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

(vi) According to the information and explanations given to us, during the period, the company has not accepted any deposits from the public to which the provisions of section 58Aand 58AAor any other provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 apply. The liability of the company towards a relative of a director, arising out of forced encashment of the pledged security by a lender, has not been considered by the company to be a deposit covered by the provisions of the Companies (Acceptance of Deposits) Rules, 1975. As informed to us, no order has been passed by the Company Law Board, National Company Law Tribunal, RBI, any court or any other Tribunal.

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

(viii) As informed to us, the Central Government has prescribed maintenance of cost records under section 209(1 )(d) of the Companies Act, 1956 in respect of manufacturing activities of the company. We were informed that the maintenance of cost records is in process.

(ix)(a) According to the records of the company, there are delays in depositing undisputed statutory dues of Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income-tax, Sales-tax and Service Tax with the appropriate authority and as such the company is not regular in depositing the same. According to the information and explanations given to us, undisputed statutory dues in respect of Income Tax deducted at source amounting to Rs.28.33 Lakhs, Investor Education and protection Fund Rs. 3.70 Lakhs and Profession Tax Rs. 8.50 Lakhs were in arrears as at 30.06.2009 for a period of more than six months from the date they became payable.

(b) According to information and explanations given to us, following are the details of disputed dues of, Income tax, sales tax, service tax, customs duty and excise duty, which have not been deposited and the forum where such dispute is pending.

Statement of disputed dues:

Nature of dues Amount Forum where dispute is pending.

Rs.Lakhs

Income Tax, AY 2000-2001 1.29 Income Tax Appellate Tribunal, Pune

West Bengal Sales Tax, Central Sales Tax 6.92 Asst. Commissioner Commercial AY 2001-02, 2002-03. Taxes, West Bengal.

Entry Tax, Behrampur. 1999-2000, 2000-01, 2001-02. 26.76 Sales Tax Tribunal, Cuttack.

CST (Supa Unit) 2006-07 31.46 D.C. Sales Tax (Appeals), Nasik

CST(Pune) (Rs.10 Lakhs paid in 09-10) 77.91 Sales Tax Tribunal (Mumbai)

Excise Duty 389.73 CESTAT Mumbai

Excise Duty 0.02 Commissioner (Appeals)

Service Tax 57.02 CESTAT Mumbai.

Customs Duty 6.32 CESTAT Mumbai.

(x) The accumulated losses of the company as at the end of the financial year are not less than 50% of its net worth. The company has incurred cash losses during the financial year covered by our audit and in the immediately preceding financial year.

(xi) During the period the company has not defaulted in repayment of dues to financial institutions, banks or debenture holders however there were minor delays in repayment to the debenture holders. Instalment due on 30th June 2009 was paid on 28th October 2009.

(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 or a nidhi I mutual benefit fund / society. Therefore, the provisions of clause 4(xiii) of the Companies (Auditors 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. Therefore the provisions of clause 4(xiv) of the Companies (Auditors Report) Order, 2003 are not applicable to the company.

(xv) According to the information and explanations given to us, the company has not given any guarantee for loans taken by others from bankorfinancial institutions.

(xvi) The company has not raised any Term Loan during the period.

(xvii) According to the information and explanations given to us and on an overall examination of the Balance Sheet we are of the opinion that there are no funds raised on short term basis which have been used for long term investments.

(xviii) The company has made preferential allotment of shares during the period to a company covered in the register maintained under section 301 of The Companies Act 1956. The price, which is in accordance with the SEBI (Disclosure & Investor Protection) Guidelines, 2000, is not prejudicial to the interest of the company.

(xix) During the period covered by our audit report, the company has not issued any debentures. As informed to us, the company has created security in respect of debentures issued in the earlier accounting year.

(xx) The company has not raised any money by public issues during the period.

(xxi) According to the information and explanations given to us, 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,

Sandeep Rao

Partner Membership No. 47235 Pune: 2ndMarch,2010.

 
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