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Auditor Report of PSL Ltd.

Mar 31, 2015

We have audited the accompanying financial statements of PSL Limited which comprise the Balance Sheet as at 31st March 2015, the Statement of Profit and Loss Account and the 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

The Company's Board of Directors is responsible for the matter stated in Section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation & presentation 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 control, 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 misstatements, 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 provision of the Act and 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 the ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatements.

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

(i) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March 2015.

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

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

Emphasis of Matter

We draw attention to:

1. Long Term Borrowings: Note No. 4 of Balance Sheet and Schedules.

Default In Payment to Banks

Based on our audit procedure and as per the information and explanation given to us, the company has defaulted in repayment of loan and interest to the banks and financial institutions as on 31st March 2015. The Company has sought a restructuring program from the bankers under the guidelines issued by the Reserve Bank of India. The Company had filed an application before the CDR Cell on March 06, 2013 (Cut Off Date : 01.01.2013) along with the Flash Report. After considering the proposal, the final restructuring package was approved by CDR Empowered Group on 23rd August, 2013 which was duly communicated to the Company by the CDR Cell vide its Letter of Approval dated 23rd September, 2013.

In terms of the aforesaid Letter of Approval, for the CDR package:

a) The promoters of the Company are required to make a total contribution of Rs.146.81 Crore by way of subscribing to the equity capital of the Company/ unsecured loan so that the said contribution constitutes 25% of the total sacrifice computed for the aforesaid restructuring.

b) A portion of outstanding debt of lenders of the Company is required to be converted into Equity Shares. Yes Bank, being one of the lenders of the Company, has assigned its debt to Edelweiss Asset Reconstruction Company Ltd. through execution of Deed of Accession to Master Restructuring Agreement. The outstanding portion of debt amounting to Rs. 5 Crore (Rupees Five Crore only) of Edelweiss Asset Reconstruction Company Ltd. was required to be converted into Equity Shares.However the debt amounting to Rs.2.72 (Rupees Two Crore Seventy Two Lacs only) aforesaid total debt amount has already been converted into Equity Shares in accordance with the members' approval dated 4th July, 2014 obtained through Postal Ballot dated 20th May, 2014. Now the remaining debt of Rs.2.28 Crore (Rupees Two Core Twenty Eight Lacs only) if required to be converted into Equity Shares of the Company.

c) The Board of the Directors has, in accordance with the SEBI (ICDR) Regulations by passing a resolution on 5th February, 2015 also duly ratified on 10th February, 2015 considered and approved, subject to the approval of the members of the company, the proposal of issuance of a total of 50619232 Equity Shares of face value of Rs.10/- (Total Ten only) each at a total price of Rs.26/- (Rupees Twenty Six only) per equity share (including premium of Rs.16/- to the Promoter/Promoter Group/Promoter's Group Entities and a CDR Lender namely Edelweiss Asset Reconstruction Company Ltd. hereinafter collectively referred to "Proposed Allottees" of the Company as mentioned at Point a) and b) above calculated in accordance with the Regulation 76 of Chapter VII of the SEBI (ICDR) Regulations for an aggregate value upto approx. Rs.1,31,61,00,120/- (Rupees One Hundred Thirty One Crores Sixty One Lacs and One Hundred Twenty only).

d) Other terms applicable to the proposed issue are as follows:

i) The equity shares shall be subject to lock-in for a period in accordance with the provisions of the SEBI (ICDR) Regulations.

ii) The equity shares now to be issued shall rank passu with the existing equity shares of the Company in all respects.

e) Further it was mentioned that the Promoters of the Company were required to bring total contribution of Rs.146.9 Crores being 25% of lenders sacrifice. It was stated that the Promoters have infused Rs.38.60 Crores by way of cash, Rs.31.6 Crores by way of subscription of equity, in lieu of sale of land belonging to promoter owned company, Broken Hills International Pvt Ltd located in Tamil Nadu and Rs.57 Crores by mortgaging promoter owned land at Kalkaji, Delhi. The CDR EG opined that CDR package is not being implemented as per CDR guidelines as promoter's contribution is not infused in time but as lenders want to continue under the aegis of CDR, the company can continue under CDR though the package has not been implemented within the timelines.

2. Due to this there is a Cash and Capital crunch and the Company is under stress due to reduction in turn over, slow down in economic environment, increase in the cost of production as well as due to idle labour, lack of sufficient orders and reduced net realization in comparison to the increase cost of sales. There is shortage of working capital.

3. The Company has not provided for the interest amounting to Rs.627.21 Crores for the period from 1st January 2013 to 31st December 2014 which was to be built up as funded interest term loan (FITL) on the Working Capital Term Loan and Cash Credit. The Company has also not provided regular interest for the period of three months i.e. from 1.1.2015 to 31.03.2015 amounting to Rs. 88.58 Crores. The loss of the Company in this financial year is understated to an extent of Rs. 88.58 Crores.

4. The Company has not carried out detailed assessment of the useful life and hence not adjusted depreciation charge accordingly as per the notification to Schedule II of the Companies Act 2013.

5. The Kandla Port Authorities cancelled Lease of certain leasehold lands at Kandla. They have demanded damages and arrears. The ultimate expected liability is not fully provided.

6. The Company has accumulated losses exceeding the entire "Net Worth' and has incurred cash loss. More than 51% of the paid up capital is held partly by one or more public financial institutions which includes share of promoters pledged with the banks and institutions.

7. The Company's financial statements have been prepared under the assumption considering the management assessment and plan to get requisite funding from various other sources as contemplated.

8. Leasing of the Land/Plant & Machinery of Manufacturing Unit - (Varsana, Vizag, Vaiyavoor & Jaipur)

Operations Maintenance and Management

Agreement with Jindal Tubular (India) Limited:

a) The company has negotiated with Jindal Tubular (I) Ltd., through the Manager (Special Purpose Vehicle owned and controlled by Jindal Saw Limited) with necessary assistance from ICICI Bank for handing over the operations of manufacturing units of the company located at Varsana, Vizag, Vaiyavoor and Jaipur on some broad terms and conditions as are finalized between two companies consequent upon personal discussions between the senior officials of the two companies and ICICI Bank.

b) The duration of the proposed transaction will be for a period of one year from the date mentioned in the Definitive Agreements and shall be renewable for an additional period of one year as may be mutually agreed between the parties.

c) Subject to deduction of all costs and expenses incurred by the Manager towards satisfaction of legacy dues, employee and utility dues/ other liability of PSL Limited, the Manager will pay to the company 70% of the net revenue for identified facilities at Vaiyavoor, Jaipur and Vizag and for facilities located at Varsana the Manager will pay 50% of net revenue.

d) Upon satisfactory completion of legal and taxation due diligence / identified facilities by the Manager the party shall decide the start up date. (Since decided 15th April, 2015).

e) After completion of the proposed transaction period the parties may agree for any sale of the identified facility, the Company and the ICICI Bank shall provide the Manager a right of first refusal.

f) As per the OMMA the Company shall , as the case may be, comply in full with the condition precedent by April 15, 2015 or within such extended time line as mutually agreed between the parties.

g) An agreement dated March 4, 2015 giving such option to sale the specific units by the Company to JTL has also been extended.

9. Lender Banks' Balance Confirmation as on 31st March 2015:

We are informed that the company has applied for their confirmation of Bank certificate / Bank Guarantees / Letter of Credits / Corporate Guarantees given on behalf of subsidiary companies and interest certificates as on 31st March 2015 which are yet to be obtained and supplied to us.

The loan figures were arrived in the ledger as per the MRA for both categories (signed and not signed). We are informed that the figures in the MRA a document has to be taken as confirmation of balance for the loan account.

10. Investments in Subsidiaries: Note No. 11 Non Current Investments.

A) Foreign Subsidiaries:

i) PSL FZE (Sharjah) (Step down Subsidiary) Pipeline Systems Ltd. Mauritius

The Company had invested Rs. 141.63 Crores in a wholly owned subsidiary namely Pipeline Systems Mauritius . Due to cumulative losses in the subsidiary the value of investment is eroded. The Company has not provided for the same.

ii) PSL USA INC (USA) PSL NA LLC (USA) (Step down Subsidiary)

The Company had invested Rs. 130.34 Crores in a wholly owned subsidiary namely PSL USA Inc. Due to cumulative losses in the subsidiary the value of investment is eroded. The Company has not provided for the same. Also the outstanding debtors includes receivable amounting to Rs. 22.30 Crores from the subsidiary which is not provided for.

We were informed that the financial statements for the period ending on 31st March 2015 audited by other auditors of the above subsidiary companies are yet to be supplied to us. Due to this, provision for diminution / impairment in the value of its investments in the above subsidiary companies is yet to be considered.

B) Indian Subsidiaries:

PSL Infrastructure & Ports Pvt. Ltd.

* Total investment in PSL Port & Infrastructure Limited is Rs.28.21 Crores.

* The company was awarded the construction of Jetty at Kandla Port. Till date the company has incurred construction Expenses of Rs 65.39 Crores.

* Due to restrictions imposed by CDR package of PSL Ltd, the parent company, could not inject/ contribute funds for the construction of the jetty.

* The Kandla Port authorities have given notice for the cancellation of the agreement. The matter is in dispute and under Arbitration. At present, project is incomplete.

11. Loan & Advances : Note No. 12 of Balance Sheet & Schedules

i) The company has given Bank Guarantees on behalf of subsidiary companies.

ii) During the year, Bank Guarantees of Rs 171.72 Crores have been encashed relating to the subsidiaries and debited to the Profit and Loss account.

12. Inventory, Current Assets: Note No. 15 of Balance Sheet and Schedules

The closing inventory as on 31st March, 2015 is Rs. 1391.25 Crores which includes non moving stock of Rs. 1101.71 Crores (includes Rs.1078.38 Crores as reported earlier). In view of company's production activities having come down and slow movement in the inventory, there is a need for systematic age wise segregation and analysis of the items comprised in the inventory to assess their usefulness/ usability in the production and servicing activities, period over which they could be used also whether the inventory items are capable of being sold/disposed off as standalone items. Pending such an exercise, we are unable to express an opinion towards non moving and obsolete inventories and the eventual realizable amount in respect of the inventories, as also the possible effect on the financial statements.

13. Debtors: Note No. 16 of Balance sheet and Schedules

i) The Company has Sundry Debtors of Rs 311.94 Crores as on March 31, 2015

Less than Six Months Rs. 85.57 Crores

More than Six Months. Rs.227.36 Crores

(-) Provision for NIL doubtful debts

Total Rs. 311.94 Crores

ii) The debtors of more than 6 months of Rs.227.36 Crores includes the following amount:-

1. Lanco (IOCL Project) Rs. 14.42 Crores

The Company is in the process of filing winding up a petition towards recovery

2. Electro Steel Rs. 0.63 Crores

3. IOCL (SMPL Project) has recovered L/D and separately for risk and cost charges amounting to Rs. 21.27 Crores.

The Company has objected to this arbitrary charge and appointed a lawyer to deal the matter.

The Company has not produced confirmation of balances from sundry debtors confirming the amount outstanding as on March 31, 2015. In the absence of adequate evidence and information made available to us supporting the recoverability of this amount, we are further unable to comment on the financial impact of this matter on the profit / loss for the year ended on 31st March 2015.

14. Sundry Creditors & Loans and Advances:

In the absence of pending confirmation of balances from Trade Payables, Other Loans & Advances as on 31st March, 2015, provision for any adverse variation in the balances is not quantified.

15. The management has decided not to provide for Gratuity, Leave Encashment & Superannuation for the period of 1st April, 2014 to 31st March 2015 because current provision is considered sufficient by the management for this purpose.

16. The Company has incurred losses during the extended financial year 2013 and paid excess remuneration aggregating to Rs.5.91.crores to Seven whole time directors. Since the remuneration was in excess to the limits specified in relevant Sections of the Companies Act, 1956 read with Schedule XIII of The Companies Act, 1956 the company has filed an application to Ministry of Corporate Affairs, Govt. of India to permit waiver of recovery of the aforesaid excess remuneration from each of the 7 Whole Time Directors. Subsequently Permission for six directors received by the Company , permission for one director is still pending.

17. The Estate Office Kandla Port Trust under Public Premises (Evacuation of unauthorized) passed order on 27th March, 2014 for the evacuation of the Kandla PCD-I premises because lease period was over The Estate Office has taken over the possession of the land. Since the lease amount is under dispute, the lease payments have not been made and not provided in the accounts.

18. Some of Creditors have filed winding up petition u/s 433(e) and 434 of The Companies Act, 1956. The matter is sub juidice.

19. A petition under Article 14, 21, 28 and 226 of the Constitution of India has been filed against the company. Our opinion is not qualified in respect of these matters.

20. As required by the Companies (Auditor's Report) Order 2015 issued by the Central Government Ministry of Corporate Affairs in terms of Sub-section (11) of Section 143 of the Companies Act, 2015, we enclose Annexure - A, attached to our report.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order, 2015 ("the Order") issued by the Central Government in terms of Section 143(11) of the Act, we give in the Annexure a statement on the matters specified in paragraphs 3 and 4 of the Order.

2. As required by Section 143 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 it appears from our examination of those books.

c) The Balance Sheet, the statement of Profit & 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, the statement of Profit & Loss and the Cash Flow Statement comply with the Accounting Standards notified under the Act read with the General Circular 15/2013 dated 13th September, 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013.

e) On the basis of 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 of the Act.

ANNEXURE - A TO THE AUDITORS' REPORT

Referred to in paragraph 1 under the heading 'Report on Other Legal and Regulatory Requirements' of our Report of even date on the financial statements for the year ended on 31st March 2015 of PSL Limited

1. a) The company has maintained proper records showing full particulars including quantitative details and situation of the Fixed Assets. These fixed assets have been physically verified by the management at reasonable intervals and no material discrepancies were noticed on such verification.

b) In our opinion the frequency of verification is reasonable having regard to the size of the Company and the nature of its assets.

2. Subject to our remark in Item No. 12 in "Emphasis of Matter" the physical verification of inventory has been conducted at reasonable intervals by the management; and the procedures of physical verification of inventory followed by the management is reasonable and adequate in relation to the size of the Company and nature of its business.

The Company is maintaining proper records of inventory and any material discrepancies noticed on physical verification have been properly dealt with in the books of account.

3. The Company has not granted loans, secured/unsecured to companies, firms or other parties covered in the register maintained under section 189 of the Companies Act.

4. 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. There is no failure to correct major weaknesses in internal control system. However the internal controls over accounting of consumption, wastages, material reconciliation, need further strengthening.

a) Based on the audit procedures applied by us and according to the information and explanations provided by the management, we are of the opinion that the particulars of contracts or arrangements that need to be entered into the register maintained under section 189 of the Companies Act, 2013 have so been entered.

b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under Section 189 of the Companies Act, 2013 have been made at prices which are reasonable having regard to prevailing market prices at the relevant time.

6. The Company has not accepted any deposits from the public within the meaning of Section 73 to 76 of the Act and the rules framed there under. Therefore, the provisions of Section 73 and 74 of the Act and any other relevant provisions of the Companies Act, 2013 and the rules framed there under with regard to deposits accepted from the public are not applicable to the Company.

7. We have broadly reviewed the books of account maintained by the Company pursuant to the rules made by the Central Government of India, regarding the maintenance of cost records 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 maintained. We have, however not made a detailed examination of the records with a view to determine whether they are accurate or complete. The cost audit is completed up to the year ended 31st March 2012.

The Cost Audit Report is mandatory u/s. 233B of the Companies Act 1956.

8. According to the records of the Company, the Company is not regular in depositing undisputed Statutory dues including Provident Fund, Employees State Insurance, Income Tax, Sales Tax, Service Tax, Duty of Excise, valued added tax cess and any other statutory dues with the appropriate authorities, however there is some delay in depositing Govt. dues due to financial difficulties. According to the information and explanations given to us, no undisputed amounts payable in respect of Income Tax, Sales Tax, Customs Duty, Service Tax, Excise Duty and Cess were outstanding, at the financial reporting period ending on 31st March 2015 for a period of more than six months from the date they became payable.

As on 31st March, 2015 according to the records of the Company the following are the particulars of disputed dues on account of Excise duty, Customs, Income Tax, Service Tax, Sales Tax & DGFT and have not been deposited.

SR. Amount under Facts of the Case No. Dispute (Rs.In Lacs)

EXCISE DUTY

1 3752 Demand of duty on exempted orders

2. 1467 Duty on Fusion Bonded Epoxy

3. 8 Duty on Fusion Bonded Epoxy Coating

4. 3 Demand of differential Excise Duty

5. 34 Demand of Cenvat Credit

6. 10 Relating to interest on incorrect Cenvat Credit

7. 0.45 Excess Cenvat Credit taken

8. 9 Goods cleared without payment of Excise Duty

9. 18 Cenvat Credit availed on Capital Goods

10. 54 Demand of Central Excise Duty

11. 181 Demand for non payment of duty on transportation charges

12. 202 Demand of Central Excise Duty

13. 57 Demand of Central Excise Duty

CUSTOMS / DGFT

1. 871 Demand for differential custom duty

2. 18900 Demand for duty

SERVICE TAX

1. 45 Tax on construction of Mall

2. 209 BAS

3. 2 Demand for Interest Liability

4. 32 Service Tax on ECB Loan

5.. 31 Denial of Credit of Service Tax on Outward Transport

6.. 6 Cenvat Credit availed on input services not covered

7. 21 Wrong availment of Cenvat Credit

8. 30 Wrong availment of Cenvat Credit

SALES TAX

1 43 Non payment of composition tax

2 1200 Demand of duty

INCOME TAX

1 136 Demand of Income Tax

2 21 Demand of Income Tax

3 25 Demand of Income Tax



SR. Amount under Period which Forum where the dispute is No. Dispute (Rs.In the amount pending Lacs) relates

EXCISE DUTY

1 3752 2006 CESTAT, Ahmedabad

2. 1467 2008 CESTAT, Mumbai

3. 8 2010 Commissioner (Appeals), Chennai

4. 3 2009 CESTAT, Chennai

5. 34 2010 CESTAT, Ahmedabad

6. 10 2010 CESTAT, Bangalore

7. 0.45 2012 CESTAT, Ahmedabad.

8. 9 2012 CESTAT, New Delhi

9. 18 2012 CESTAT, Ahmedabad

10. 54 2012 CESTAT, Ahmedabad

11. 181 2013 CESTAT, Bangalore

12. 202 2013 Commissioner, Rajkot

13. 57 2013 CESTAT, Ahmedabad

CUSTOMS / DGFT

1. 871 2012 CESTAT, Ahmedabad

2. 18900 2013 DGFT, New Delhi

SERVICE TAX

1. 45 2008 CESTAT, Chennai

2. 209 2009 Commissioner, Chennai

3. 2 2009 Commissioner (Appeals),Vizag

4. 32 2011 Addl. Commissioner,Mumbai.

5.. 31 2011 Addl..Commissioner, Jaipur

6.. 6 2012 Commissioner (Appeals),Vizag

7. 21 2012 CESTAT,Ahmedabad

8. 30 2013 Commissioner (Appeals),

SALES TAX

1 43 2004 High court of A.P.

2 1200 2005 High Court of A.P.

INCOME TAX

1 136 2011-2012 CIT (Appeals)

2 21 2005-2006 CIT (Appeals)

Sec 143(3)/263

3 25 2012-2013 CIT (Appeals)



CASES FILED AGAINST THE COMPANY

Financial Institution Purpose

Syndicate Bank Notice u/s 138 of NI Act, 1881 regarding Dishonour of the cheque No 355113 for Rs. 12,50,00,000/- drawn on State Bank Of India

Syndicate Bank Notice u/s 138 of NI Act, 1881 regarding Dishonour of the cheque No 355114 for Rs. 12,50,00,000/- drawn on State Bank Of India

Kotak Mahindra Bank Notice u/s 138 of NI Act, 1881 regarding Dishonour of two cheques No 753765 & 753766 for Rs. 5,00,00,000/- each drawn on ICICI Bank

Kotak Mahindra Bank Notice u/s 138 of NI Act, 1881 regarding Dishonour of two cheques No 483804 & 539241 for Rs. 5,00,00,000/- each drawn on ICICI Bank

Kotak Mahindra Bank Notice u/s 138 of NI Act, 1881 regarding Dishonour of two cheques No 483805 & 539242 for Rs. 5,00,00,000/- each drawn on ICICI Bank

DBS Bank Limited Legal Notice Regarding recall of credit facility for Rs. 2000 Million. However the Bank has agreed for the restructuring of the loan and signed the MRA.

Aditya Birla Finance Notice regarding recall of outstanding Limited credit facility extended vide sanctioned letter dated 30/05/2012. A case was registered by Economic offences wing (EOW) on the Company as well as the Directors under CrPC. The matter is under investigation.

9. The Company has transferred to investor education and protection fund in accordance with the relevant provisions of the Companies Act, 1956 (1 of 1956) and rules made thereunder has been transferred to such fund within time.

10. Based on our audit procedures and on the information and explanations given by the management, the Company has defaulted in repayment of dues as per CDR package amounting to Rs. 273.11 Crore towards principal and Rs. 88.58 Crores towards Interest during the year to financial institution, and banks due to financial difficulty. The Company operates in a multiple banking system availing facility for various coated pipe supply projects from respective bankers. In this circumstances amount of overdue principal and overdue interest as on a particular date and corresponding period of delay is not quantifiable.

11. In our opinion and explanation given to us the Company has given Guarantees for loan taken by its subsidiaries from banks/financial institutions, but terms and conditions of such guarantees are not prejudicial to the interest of the Company. However company has not given any guarantee during the year.

12. Based on information and explanations given to us by the management, term loans were applied for the purpose for which the loans were obtained. However there is no new loan availed by the company during the year.

13. According to the information and explanations given to us & based on the documents & records produced to us, the Company has not granted loans or advances on the basis of security by way of pledge of shares, debentures & other securities.

14. According to the information and explanations given to us and on an overall examination of the Balance Sheet and Cash flow statement of the Company, the Company has not availed any new loan.

15. Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.

Reasons for unfavourable /Qualified answers

1. Paragraph No. 7 - Cost Audit - We were given to understand that report for the period ended September 2013, March 2013, March 2014 and March 2015 are under progress.

2. Paragraph No. 8 - Statutory dues Due to Financial crunch non availability of funds there is irregularity in depositing statutory dues. However the management is taking all the necessary steps to be in line.

3. Paragraph No. 10- - Default in repayment of bank loan -

Due to Financial crunch the repayments were not made. The company is in the process of entering into a Contract (OMMA) with another company in order to revive the operation and generate revenue towards repayment of loan. In the absence of bank confirmation banks loans were taken as per books.

For Suresh C. Mathur & Co. Chartered Accountants, (Firm Regn. No. 000891N)

Place: New Delhi (Suresh C. Mathur) Dated: 13th May, 2015 PARTNER M. No. 1276


Mar 31, 2014

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

Management''s Responsibility for the Financial Statements

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 notified under The Companies Act, 1956 (the Act) read with the General Circular 15/2013 dated 13th September, 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013 and in accordance with the accounting principles generally accepted in India. 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 misstatements, whether due to fraud or error.

Auditors'' 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 ICAI. Those Standards require that we comply with the ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatements.

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

(i) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March 2014.

(ii) in the case of the Statement of Profit and Loss, of the loss of the Company for the six months period ended on that date and

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

Emphasis of Matter

We draw attention to:

1) Long Term Borrowings: Note No. 4 of Balance Sheet and Schedules.

Default In Payment to Banks

Based on our audit procedure and as per the information and explanation given to us, the company has defaulted in repayment of loan and interest to the banks and financial institutions as on 31st March 2014. The Company has sought a restructuring program from the bankers. The Company had filed an application before the CDR Cell on March 06, 2013 (Cut Off Date : 01.01.2013) along with the Flash Report. The outstanding amount as on 01.01.2013 of both CDR member banks and NON CDR banks is proposed to be restructured through this restructuring package. The Company has received letter of approval on 23rd September, 2013 conveying the Approval of CDR Empowered Group letter dated 23rd August, 2013 on the restructuring package of the Company.

14 out of 16 CDR lenders (including transaction specific lenders) constituting 75.61% of the CDR debt by value and 87.50% by number have executed MRA as on date. Further, a non CDR lender, DBS Bank Limited has also executed the MRA. The execution of MRA by the balance banks (7 Nos) is under progress. Amongst CDR members barring two banks namely SBI & Syndicate Bank all other banks have executed the Master Restructuring Agreement dated 19th November 2013 thereby accelerating the progress of implementation of CDR Package.

In pursuance to Corporate Restructuring Package approved by CDR Empowered group, company has to issue 5.65 crore equity shares to Promoters / Promoter Group''s Entities for an aggregate consideration not exceeding Rs. 146.90 crores and 5.95 crore equity shares to CDR Lenders for an aggregate consideration not exceeding Rs. 154.70 crore on preferential basis having face value of Rs. 10/- each.

For this purpose, the company is in process of increasing the Authorised Share Capital.

The company''s financial statements have been prepared under the assumption considering the management assessment and plan to get requisite funding from various other sources as contemplated.

2) Finance Cost: Note No. 26 of Balance Sheet and Schedules

In terms of the approval (LOA) interest on the loans of CDR member banks and non CDR Banks shall be funded for a period of two years i.e. 01.01.2013 to 31.12.2014 as a fresh Term Loan namely FITL.

As per the general Accounting Standards, the company is required to account for the interest on the loans on accrual basis. However, the company has not provided for interest on the loans of the banks for the period from 01.10.2013 to 31.03.2014 amounting to Rs. 161.30 crores (Previous Year Rs. 224.69 crores). The loss to the accounting period is understated to that extent. After accounting for the above, the loss for the accounting period from 1st Oct, 2013 to 31st March 2014 will increase from Rs. 141.99 crores to Rs. 303.29 crores. Such accumulated Funded interest of Rs. 385.99 crore is yet to be accounted for as FITL.

3) Lender Banks'' Balance Confirmation as on 31st March 2014 :

We are informed that the company has applied for their confirmation of Bank certificate / Bank Guarantees / Letter of Credits / Corporate Guarantees given on behalf of subsidiary companies and interest certificates as on 31st March 2014 which are yet to be obtained and supplied to us.

The loan figures were arrived in the ledger as per the MRA for both categories (signed and not signed). The MRA which is prepared by ICICI Bank and vetted by the legal advisor of ICICI Bank (i.e.) Amarchand. We are informed that the figures in the MRA documents has to be taken as confirmation of balance for the loan account.

Interest is not provided for the loans outstanding as on 31st March, 2014 for the six months period. The interest is released by banks as another loan called funded interest term loan. FITL interest @ 10.25% has been provided.

4) Investments in Subsidiaries. Note No. 11 Non Current Investments.

A) Foreign Subsidiaries:

i) Pipeline Systems Mauritius

PSL FZE (Sharjah) (Stepdown Subsidiary)

ii) PSL USA INC (USA)

PSL North America LLC (Stepdown Subsidiary)

Investment in PSL USA INC is Rs. 130.34 Crores & in Pipeline Systems Mauritius is Rs. 141.63 Crores. These companies are running in a loss. The accumulated losses are more than the paid up capital. The market value of their assets will be lower than the estimated realizable value.

We were informed that the Financial statements for the period ending on 31st March 2014 audited by other auditors of the above subsidiary companies are yet to be supplied to us. Due to this, provision for diminution / impairment in the value of its investments in the above subsidiary companies is yet to be considered.

We were informed by the management that the economy of the country will improve in the current year and they shall come out from the woods.

B) Indian Subsidiaries:

PSL Infrastructure & Ports Pvt. Ltd.

* Total investment in PSL Port & Infrastructure Limited is Rs. 28.21 crores.

* The company was awarded the construction of Jetty at Kandla Port. Till date the company has incurred construction Expenses of Rs. 64.88 crores.

* Due to restrictions imposed by CDR package of PSL Ltd, the parent company, could not inject/ contribute funds for the construction of the jetty.

* The Kandla Port authorities have given notice for the cancellation of the agreement. The matter is in dispute. At present, project is incomplete.

5) Refer to Note No. 12 (Loans & Advances)

i) The company has given Bank Guarantees on behalf of subsidiary companies.

ii) During the period, Bank Guarantees of Rs. 58.18 Crores have been encashed relating to the subsidiaries and is shown in the other advances.

6) Inventory, Current Asssets : Note No. 15

The closing inventory as on 31.03.2014 is Rs. 1444.04 crores which includes non moving old stock of Rs. 1047.63 crores (as reported by the stock auditor last year). However the present market value of the old stock is not be ascertainable.

7) Fixed Assets : The company has capitalized the capital WIP to the extent of Rs. 52.15 Crore towards Plant & Machinery. We were informed that the Plant & Machinery which has repaired and had outlived its utility and expenses were incurred for replacing vital parts in order to make the same functional and the expenditure was of such nature that it bought in to existence a new machinery altogether and consequently, there was benefit of enduring nature to the company even though technically no new asset come into existence.

8) Debtors: Note No. 16

i) The Company has Sundry Debtors of Rs. 349.85 Crores as on March 31, 2014:-

Less than Six Months 229.87 Crores

More than Six Months. 122.19

(-) Provision for doubtful (2.21) 119.98 crores debts

Total 349.85 crores

The advances of more than 6 months of Rs. 119.98 crores includes the following amount:-

1. Lanco (IOCL Project) 14.42 Crores

2. Electro Steel 0.63 Crores

3. IOCL (SMPL Project) has recovered L/D and separately for risk and cost charges amounting to Rs. 21.27 Crores. The Company has objected to this arbitrary charge and appointed a lawyer to deal the matter.

ii) The Company has not produced confirmation of balances from sundry debtors confirming the amount outstanding as on March 31, 2014. In the absence of adequate evidence and information made available to us supporting the recoverability of this amount, we are further unable to comment on the financial impact of this matter on the profit / loss for the period ended on 31st March 2014.

9) Sundry Creditors & Loans and Advances:

In the absence of pending confirmation of balances from Trade Payables, Other Loans & Advances as on 31.03.2014, provision for any adverse variation in the balances is not quantified.

10) The management has decided not to provide for Gratuity, Leave Encashment & Superannuation for the period of 1st October 2013 to 31st March 2014 because current provision is considered sufficient by the management for this purpose.

11) Due to financial crunch, the company could not execute the supply of orders to the tune of 1.90 lakh meters. The parties gave notices of defaults and subsequently terminated the contracts and levied liquidated damages of Rs. 10.34 Crores during the period.

12) The Company has incurred losses during the extended financial year 2013 and paid excess remuneration aggregating to 5.91 crores to Seven whole time directors. Since the remuneration was in excess to the limits specified in relevant Sections of the Companies Act, 1956 read with Schedule XIII of The Companies Act, 1956 the company is in the process to file an application to Ministry of Corporate Affairs, Govt. Of India to permit waiver of recovery of the aforesaid excess remuneration from each of the 7 Whole Time Directors.

For the period 1st October 2013 to 31st March 2014, the company has fixed the managerial remuneration for each of the seven directors for Rs. 4 lakh per director per month which is under the limits specified by the Companies Act, 1956.

13) The Estate Office Kandla Port Trust under Public Premises (Evacuation of unauthorized) passed order on 27th1 March, 2014 for the evacuation of the Kandla PCD-I premises because lease period was over. The company is taking suitable legal action against above order. Since the lease amount is under dispute, the lease payments have not been made and not provided in the accounts.

14) A Creditor has filed winding up petition u/s 433(e) & 434 of the Companies Act, 1956. The matter is subjudice.

15) A petition under Article 14,21,28 and 226 of the Constitution of India has been filed against the company.

Our opinion is not qualified in respect of these matters.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2003 ("the Order") issued by the Central Government in terms of Section 227(4A) 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 it appears from our examination of those books.

c) The Balance Sheet, the statement of Profit & 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, the statement of Profit & Loss and the Cash Flow Statement comply with the Accounting Standards notified under the Act read with the General Circular 15/2013 dated 13th September, 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013.

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

ANNEXURE TO THE AUDITOR''S REPORT

Referred to in paragraph 1 under the heading ''Report on Other Legal and Regulatory Requirements'' of our Report of even date on the financial statements for the year ended on 31st March 2014 of PSL Limited

1. a) The Company has maintained proper records showing full particulars including quantitative details and situation of the Fixed Assets.

b) A substantial portion of the fixed assets have been physically verified by the management during the period. In our opinion the frequency of verification is reasonable having regard to the size of the Company and the nature of its assets.

c) Fixed assets were disposed off during the period were not substantial. According to the information and explanation given to us, we are of the opinion that the disposal of the fixed assets has not affected the going concern status of the Company.

2. a) Subject to our remark in item no 1 in "Emphasis of Matter" the inventory has been physically verified by the management and the stock auditor during the period by the management at reasonable intervals. In our opinion, the frequency of verification is reasonable.

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

c) In our opinion and according to the information and explanation given to us, the Company is maintaining proper records of inventory and the same is certified by the management. The discrepancies noticed on verification between physical stocks and the book records have been properly dealt with in the books of account.

3. a) Company has not granted unsecured loans and Inter Corporate Deposits to companies covered in the Register maintained under Section 301 of the Act. Hence the provisions of clause (iii)(a), (b), (c), (d) of paragraph 4 are not applicable to the Company.

b) The Company has taken the unsecured loan from companies under the same management covered in the Register maintained under Section 301 of the Companies Act, 1956. The maximum amount involved in the current year amounted to Rs. 17.48 Crore and the period-end balance of loans taken from such parties is Rs. 17.48 Crore.

c) Based on the information and explanations given to us, we are of the opinion that the rate of interest and other terms and conditions of loans taken from such parties covered in the Register maintained under Section 301 are not prima facie prejudicial to the interests of the Company.

d) According to the information and explanation given to us, the repayment of principal and interest has not been paid.

4. In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business for purchase of inventory and fixed assets and for the Work Done. However the internal controls over accounting of consumption, wastages, material reconciliation, need further strengthening.

5. a) Based on the audit procedures applied by us and according to the information and explanations provided by the management, we are of the opinion that the particulars of contracts or arrangements that need to be entered into the register maintained under Section 301 of the Companies Act, 1956 have so been entered.

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

6. The Company has not accepted any deposits from the public within the meaning of Section 58A and 58AA of the Act and the rules framed there under. Therefore, the provisions of Section 58A, 58AA and any other relevant provisions of the Companies Act, 1956 and the rules framed there under with regard to deposits accepted from the public are not applicable to the Company.

7. In our opinion, the Company has an internal audit system, commensurate with the size and nature of its business. However the scope needs to be enlarged to cover project related cost-to-complete workings and certain areas of head office accounting.

8. We have broadly reviewed the books of account maintained by the Company pursuant to the rules made by the Central Government of India, regarding the maintenance of cost records under clause (d) of the sub-section (1) of Section 209 of the Act and are of the opinion that prima facie, the prescribed accounts and records have been maintained. We have, however not made a detailed examination of the records with a view to determine whether they are accurate or complete. The cost audit is completed up to the period ended 31st March 2012.

9. According to the records of the Company, the Company is generally regular in depositing undisputed Statutory dues including with-holding of taxes, Provident Fund, Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Custom Duty, Excise Duty, Service Tax, Cess and other Statutory dues applicable to it with the appropriate authorities, however there is some delay in depositing Government dues due to financial difficulties. According to the information and explanations given to us, no undisputed amounts payable in respect of Income Tax, Wealth Tax, Sales Tax, Customs Duty, Service Tax, Excise Duty and Cess were outstanding, at the financial reporting period ending on 31st March 2014 for a period of more than six months from the date they became payable.

As on 31st March, 2014 according to the records of the Company the following are the particulars of disputed dues on account of Excise duty, Customs, Income Tax, Service Tax, Sales Tax and DGFT and have not been deposited.

Sl. Amount under Facts of the Case Period which No. Dispute (Rs. In the amount Lacs) relates

EXCISE DUTY

1. 25 Payment of Cenvat credit on 2004-05-06 coating of inputs

2. 3752 Demand of duty on exempted 2006 orders

3. 1467 Duty on Fusion Bonded Epoxy 2008

4. 8 Duty on Fusion Bonded Epoxy 2010 Coating

5. 3 Demand of differential Excise Duty

6. 34 Demand of Cenvat Credit 2010

7. 10 Relating to interest on 2010 incorrect Cenvat

8. 0.45 Excess Cenvat Credit taken 2012

9. 9 Goods cleared without 2012 payment of Excise

10. 18 Cenvat Credit availed on 2012 Capital Goods

11. 54 Demand of Central 2012 Excise Duty

12. 0.32 Demand of Central 2013 Excise Duty

13. 181 Demand for non payment 2013 of duty on transportation charges

14. 202 Demand of Central 2013 Excise Duty

15. 57 Demand of Central 2013 Excise Duty

CUSTOMS / DGFT

1. 871 Demand for differential 2012 custom duty

2. 18900 Demand of duty & penalty 2012

3. 18900 Demand for duty 2013

SERVICE TAX

1. 45 Tax on construction of Mall 2008

2. 209 BAS 2009

3. 2 Demand for Interest Liability 2009

4. 15 Refund of excess amount paid 2009

5. 2 Demand of Service Tax BAS 2010

6. 32 Service Tax on ECB Loan 2011

7. 31 Denial of Credit of Service 2011 Tax on Outward Transport

8. 6 Cenvat Credit availed on 2012 input services not covered

9. 21 Wrong availment of 2012 Cenvat Credit

10. 30 Wrong availment of 2013 Cenvat Credit

SALES TAX

1 43 Non payment of 2004 composition tax

2 1200 Demand of duty 2005 INCOME TAX

1 136 Demand of Income Tax 2010-2011

2 44 Demand of Income Tax 2005-2006

Sl. Amount under Forum where the dispute is pending No. Dispute (Rs. In Lacs)

EXCISE DUTY

1. 25 Tribunal, Ahmedabad - Obtained Stay

2. 3752 Remanded back by Tribunal Ahmedabad, Received

3. 1467 Transferred to Tribunal, Mumbai on Nov 12

4. 8 Commissioner (Appeals), Chennai

5. 3 Appellate Tribunal, Chennai-Obtained Stay Order

6. 34 Transferred to Tribunal, Mumbai on Nov 12

7. 10 Appellate Tribunal, Bangalore Credit

8. 0.45 Asstt. Commissioner, Vapi, Daman

9. 9 Addl. Commissioner of Central Excise, Duty Jaipur

10. 18 Addl. Commissioner, Daman

11. 54 Commissioner, Central Excise, Ahmedabad

12. 0.32 Dy. Commissioner, Central Excise, Vizag

13. 181 Dy. Commissioner, Central Excise, Vizag

14. 202 Commissioner, Central Excise, Rajkot

15. 57 Commissioner, Central Excise, Rajkot

CUSTOMS / DGFT

1. 871 Appeal with CESTAT, Mumbai is pending

2. 18900 Appeal with CESTAT, Mumbai is pending

3. 18900 Add. DGFT

SERVICE TAX

1. 45 Tribunal, Chennai

2. 209 Commissioner of Central Excise, pondicherry

3. 2 Asstt. Commissioner, Service Tax, Vizag

4. 15 Asstt. Commissioner, Service Tax, Vizag

5. 2 Transferred to Tribunal, Mumbai on Nov 12

6. 32 Addl. Commissioner of Service Tax, Churchgate

7. 31 Commissioner, Jaipur

8. 6 Addl. Commissioner of Central Excise, Vizag-I, Commissionerate

9. 21 Commissioner of Central Excise & Customs, Rajkot

10. 30 Jt. Commissioner

SALES TAX

1 43 High court of A.P.

2 1200 Supreme Court

INCOME TAX

1 136 CIT (Appeals)

2 44 CIT (Appeals) Sec 143(3)/263



CASES FILED AGAINST THE COMPANY

Financial Purpose Institution

Syndicate Notice u/s 138 of NI Act, 1881 regarding Bank Dishonour of the cheque No 355113 for Rs. 12,50,00,000/- drawn on State Bank of India

Syndicate Notice u/s 138 of NI Act, 1881 regarding Bank Dishonour of the cheque No 355114 for Rs. 12,50,00,000/- drawn on State Bank of India

Kotak Notice u/s 138 of NI Act, 1881 regarding Mahindtra Dishonour of two cheques No 753765 & 753766 Bank for Rs. 5,00,00,000/- each drawn on ICICI Bank

Kotak Notice u/s 138 of NI Act, 1881 regarding Mahindtra Dishonour of two cheques No 483804 & 539241 Bank for Rs. 5,00,00,000/- each drawn on ICICI Bank

Kotak Notice u/s 138 of NI Act, 1881 regarding Mahindtra Dishonour of two cheques No 483805 & 539242 Bank for Rs. 5,00,00,000/- each drawn on ICICI Bank

DBS Bank Legal Notice Regarding recall of credit facility Limited for Rs. 2000 Million

Aditya Birla Notice regarding recall of outstanding credit Finance facility extended vide sanctioned letter dated Limited 30/05/2012

10. The Company has no accumulated losses at the beginning of the financial reporting period ending on 31st March 2014. It has incurred cash losses during the current and financial reporting period.

11. Based on our audit procedures and on the information and explanations given by the management, the Company has defaulted in repayment of dues to financial institution, and banks due to financial difficulty. The Company operates in a multiple banking system availing facility for various coated pipe supply projects from respective bankers. In this circumstances amount of overdue principal and overdue interest as on a particular date and corresponding period of delay is not quantifiable.

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

13. 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.

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

15. In our opinion and explanation given to us the Company has given Guarantees for loan taken by its subsidiaries from banks/financial institutions, but terms and conditions of such guarantees are not prejudicial to the interest of the Company.

16. Based on information and explanations given to us by the management, term loans were applied for the purpose for which the loans were obtained.

17. According to the information and explanations given to us and on an overall examination of the Balance Sheet and Cash flow statement of the Company, we report that funds raised on short-term basis have been used for short-term investment.

18. As per the Information & Explanation given to us, the Company has not made any preferential allotment of shares to parties and companies covered in the Register maintained under Section 301 of the Companies Act, 1956 during the period.

19. The Company has not raised any money by way of issue of Debentures, so no question arises of security or charges created in respect of Debentures.

20. The Company has not raised any money during the period by way of Share Capital. However, the Company has received share application of Rs. 18.00 crores which is pending allotment.

21. Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.

For Suresh C. Mathur & Co., Chartered Accountants, (Firm Regn. No. 000891N)

Sd/- Place: Mumbai (Suresh C. Mathur) Dated: 30th May, 2014 PARTNER M. No. 1276


Sep 30, 2013

Report on the Financial Statements

We have audited the accompanying Financial Statements of PSL Limited (''the Company'') which comprise the Balance Sheet as at 30th September, 2013, the Statement of Profit and Loss Account and the Cash Flow Statement for the period then ended and a summary of significant accounting policies and other explanatory information.

The Financial Year of PSL Limited has been extended by 6 months so as to comprise of 18 months, i.e. from 1st April 2012 to 30th September 2013. An application was filed by the company with Registrar of companies, Goa on 24th May, 2013 and the approval was given on 3rd June, 2013 for the extension of six months in the financial year 2012-13 to prepare its accounts as at 30th September 2013.

Management''s Responsibility for the Financial Statements

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 referred to in Section 211(3C) 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 misstatements, whether due to fraud or error.

Auditors'' 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 ICAI. Those Standards require that we comply with the ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the Financial Statements are free from material misstatements.

An audit involves performing procedures to obtain audit evidence about the amount and disclosures in the Financial Statements. The procedures selected depend on the auditor''s judgement, including the assessment of the risk of material misstatement of the Financial Statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company''s preparation and fair presentation of the Financial Statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company''s internal control. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the 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 the 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 true and fair view in conformity with the accounting principles generally accepted in India.

(i) in the case of the Balance Sheet, of the state of affairs of the Company as at 30th September, 2013.

(ii) in the case of the Statement of Profit and Loss, of the loss of the Company for the period ended on that date and

(iii) in the case of the Cash Flow Statement, of the Cash Flows of the Company for the period ended on that date.

Emphasis of Matter

1. We draw attention to:

Long Term Borrowings: Note No. 4 of Balance Sheet and Schedules.

a) Default In Payment to Banks

Due to financial difficulty the Company has defaulted payments to the bank during this period towards interest as well as principal amount effective September 2012. Subsequently the Company has sought a restructuring program from the bankers. The Company had filed an application before the CDR Cell on 6th March, 2013 along with the Flash Report. The CDR Cell has approved the restructuring package in its meeting held on August 2013, the effective date being August 24, 2013. The outstanding amount as on 01.01.2013 of both CDR member banks and non CDR banks were restructured through this restructuring package. The Company has received letter of approval on 23rd September, 2013 conveying the Approval of CDR Empowered Group letter dated 23rd August, 2013 on the restructuring package of the Company. The details of proposed CDR scheme are given in Annexure "I" of Notes to Accounts.

The Master Restructuring Agreement (MRA) is being drafted by Amarchand & Mangaldas & Suresh A. Shroff & Co. (AMSS) (Legal Counsel to the bankers) and is in the process of signing by the CDR member bankers as on this date of Balance Sheet. Non CDR member banks are yet to give their approval for this restructuring package and subsequent signature on the MRA.

Finance Cost: Note No. 26 of Balance Sheet and Schedules.

In terms of the approval (LOA) interest on the loans of CDR member banks and non CDR Banks shall be funded for a period of two years i.e. 01.01.2013 to 31.12.2014 as a fresh Term Loan namely FITL.

However, the Company has calculated interest @ 10.25% based on restructuring package and charged interest on the Loan outstanding of non CDR member banks as on January 01, 2013 for the period 9 months ending September 30, 2013. The Company has not accounted the interest payable as above for the loan outstanding of CDR member banks.

As per the general Accounting Standards, the company is required to account for the interest on the loans on accrual basis. However, the company has not provided for interest on the loans of the CDR member banks for the period from 01.01.2013 to 30.09.2013 amounting to ''163.36 crores.

The loss to the accounting period is understated to that extent. After accounting for the above, the loss for the accounting period will increase from ''595.25 crores to ''758.61 crores.

b) Employee Benefits and Expenses (Managerial Remuneration): Note No. 25

Pursuant to the provisions of Sections 198 and 309 of the Companies Act due to loss in the financial reporting period ending 30th September, 2013 the remuneration shall payable to the Directors should not exceed ''0.48 crores per annum each director to be calculated based on the effective capital. The excess remuneration paid to Directors for this period of 18 months is ''5.91 crores.

c) Investments in Subsidiaries. Note No.11 Non Current Investments.

Company''s exposure in the nature of long-term investments of ''301.76 Crores in its subsidiaries namely

i) PSL USA INC

ii) Pipeline Systems Mauritius

iii) PSL Corrosion Control Services Limited

iv) PSL Infrastructure and Ports Private Limited,

v) PSL Gas Distribution Private Limited.

On the basis of the book value of these companies, there is a diminution in the value of these investments, which in the opinion of the management is of temporary in nature.

d) Inventory, Current Assets : Note No. 15 to be read with Note No. 24

The closing inventory as on 30th September 2013 is ''1497.03 crores which includes non moving old stock of ''1047.63 crores. ICICI Bank Limited, the Monitoring Institution (MI) has appointed a CA firm as a stock auditor to verify and value the non moving old stock. The firm has submitted their draft report which was taken by the Company on records. As per this Audit Report the break-up is as under:

Particulars Amount in Crores

a) Old Coated Pipes at various Rs. 428.01 locations

b) Other very old coating Rs. 619.62 materials, sand, iron ore etc.

Total Amount Rs. 1047.63

The stock auditor has certified the value for item ''a'' above as ''400.33 crores and regarding item ''b'' valuation is not quantified by the stock auditor with a remark that the stocks were very old and proper records were not produced by the Company.

However the company has valued the total stock as ''1497.03 including the old non moving stock as ''1047.03 crores.

The Company has therefore revalued its opening inventory being diminution as on 01.04.2012 by an amount of ''514.00 Crores. This amount was reduced from the opening Reserves and Surplus of the Company.

e) Debtors: Note No. 16 of Current Assets.

i) The Company has Sundry Debtors of ''338.76 Crores as on 30th September, 2013.

ii) Less than Six Months 253.84 crores More than Six Months and 84.92 crores above.

iii) The Company has not produced confirmation of balances confirming the amount outstanding as on September 30, 2013. In the absence of adequate evidence and information made available to us supporting the recoverability of this amount, we are further unable to comment on the financial impact of this matter on the profit / loss for the period ended on 30th September, 2013.

f) Fixed Assets: Note No. 10 Tangible Assets.

The Company has capitalized the capital WIP to an extent of '' 318.88 crores towards Plant & Machinery and Buildings in all units. We were informed that the Plant and Machinery which has repaired & had outlived its utility and expenses were incurred for replacing vital parts in order to make the same functional and the expenditure was of such nature that it bought in to existence a new machinery altogether and consequently, there was benefit of enduring nature to the company even though technically no new asset come into existence.

Due to CDR, the depreciation for the last quarter has been calculated on the basis of the working of all units instead of the full quarter.

The company has revalued the factory lands. As per valuation report submitted by a valuer appointed by ICICI Bank Limited (MI) revaluation has been done by ''514.00 crores against the previous book value of '' 59.78 crores.

Our opinion is not qualified in respect of these matters.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2003 ("the Order") issued by the Central Government in terms of Section 227(4A) 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 it appears from our examination of those books.

c) The Balance Sheet, the statement of Profit & 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, the statement of Profit & Loss and the Cash Flow Statement comply with the Accounting Standards referred to in Section 211(3C) of the Act.

e) On the basis of written representations received from the directors as on 30th September, 2013 taken on record by the Board of Directors, none of the directors is disqualified as on 30th September, 2013 from being appointed as a director in terms of Section 274(1) (g) of the Act.

Referred to in paragraph 1 under the heading ''Report on Other Legal and Regulatory Requirements'' of our Report of even date on the financial statements for the year ended on 30th September, 2013 of PSL Limited

1. a) The company has maintained proper records showing full particulars including quantitative details and situation of the Fixed Assets.

b) A substantial portion of the fixed assets have been physically verified by the management during the period. In our opinion the frequency of verification is reasonable having regard to the size of the Company and the nature of its assets.

c) Fixed assets were disposed off during the period were not substantial. According to the information and explanation given to us, we are of the opinion that the disposal of the fixed assets has not affected the going concern status of the Company.

2. a) Subject to our remark in item no 1 in "Emphasis of Matter" the inventory has been physically verified by the management and the stock auditor during the period by the management at reasonable intervals. In our opinion, the frequency of verification is reasonable.

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

c) In our opinion and according to the information and explanation given to us, the Company is maintaining proper records of inventory and the same is certified by the management. The discrepancies noticed on verification between physical stocks and the book records have been properly dealt with in the books of account.

3. a) Company has not granted unsecured loans and Inter Corporate Deposits to companies covered in the Register maintained under Section 301 of the Act. Hence the provisions of clause (iii)(a), (b),

(c), (d) of paragraph 4 are not applicable to the Company.

b) The company has taken the unsecured loan from companies under the same management covered in the Register maintained under Section 301 of the Companies Act, 1956. The maximum amount involved in the current year amounted to '' 17.48 Crore and the period-end balance of loans taken from such parties is ''17.48 Crore.

c) Based on the information and explanations given to us, we are of the opinion that the rate of interest and other terms and conditions of loans taken from such parties covered in the Register maintained under Section 301 are not prima facie prejudicial to the interests of the Company.

d) According to the information and explanation given to us, the repayment of principal and interest has not been paid.

4. In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business for purchase of inventory and fixed assets and for the work done. However, the internal controls over accounting of consumption, wastages, material reconciliation, need further strengthening.

5. a) Based on the audit procedures applied by us and according to the information and explanations provided by the management, we are of the opinion that the particulars of contracts or arrangements that need to be entered into the register maintained under section 301 of the Companies Act, 1956 have so been entered.

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

6. The Company has not accepted any deposits from the public within the meaning of Section 58A and 58AA of the Act and the rules framed there under. Therefore, the provisions of Section 58A, 58AA and any other relevant provisions of the Companies Act, 1956 and the rules framed there under with regard to deposits accepted from the public are not applicable to the Company.

7. In our opinion, the Company has an internal audit system, commensurate with the size and nature of its business. However, the scope needs to be enlarged to cover project related cost-to-complete workings and certain areas of head office accounting.

8. We have broadly reviewed the books of account maintained by the Company pursuant to the rules made by the Central Government of India, regarding the maintenance of cost records under clause (d) of the sub-section (1) of Section 209 of the Act and are of the opinion that''s prima facie, the prescribed accounts and records have been maintained. We have, however not made a detailed examination of the records with a view to determine whether they are accurate or complete. The Cost Audit is completed up to the period ended 31st March 2012.

9. According to the records of the Company, the Company is regular in depositing undisputed Statutory dues including with-holding of taxes, Provident Fund, Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Custom Duty, Excise Duty, Service Tax, Cess and other Statutory dues applicable to it with the appropriate authorities, however, there is some delay in depositing Govt. dues due to financial difficulties. According to the information and explanations given to us, no undisputed amounts payable in respect of Income Tax, Wealth Tax, Sales Tax, Customs Duty, Service Tax, Excise Duty and Cess were outstanding, at the financial reporting period ending on 30th September 2013 for a period of more than six months from the date they became payable.

As on 30th September, 2013 according to the records of the Company the following are the particulars of disputed dues on account of Excise duty, Customs, Income Tax, Service Tax, Sales Tax & DGFT and have not been deposited.

Sl. Amount Facts of the Period Forum where No. under case which the the dispute is Dipute amount pending (Rs.Lacs) relates EXCISE DOTY

1. 25 Payment of 2004-05- Tribunal, Cenvat credit 06 Ahmedabad - on coating of Obtained Stay inputs

2. 3752 Demand 2006 Remanded back of duty on by Tribunal exempted Admedabad, orders Received

3. 1467 Duty on Fusion 2008 Transferred to Bonded Epoxy Tribunal, Mumbai on Nov 12

4. 8 Duty on Fusion 2010 Commissioner Bonded Epoxy (Appeals), Coating Chennai

5. 3 Demand of Appellate differential Tribunal, Excise Duty Chennai- Obtained Stay Order

6. 34 Demand of 2010 Transferred to Cenvat Credit Tribunal, Mumbai on Nov 12

7. 10 Relating to 2010 Appellate interest on Tribunal, incorrect Bangalore Cenvat Credit

8. 0.45 Excess Cenvat 2012 Asstt. Credit taken Commissioner, Vapi, Daman

9. 9 Goods cleared 2012 Addl. without Commissioner of payment of Central Excise, Excise Duty Jaipur

10. 18 Cenvat Credit 2012 Addl. availed on Commissioner, Capital Goods Daman

11. 2 Wrong 2012 Asstt. availment of Commissioner of Cenvat Credit Central Excise, Daman

12. 54 Demand of 2012 Commissioner, Central Excise Central Excise, Duty Ahmedabad

13. 0.32 Demand of 2013 Dy. Central Excise Commissioner, Duty Central Excise, Vizag

14. 181 Demand for 2013 Dy. non payment Commissioner, of duty on Central Excise, transportation Vizag charges

15. 202 Demand of 2013 Commissioner, Central Excise Central Excise, Duty Rajkot

16. 57 Demand of 2013 Commissioner, Central Excise Central Excise, Duty Rajkot

CUSTOMS / DGFT

1. 871 Demand for 2012 Appeal with differential CESTAT, Mumbai custom duty is pending

2. 18900 Demand of 2012 Appeal with duty & penalty CESTAT, Mumbai is pending

3. 18900 Demand for 2013 Add. DGFT duty

SERVICE TAX

1. 45 Tax on 2008 Tribunal, Chennai construction of Mall

2. 209 BAS 2009 Commissioner of Central Excise, Puducherry

3. 2 Demand 2009 Asstt. for Interest Commissioner, Liability Service Tax, Vizag

4. 15 Refund of 2009 Asstt. excess amount Commissioner, paid Service Tax, Vizag

5. 2 Demand of 2010 Transferred to Service Tax Tribunal, Mumbai BAS on Nov 12

6. 153 Service Tax 2010 Commissioner on GTA not of Customs & considered Central Excise, Rajkot

7. 32 Service Tax on 2011 Addl. ECB Loan Commissioner of Service Tax, Churchgate

8. 31 Denial of 2011 Commissioner, Credit of Jaipur Service Tax on Outward Transport

9. 6 Cenvat Credit 2012 Addl. availed on Commissioner input services of Central not covered Excise, Vizag-I, Commissioner

10. 21 Wrong 2012 Commissioner of availment of Central Excise & Cenvat Credit Customs, Rajkot

11. 30 Wrong 2013 Jt. Commissioner availment of Cenvat Credit

SALES TAX

1. 43 Non payment 2004 High court of A.P. of composition tax

2 1200 Demand of 2005 High court of A.P. duty

CASES FILED AGAINST THE COMPANY

Financial Institution Purpose

Syndicate Notice u/s 138 of NI Act, 1881 regarding Bank Dishonour of the cheque No 355113 for '' 12,50,00,000/- drawn on State Bank Of India

Syndicate Notice u/s 138 of NI Act, 1881 regarding Bank Dishonour of the cheque No 355114 for '' 12,50,00,000/- drawn on State Bank of India

Kotak Notice u/s 138 of NI Act, 1881 regarding Mahindtra Dishonour of two cheques No 753765 & 753766 Bank for '' 5,00,00,000/- each drawn on ICICI Bank

Kotak Notice u/s 138 of NI Act, 1881 regarding Mahindtra Dishonour of two cheques No 483804 & 539241 Bank for '' 5,00,00,000/- each drawn on ICICI Bank

Kotak Notice u/s 138 of NI Act, 1881 regarding Mahindtra Dishonour of two cheques No 483805 & 539242 Bank for '' 5,00,00,000/- each drawn on ICICI Bank

DBS Bank Legal Notice Regarding recall of credit facility Limited for ''2000 Million

Aditya Birla Notice regarding recall of outstanding credit Finance facility extended vide sanctioned letter dated Limited 30/05/2012

10. The Company has no accumulated losses at the beginning of the financial reporting period ending on 30th September 2013. However, it has incurred cash losses during the current and financial reporting period.

11. Based on our audit procedures and on the information and explanations given by the management, The Company has defaulted in repayment of dues to financial institution, and banks due to financial difficulty. The Company operates in a multiple banking system availing facility for various coated pipe supply projects from respective bankers. In this circumstances amount of overdue principal and overdue interest as on a particular date and corresponding period of delay is not quantifiable.

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

13. 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.

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

15. In our opinion and explanations given to us the Company has given Guarantees for loan taken by its subsidiaries from banks/financial institutions, but terms and conditions of such guarantees are not prejudicial to the interest of the Company.

16. Based on information and explanations given to us by the management, term loans were applied for the purpose for which the loans were obtained.

17. According to the information and explanations given to us and on an overall examination of the Balance Sheet and Cash Flow Statement of the Company, we report that funds raised on short-term basis have been used for long- term investment due to financial crunch.

18. As per the Information & Explanations given to us, the Company has not made any preferential allotment of shares to parties and companies covered in the Register maintained under Section 301 of the Companies Act, 1956 during the year.

19. The Company has not raised any money by way of issue of Debentures, so no question arises of security or charges created in respect of Debentures.

20. The Company has not raised any money during the period by way of Share Capital. However, the Company has received share application of ''11.12 crores which is pending allotment.

21. Based upon the audit procedures performed for the purpose of reporting the true and fair view of the Financial Statements and as per the information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.

For Suresh C. Mathur & Co.,

Chartered Accountants,

(Firm Regn. No. 000891N)

Sd/-

(Suresh C. Mathur)

Place: Mumbai Partner

Dated: 28th November, 2013 M. No. 1276


Mar 31, 2012

1. We have audited the attached Balance Sheet as at March 31, 2012 and also the Profit and Loss account and the Cash Flow statement for the year ended on that date annexed thereto. These Financial Statements are the responsibility of the 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 auditing standards generally accepted in India. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the Financial Statements are free of material mis-statement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Financial Statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor's Report) Order, 2003 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 & 5 of the said Order.

4. Further to our comments in the annexure referred to above, we report that:

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

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

III. The Balance Sheet, Profit and Loss account and 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 the written representations received from the Directors, as on March 31, 2012 and taken on record by the Board of Directors, we report that none of the Directors is disqualified as on March 31, 2012 from being appointed as a Director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

VI. In our opinion and to the best of our information and according to the explanations given to us, they said accounts read together with the significant accounting policies in notes appearing thereon give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India;

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

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

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

1. The Company has maintained proper records showing full particulars, including quantitative details at factory level. Consolidation of the Assets including quantity & value is under progress at the Corporate Office. In accordance with the phased programme for verification of fixed Assets, certain items of fixed Assets were physically verified by the management during the year and no material discrepancies were noticed on such verification.

2. The inventory of the Company has been physically verified by the management during the year. In our opinion, the frequency of verification is reasonable. In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventory followed by the management were found reasonable and adequate in relation to the size of the Company and the nature of its business. On the basis of our examination of records of inventory, in our opinion, the Company has maintained proper records of inventory and the discrepancies noticed on physical verification between the physical stocks and the book records were not material in relation to the operations of the Company.

3. According to information and explanation given to us the company has not granted any loans secured or unsecured to Companies, Firms or other parties which are of the nature required to be covered under Section 301 of the Companies Act 1956. However the company has given Rs. Nil (Previous Year Rs. 813.60 lacs) as interest free advance to wholly owned subsidiaries during the year, which is repayable on demand.

4. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business for the purchase of inventory, fixed Assets and for the sale of goods. Further, on the basis of our examination and according to the information and explanations given to us, we have neither come across nor have we been informed of any instance of major weaknesses in the aforesaid internal control procedures.

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

6. The Company has not accepted any deposits from the public.

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

8. We have broadly reviewed the books of account maintained by the Company in respect of products where, pursuant to the Rules made by the Central Government, the maintenance of cost records has been prescribed under Section 209 (1)(d) of the Companies Act, 1956. We are of the opinion that prima facie the prescribed accounts and records have been maintained. We have not, however made a detailed examination of the records with a view to determining whether they are accurate or complete.

9. According to the records of the Company, the Company is regular in depositing undisputed Statutory dues including with-holding of taxes, Provident Fund, Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Custom Duty, Excise Duty, Service Tax, Cess and other Statutory dues applicable to it with the appropriate authorities. According to the information and explanations given to us, no undisputed amounts payable in respect of Income Tax, Fringe Benefit Tax, Wealth Tax, Sales Tax, Customs Duty, Service Tax, Excise Duty and Cess were outstanding, at the yearend for a period of more than six months from the date they became payable.

As on March 31, 2012 according to the records of the Company the following are the particulars of disputed dues on account of Excise duty , Customs, Income Tax, Service Tax and Sales Tax that have not been deposited.

Sr. Nature of Amount Period to Forum where No Dues Under Which the the dispute is Dispute Amount pending (Rs. in Lacs) Relates

1. Central 25 2004-05-06 Tribunal, Excise Ahmadabad

2 -- do -- 38 2006 Remanded back by Tribunal, Ahmadabad and pending with Central Excise Commissioner, Rajkot

3. -- do -- 1467 2008 Tribunal,

Ahmadabad

4. -- do -- 1452 2008 Commissioner

Rajkot

5. -- do -- 8 2010 Jt.Commissioner

C.Ex.Puducherry

6. -- do -- 3 2011 Commissioner

Central Excise, Puducherry

7. -- do -- 34 2010 Appellate

Tribunal

Ahmadabad

8. -- do -- 10 2010 Appellate

Tribunal

Ahmadabad

9. -- do -- 35 2011 Addl.Comm.

C.Ex. Rajkot

10. Customs 179 2011 Commissioner

of Customs Kandla

11. -- do -- 127 2011 Commissioner

of Customs Kandla

12. -- do -- 309 2011 Commissioner

of Customs Kandla

13. -- do -- 131 2011 Commissioner

of Customs,

Appeal

Ahmadabad 14. -- do -- 13 2011 Commissioner

of Customs,

Appeal

Ahmadabad

15. Service Tax 45 2008 Tribunal

Chennai

16. -- do -- 209 2009 Commissioner

C.Ex.

Puducherry

17. -- do -- 2 2009 Asst.

Commissioner Service Tax, Vizag

18. -- do -- 15 2009 Asst.

Commissioner Service Tax, Vizag

19. -- do -- 2 2010 Asst.

Commissioner

S.Tax , Rajkot

20. -- do -- 155 2010 Commissioner

of Customs &

C.Ex Rajkot

21. -- do -- 32 2011 Addl.

Commissioner of S.Tax, Churchgate

22. -- do -- 31 2011 Commissioner

Jaipur

23. -- do -- 6 2012 Addl. Commissioner of C.Ex.Vizag

24. -- do -- 21 2012 Commissioner

of C.Ex & Customs. Rajkot

25. Sales Tax 43 2000-01-02 Pending in AP

High Court

26. -- do -- 1400 1999-2000 Tribunal

Ahmadabad

27. -- do -- 1200 2003-04-05 AP High Court

28. Income Tax 503.90 2005- 2006 Commissioner

of Income Tax (Appeal) & ITAT

29. -- do -- 257.35 2009-2010 Commissioner

of Income Tax (Appeal)

10. The Company has no accumulated losses at the end of the financial year and it has not incurred any cash losses in the current and immediately preceding financial year.

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

11. The Company does not have any outstanding Debentures.

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

13. 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.

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

15. In our opinion and explanation given to us the Company has given Guarantees for loan taken by its subsidiaries from banks/financial institutions.

16. Based on information and explanations given to us by the management, term loans were applied for the purpose for which the loans were obtained.

17. According to the information and explanations given to us and on an overall examination of the Balance Sheet and Cash flow statement of the Company, we report that no funds raised on short-term basis have been used for long-term investment and no long-term funds have been used to finance short-term Assets (excludes Long Term working capital).

18. The Company has not made any preferential allotment of shares to parties and companies covered in the Register maintained under Section 301 of the Companies Act, 1956 during the year.

19. The Company has not raised any money by way of issue of Debentures.

20. The Company has not raised any money during the year by way of Share Capital.

21. Based upon the audit procedures performed for the purpose of reporting the true and fair view of the Financial Statements and as per the information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.

For & on behalf of

Suresh C. Mathur & Company

Chartered Accountants

Firm Registration No. 000891N

Sd/-

Suresh C. Mathur

Place : Mumbai Partner

Date : 29th May, 2012 Membership No.: 1276


Mar 31, 2011

1. We have audited the attached Balance Sheet as at March 31, 2011 and also the Profit and Loss account and the Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the 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 auditing standards generally accepted in India. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material mis-statement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Financial Statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor's Report) Order, 2003 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 & 5 of the said Order.

4. Further to our comments in the annexure referred to above, we report that:

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

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

III. The Balance Sheet, Profit and Loss Account and 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 the written representations received from the Directors, as on March 31, 2011 and taken on record by the Board of Directors, we report that none of the Directors is disqualified as on March 31, 2011 from being appointed as a Director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

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 significant accounting policies in schedule "Q" and notes appearing thereon give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India;

(a) In the case of the Balance Sheet, of the state of affairs of the company as at March 31, 2011;

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

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

ANNEXURE REFERRED TO IN PARAGRAPH 3 OF OUR REPORT OF EVEN DATE

1. The Company has maintained proper records showing full particulars, including quantitative details at factory level. Consolidation of the Assets including quantity & value is under progress at the Corporate Office. In accordance with the phased programme for verification of fixed assets, certain items of fixed assets were physically verified by the management during the year and no material discrepancies were noticed on such verification.

2. The inventory of the Company has been physically verified by the management during the year. In our opinion, the frequency of verification is reasonable. In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventory followed by the management were found reasonable and adequate in relation to the size of the Company and the nature of its business. On the basis of our examination of records of inventory, in our opinion, the Company has maintained proper records of inventory and the discrepancies noticed on physical verification between the physical stocks and the book records were not material in relation to the operations of the Company.

3. According to information and explanation given to us the company has not granted any loans secured or unsecured to Companies, Firms or other parties which are of the nature required to be covered under Section 301 of the Companies Act, 1956. However the company has given Rs. 813.60 lacs as interest free advance to wholly owned subsidiary during the year, which is repayable on demand.

4. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business for the purchase of inventory, Fixed Assets and for the sale of goods. Further, on the basis of our examination and according to the information and explanations given to us, we have neither come across nor have we been informed of any instance of major weaknesses in the aforesaid internal control procedures.

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

6. The Company has not accepted any deposits from the public.

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

8. We have broadly reviewed the books of account maintained by the Company in respect of products where, pursuant to the Rules made by the Central Government, the maintenance of cost records has been prescribed under Section 209 (1)(d) of the Companies Act, 1956. We are of the opinion that prima facie the prescribed accounts and records have been maintained. We have not, however made a detailed examination of the records with a view to determining whether they are accurate or complete.

9. According to the records of the Company, the Company is regular in depositing undisputed statutory dues including With-holding of Taxes, Provident Fund, Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Custom Duty, Excise Duty, Service Tax, Cess and other statutory dues applicable to it with the appropriate authorities. According to the information and explanations given to us, no undisputed amounts payable in respect of Income Tax, Wealth Tax, Sales Tax, Customs Duty, Service Tax, Excise Duty and Cess were outstanding, at the year end for a period of more than six months from the date they became payable.

As on March 31, 2011 according to the records of the Company the following are the particulars of disputed dues on account of Excise duty, Customs, Income Tax, Service Tax and Sales Tax that have not been deposited.

Sr. Nature of Amount Period to Forum where No. Dues Under Which the the dispute is Dispute Amount pending (Rs. in Lacs) Relates

1. Central 25 2004-05-06 Tribunal, Excise Ahmedabad

2. - do - 3752 2006 Remanded back by Tribunal, Ahmedabad and pending with Central Excise Commissioner, Rajkot

3. - do - 1467 2008 Tribunal, Ahmedabad

4. - do - 1452 2008 Commissioner, Rajkot

5. - do - 8 2010 Commissioner (Appeals), Pondicherry

6. - do - 34 2010 Addl. Commissioner Central Excise, Rajkot

7. - do - 9 2010 Commissioner Appeals, Vizag

8. - do - 3 2011 Commissioner Central Excise, Vizag

9. Customs 9 2010 Dy. Commissioner of Customs, Kandla

10. - do - 4 2010 Dy. Commissioner of Customs, Kandla

11. Service Tax 45 2008 Tribunal, Chennai

12. - do - 10 2009 Jt.Commisioner Central Excise Puducherry

13. - do - 209 2009 Commissioner Central Excise Puducherry

14. - do - 2 2009 Commissioner Appeals, Vizag

15. - do - 15 2009 Commissioner Appeals, Vizag

16. - do - 2 2010 Asst. Commissioner Service Tax, Rajkot

17. - do - 155 2010 Commissioner, Rajkot

18. - do - 49 2010 Addl. Commssioner Central Excise, Service Tax Commissioner, Rajkot

19. Sales Tax 43 2000-01 Pending in AP High Court

20. - do - 14 1999-2000 Tribunal, Ahmedabad

21. - do - 1200 2003-04-05 AP High Court

22. Income Tax 700 2005- 2006 Commissioner of Income Tax (Appeal ) & ITAT

23. Income Tax 74.91 2008-2009 Commissioner of Income Tax (Appeal)

10. The Company has no accumulated losses at the end of the Financial Year and it has not incurred any cash losses in the current and immediately preceding Financial Year.

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

11. The Company does not have any outstanding Debentures.

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

13. 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.

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

15. In our opinion and explanation given to us the Company has given Guarantees for loan taken by its subsidiaries from Banks/Financial Institutions.

16. Based on information and explanations given to us by the management, term loans were applied for the purpose for which the loans were obtained.

17. According to the information and explanations given to us and on an overall examination of the Balance Sheet and Cash flow statement of the Company, we report that no funds raised on short-term basis have been used for long-term investment and no long-term funds have been used to finance short-term assets (excludes Long Term working capital).

18. The Company has not made any preferential allotment of shares to parties and companies covered in the Register maintained under Section 301 of the Companies Act, 1956 during the year.

19. The Company has not raised any money by way of issue of Debentures.

20. The Company has not raised any money during the year by way of Share Capital.

21. Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit. For & on behalf of

Suresh C. Mathur & Company

Chartered Accountants

Sd/-

SURESH C. MATHUR

Place: Mumbai Partner

Date : 24th June, 2011 Membership No.1276












Mar 31, 2010

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

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

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

4. Further to our comments in the annexure referred to above, we report that:

(i) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the 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 the written representations received from the Directors, as on March 31, 2010 and taken on record by the Board of Directors, we report that none of the Directors is disqualified as on March 31, 2010 from being appointed as a Director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956.

(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 significant accounting policies in schedule "Q" and notes appearing thereon give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India;

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

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

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

ANNEXURE REFERRED TO IN PARAGRAPH 3 OF OUR REPORT OF EVEN DATE

1. The Company has maintained proper records showing full particulars, including quantitative details at factory level. Consolidation of the Assets including quantity & value is under progress at the Corporate Office. In accordance with the phased programme for verification of fixed assets, certain items of fixed assets were physically verified by the management during the year and no material discrepancies were noticed on such verification.

2. The inventory of the Company has been physically verified by the management during the year. In our opinion, the frequency of verification is reasonable. In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventory followed by the management were found reasonable and adequate in relation to the size of the Company and the nature of its business. On the basis of our examination of records of inventory, in our opinion, the Company has maintained proper records of inventory and the discrepancies noticed on physical verification between the physical stocks and the book records were not material in relation to the operations of the Company.

3. According to information and explanation given to us the company has not granted any loans secured or unsecured to Companies, Firms or other parties which are of the nature required to be covered under Section 301 of the Companies Act 1956. However the company has given Rs. 605.25 lacs as interest free advance to a wholly owned subsidiary during the year, which is repayable on demand.

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

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

6. The Company has not accepted any deposits from the public.

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

8. We have broadly reviewed the books of account maintained by the Company in respect of products where, pursuant to the Rules made by the Central Government, the maintenance of cost records has been prescribed under Section 209 (1)(d) of the Companies Act, 1956. We are of the opinion that prima facie the prescribed accounts and records have been maintained. We have not, however made a detailed examination of the records with a view to determining whether they are accurate or complete.

9. According to the records of the Company, the Company is regular in depositing undisputed statutory dues including with-holding of taxes, Provident Fund, Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Custom Duty, Excise Duty, Service Tax, Cess and other Statutory Dues applicable to it with the appropriate authorities. According to the information and explanations given to us, no undisputed amounts payable in respect of Income Tax,

Fringe Benefit Tax, Wealth Tax, Sales Tax, Customs Duty, Service Tax, Excise Duty and Cess were outstanding, at the year end for a period of more than six months from the date they became payable.

As on March 31,2010, according to the records of the Company the following are the particulars of disputed dues on account of Excise Duty, Customs, Income Tax, Service Tax and Sales Tax that have not been deposited.

Sr. Nature of Amount Period to Forum where the dispute No. Dues Under Which the pending Dispute Amount (Rs. in Lacs) Relates



1 Central Excise 25 2004-2005-2006 Tribunal, Ahmedabad

2 - do - 3752 2006 Tribunal, Ahmedabad

3 - do - 1467 2008 Commissioner Rajkot

4 - do - 1452 2006 Commissioner Rajkot

5 - do - 8 2010 Jt. Commissioner

C.Ex.Puducherry

6 Customs 179 2009 DRI

7 - do - 127 2009 Commissioner of

Customs, Kandla

8 Service Tax 45 2008 Tribunal, Chennai

9 - do - 10 2009 Jt.Commissioner C.Ex.

Puducherry

10 - do - 209 2009 Commissioner C.Ex.

Puducherry

11 - do - 66 2009 Asst. Commissioner,

Service Tax, Rajkot

12 - do - 2 2009 Asst. Commissioner,

Service Tax, Vizag

13 - do - 15 2009 Asst. Commissioner,

Service Tax, Vizag

14 Sales Tax 43 2000-01 Pending in AP High

Court

15 - do - 14 1999-2000 Tribunal, Ahmedabad

16 - do - 1200 2003-04-05 AP High Court

17 Income Tax 723 2005-2006 Commissioner of Income Tax (Appeal)

18 - do - 154 2006-2007 Commissioner of

Income Tax (Appeal) & ITAT

19 - do - 478 2007-2008 Commissioner of

Income Tax (Appeal)





10. The Company has no accumulated losses at the end of the financial year and it has not incurred any cash losses in the current and immediately preceding financial year.

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

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

13. 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.

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

15. Based on information and explanations given to us by the management, term loans were applied for the purpose for which the loans were obtained.

16. According to the information and explanations given to us and on an overall examination of the Balance Sheet and Cash Flow statement of the Company, we report that no funds raised on short-term basis have been used for long-term investment and no long-term funds have been used to finance short-term assets (excludes Long Term working capital).

17. The Company has not made any preferential allotment of shares to parties and Companies covered in the Register maintained under Section 301 of the Companies Act, 1956 during the year.

18. The Company has raised Rs. 10,75,00,000/- (Rupees Ten Crore Seventy Five Lakhs only) as share capital during the year by way of preferential allotment to private investors.

19. Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.

For & on behalf of

Suresh C. Mathur & Company

Chartered Accountants



Sd/- Suresh C. Mathur

Place : Mumbai Partner

Date : 29th May, 2010 Membership No.: 1276



 
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