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Auditor Report of Steel Exchange India Ltd.

Mar 31, 2015

We have audited the accompanying financial statements of STEEL EXCHANGE INDIA LIMITED ("the company"), which comprise the Balance Sheet as at March 31,2015, the Statement of Profit and Loss, 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 management and Board of Directors of the company are responsible for the matters stated in section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these financial statements 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 includes maintenance of adequate accounting records in accordance with the provision of the Act for safeguarding of the assets of the Company and for preventing and detecting the 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 misstatement, whether due to fraud or error.

Auditors' Responsibility

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

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

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

Opinion

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

a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31,2015;

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

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

Report on Other Legal and Regulatory Requirements

As required by the Companies (Auditor's Report) Order, 2015 ("the Order") issued by the Central Government of India in terms of sub-section (11) of section 143 of the act, we give in the Annexure a statement on the matters specified in paragraphs 3 and 4 of the Order to the extent applicable.

As required by section 143(3) of the Act, we further report that:

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

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

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

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

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

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

(i) The Company does not have any pending litigations which would impact its financial position.

(ii) The Company did not have any long-term contracts including derivative contracts; as such the question of commenting on any material foreseeable losses thereon does not arise.

(iii) There has been an occasion in case of the company during the year under report to transfer any sums to the Investor Education and Protection Fund.

Annexure referred to in paragraph 7 Our Report of even date to the members of STEEL EXCHANGE INDIA LIMITED on the accounts of the company for the year ended 31st March'2015

On the basis of such checks as we considered appropriate and according to the information and explanations given to us

during the course of our audit, we report that:

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

(b) The company has a regular programme of physical verification of its fixed assets by which fixed assets are verified in a phased manner over a period of three years. In accordance with this programme, certain fixed assets were verified during the year and no material discrepancies were noticed on such verification. In our opinion, this periodicity of physical verification is reasonable having regards to the size of the company and the nature of its assets;

(ii) (a) The inventories have been physically verified by the management during the year at reasonable intervals.

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

(c) The company has maintained proper records of inventories and the discrepancies noticed on physical verification of inventories as compared to book records were not material.

(iii) In our opinion, the Company has not granted any loans but taken loans from companies, firms or other parties covered in the Register, maintained under Section 189 of the Companies Act, 2013; The maximum amount involved during the year Rs.20,00,00,000/- and the year-end balance of loans taken for such parties were Rs.20,00,00,000/-

(iv) In our opinion and according to the information and explanations given to us, there is adequate internal control system commensurate with the size of the company and the nature of its business, for the purchase of fixed assets and for the sale of services. Further, on the basis of our examination of the books and records of the company and according to the information and explanations given to us, no major weakness has been noticed or reported.

(v) In our opinion and according to the information and explanation given to us, the company has not accepted any deposits from the public covered under section 73 to 76 of the Companies Act, 2013.

(vi) In our opinion and according to the information and explanation given to us, the Central Government has not prescribed the maintenance of cost records under sub-section (1) of Section 148 of the Companies Act, 2013. We have broadly reviewed the Cost Records maintained by the Company pursuant to the Company's (Cost Records and Audit) Rules, 2014 prescribed by the Central Government and are of the opinion that prima facie the prescribed cost records have been maintained. However, we have not carried out a detailed examination of the cost records with a view to determine whether they are accurate or complete.

(vii) (a) According to the information and explanations given to us and on the basis of our examination of the records of the company, amounts deducted/accrued in the books of account in respect of undisputed statutory dues including Provident Fund, Income Tax, Sales Tax, Wealth Tax, Service Tax, Duty of Customs, Value added tax, cess and other material statutory dues have been regularly deposited during the year by the company with the appropriate authorities. As explained to us, the company did not have any dues on account of employees' state insurance and duty of excise.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of Provident Fund, Income Tax, Wealth Tax, Service Tax, Sales Tax, Duty of Customs, Excise Duty, Value added tax and Other material statutory dues were in arrears as at March 31,2015 for a period of more than six months from the date they became payable.

(c) According to the information and explanations given to us, there are no material dues of Wealth tax, Duty of Customs and Cess which have not been deposited with the appropriate authorities on account of any dispute. However, according to information and explanations given to us, the following dues of income tax, sales tax, service tax and Value added tax have not been deposited by the company on account of disputes;

Nature Period Amount in Name of the Statute of Dues which the (Rs.) amount relates

CST Act Sales Tax 2003-04 22,43,895/- 2004-05 28,27,172/-

CST Act Sales Tax 2005-06 47,85,829/- AP VAT Act 2011-12 11,57,334/-

AP VAT Act Sales Tax 2011-12 13,94,858/-



AP VAT Act Sales Tax 2013-14 31,41,694/-



Customs Act Customs Duty 2003-04 54,35,648/-



Customs Act Customs Duty 2012-13 67,38,452/-

Central Excise Act, Excise Duty 2007-08 86,30,228/- 2008-09 1,91,708/- 2009- 10 to 2011-12 45,89,094/-

Central Excise Act Excise Duty 2009-10 2,14,21,207/- 2010- 11 & 2011-12 2009- 10 3,893/-

Central Excise Act Excise Duty 2010-11 14,35,189/-



Buildings and Other Cess 2010-11 1,27,98,000/- Construction Workers Welfare Cess Act, 1996

AP Registration & Stamp duty 2008-09 44,99,900/- Stamps Act

AP Electricity & Cross Subsidy 2009-10 97,56,021/- Regulatory Authority -EPDC L

Name of the Statute Deposits/ Forum where the dispute is Paid in pending with (Rs.)

CST Act 2,80,487/- CTO,Gajuwaka, 3,53,397/- Visakhapatnam

CST Act 11,96,457/- STAT-Visakhapatnam. AP VAT Act 2,89,334/-

AP VAT Act 3,48,715/- The Hon'ble High Court of Telangana & Andhra Pradesh

AP VAT Act 7,85,424/- Appellate Deputy Commissioner, Visakhapatnam

Customs Act NIL Hon'ble High Court of Telangana & Andhra Pradesh

Customs Act NIL CESTAT-Bangalore

Central Excise Act, 10,00,000/- CESTAT-Bangalore NIL

NIL

Central Excise Act 50,00,000/- Commissioner of Central Excise, Visakhapatnam. NIL

Central Excise Act NIL Hon'ble High Court of Telangana & Andhra Pradesh

Buildings and Other NIL Hon'ble High Court of Construction Telangana & Andhra Pradesh Workers Welfare Cess Act, 1996

AP Registration & NIL The District Registrar, Stamps Act Vizianagaram.

AP Electricity & NIL Hon,ble High Court of Telangana Regulatory Authority & AP- Interim Relief Order -EPDC L

(d) According to the information and explanations given to us the amounts which were required to be transferred to the Investor Education and Protection Fund in accordance with the relevant provisions of the Companies Act, 1956 (1 of 1956) and rules there under has not been transferred to such fund within time.

(viii) The Company has accumulated losses at the end of the financial year and has not incurred cash losses in the financial year and in the immediately preceding financial year.

(ix) In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of its dues to banks or financial institution or debenture holders.

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

(xi) In our opinion, the term loans have been applied for the purpose for which they were raised.

(xii) According to the information and explanations given to us, no material fraud on or by the company has been noticed or reported during the course of our audit.

For Pavuluri & Co Chartered Accountants Firm Registration No: 012194S

CA. P.A.RAMAIAH Camp: Visakhapatnam Partner Date: 09.05.2015 M.No.: F-203300




Mar 31, 2014

We have audited the accompanying financial statements of Steel Exchange India Limited ("the Company"), which comprise the Balance Sheet as at March 31,2014, the Statement of Profit and Loss and Cash Flow Statement for the year then ended and a summary of significant accounting policies and other explanatory information, which we have signed under reference to this report.

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 Sec 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 misstatement, 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 and other applicable authoritative pronouncements issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatements.

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

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

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

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

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

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

Report on Other Legal and Regulatory Requirements

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

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

d) In our opinion, the Balance Sheet, the Statement of Profit and 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 Sec 133 of Companies Act 2013.

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

ANNEXURE TO INDEPENDENT AUDITORS1 REPORT

Referred to in Paragraph 1 under the heading of "report on other legal and regulatory requirements" of our report of even date

1. In respect of its fixed assets:

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

(b) As explained to us, all the assets have not been physically verified by the management during the year but there is a regular programme of verification which, in our opinion, is reasonable having regard to the size of the company and the nature of its business. No material discrepancies were noticed on such physical verification.

(c) According to the information and explanations furnished to us, the Company has not disposed of a substantial part of its fixed assets during the year and the going concern status of the company is not affected.

2. In respect of its inventories:

(a) The inventories have been physically verified by the management during the year at reasonable intervals.

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

(c) The company has maintained proper records of inventories and discrepancies noticed on physical verification of inventories as compared to book records were not material.

3. In respect of the loans, secured or unsecured, granted or taken by the Company to/from companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956:

(a) The Company has granted loans to two parties covered in the Register maintained under Section 301 of the Companies Act, 1956. The maximum amount outstanding at any time during the year was Rs. 10.22 Crores and year end balance is Nil.

(b) In our opinion and according to the information and explanation given to us, the rate of interest and other terms and conditions of the loans given by the company, are not prima facie not prejudicial to the interest of the company.

(c) The parties have been regular in payment of interest and there is no stipulation for the repayment of principal and interest.

(d) There is no overdue amount of loans granted to companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956.

(e) According to the information and explanation given to us, the company has not taken any loans during the 9 months period from companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Accordingly, Paragraph 4 (iii)(e)(f)(g) of the Order is not applicable.

4. In our opinion, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business with regard to purchase of inventories, fixed assets and for the sale of goods. During the course of our audit, we have not observed any continuing failure to correct the weaknesses in internal control system.

5. In respect of the contracts or arrangements referred to in Section 301 of the Companies Act, 1956:

(a) According to the information and explanation given to us we are of the opinion, that the transactions that need to be entered into the register maintained under section 301 of the Companies Act, 1956 have been so entered.

(b) In our opinion and according to the information and explanation 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 aggregating during the year to Rs. 5,00,000/- or more in respect of any party have been made at prices which are reasonable having regard to prevailing market prices at the relevant time.

6. In our opinion and according to the information and explanation given to us, the Company has not accepted any deposits as defined under section 58A of the Companies Act'' 1956. Therefore, the provisions of Clause (vi) of paragraph 4 of the Order are not applicable to the Company.

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

8. We have broadly reviewed the Cost Records maintained by the Company pursuant to the Company''s (Cost Accounting Records) Rules 2011 prescribed by the Central Government for maintenance of cost records under section 209 (1) (d) of the Companies Act, 1956 and are of the opinion that prima facie the prescribed cost records have been maintained. However, we have not carried out a detailed examination of the cost records with a view to determine whether they are accurate or complete.

9. In respect of Statutory Dues:

(a) According to the books and records of the company, the company is regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees'' State Insurance, Income Tax, Sales Tax, Customs Duty, Excise Duty, Cess and other statutory dues with appropriate authorities. According to the information and explanations given to us, there are no undisputed amounts payable in respect of such statutory dues which have remained outstanding as at 31st March, 2014 for a period exceeding six months from the date they became payable.

(b) The disputed statutory dues that have not been deposited on account of disputed matters pending before appropriate authorities are as under:

Name of the Statute Nature Period Amount in of Dues which the Rs. amount relates

CST Act Sales Tax 2002-03 50,71,067/- 2004-05

CST Act Sales Tax 2005-06 52,20,506/- 2006-07 AP VAT Act Sales Tax 2011-12 13,94,858/- AP VAT Act Sales Tax 2013-14 31,41,694/- Customs Act Customs duty 2003-04 54,35,648/- Customs Act Customs duty 2012-13 67,38,452/-

Central Excise Act Excise Duty 2007-08 88,21,936/- 2008-09

Central Excise Act Excise Duty 2009-10 2,75,43,892/- 2010-11 2011-12

Central Excise Act Excise Duty 2010-11 14,35,189/-

Buildings and Other Cess 2010-11 1,27,98,000/- Construction Workers Welfare Cess Act, 1996

AP Registration & Stamp duty 2008-09 44,99,900/- Stamps Act

Name of the Statute Deposits/ Forum where the dispute is Paid in pending with (Rs.)

CST Act 6,33,884/- Appellate Deputy Commissioner, Visakhapatnam

CST Act 13,05,126/- STAT-Visakhapatnam.

AP VAT Act 3,48,715/- The Hon''ble High Court of Andhra Pradesh

AP VAT Act 7,85,424/- Appellate Deputy Commissioner, Visakhapatnam

Customs Act NIL Hon''ble High Court of Andhra Pradesh

Customs Act NIL CESTAT-Bangalore

Central Excise Act NIL CESTAT-Bangalore

Central Excise Act 50,00,000/- Commissioner of Central Excise, Visakhapatnam. Central Excise Act NIL Hon''ble High Court of Andhra Pradesh

Buildings and Other NIL Hon''ble High Court of Construction Andhra Pradesh Workers Welfare Cess Act, 1996

AP Registration & NIL The District Registrar, Stamps Act Vizianagaram.

10. The Company has accumulated losses and has not incurred cash losses in the current financial year and immediately preceding 9 months financial period.

11. In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of its dues to banks and financial institutions.

12. Based on audit procedures and according to the information and explanations given to us, the Company has not granted any loans or advances on the basis of security by way of pledge of shares, debentures or 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 or trading in shares, securities, debentures or other investments and hence, the requirements of clause 4(xiv) of the Companies (Auditor''s Report) order, 2003 are not applicable to the Company.

15. According to the information and explanations given to us, the company has given guarantee to Rs. 288 Crores to the associate company for loans taken from banks, and financial institutions. The terms and other conditions, in our opinion are not prima facie prejudicial to the interest of the company.

16. In our opinion, the term loans raised during the year have been applied for the purpose for which they were raised.

17. In our opinion and according to the information and explanations given to us and on an overall examination of the balance sheet of the company, we report that, the funds raised on short-term basis have not been used for long-term investments.

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.

19. No debentures have been issued by the company and hence, the question of creating securities in respect thereof does not arise.

20. The company has not raised any monies by way of public issues during the year.

21. On the basis of our examination and according to the information and explanations given to us, no material fraud, on or by the Company, has been noticed or reported during the year.

For Pavuluri & Co Chartered Accountants Firm Registration No: 012194S

CA. P.A.RAMAIAH Camp: Visakhapatnam Partner Date: 29.05.2014 M.No.: F-203300


Mar 31, 2013

Report on the Financial Statements

We have audited the accompanying financial statements of Steel Exchange India Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2013, the Statement of Profit and Loss and Cash Flow Statement for the 9 months period ended and a summary of significant accounting policies and other explanatory information.

Management''s Responsibility for the Financial Statements

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India including 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 misstatement, 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 Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatements.

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

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

Opinion

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

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

b) In the case of the Statement of Profit and Loss, of the profit for the 9 months period ended on that date; and

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

Report on Other Legal and Regulatory Requirements

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

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

d) in our opinion, the Balance Sheet, the Statement of Profit and 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 the written representations received from the directors as on March 31, 2013, taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2013, from being appointed as a director in terms of Section 274(1)(g) of the Act.

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

ANNEXURE TO INDEPENDENT AUDITORS'' REPORT

Referred to in Paragraph 1 under the heading of "report on other legal and regulatory requirements" of our report of even date

1. In respect of its fixed assets:

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

(b) As explained to us, all the assets have not been physically verified by the management during the 9 months period but there is a regular programme of verification which, in our opinion, is reasonable having regard to the size of the company and the nature of its business. No material discrepancies were noticed on such physical verification.

(c) According to the information and explanations furnished to us, the Company has not disposed of a substantial part of its fixed assets during the 9 months period and the going concern status of the company is not affected.

2. In respect of its inventories:

(a) The inventories have been physically verified by the management during the 9 months period at reasonable intervals.

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

(c) The company has maintained proper records of inventories and discrepancies noticed on physical verification of inventories as compared to book records were not material.

3. In respect of the loans, secured or unsecured, granted or taken by the Company to/from companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956:

(a) The Company has granted loans to two parties covered in the Register maintained under Section 301 of the Companies Act, 1956. The maximum amount outstanding at any time during the 9 months period was ?.10.22 Crores and the 9 months period end balance is ?.10.22 Crores.

(b) In our opinion and according to the information and explanation given to us, the rate of interest and other terms and conditions of the loans given by the company, are not prima facie not prejudicial to the interest of the company.

(c) The parties have been regular in payment of interest and there is no stipulation for the repayment of principal and interest.

(d) There is no overdue amount of loans granted to companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956.

(e) According to the information and explanation given to us, the company has not taken any loans during the 9 months period from companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Accordingly, Paragraph 4 (iii)(e)(f)(g) of the Order is not applicable.

4. In our opinion, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business with regard to purchase of inventories, fixed assets and for the sale of goods. During the course of our audit, we have not observed any continuing failure to correct the weaknesses in internal control system.

5. In respect of the contracts or arrangements referred to in Section 301 of the Companies Act, 1956:

(a) According to the information and explanation given to us we are of the opinion, that the transactions that need to be entered into the register maintained under section 301 of the Companies Act, 1956 have been so entered.

(b) In our opinion and according to the information and explanation 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 aggregating during the 9 months period to ?.5,00,000/- or more in respect of any party have been made at prices which are reasonable having regard to prevailing market prices at the relevant time.

6. In our opinion and according to the information and explanation given to us, the Company has not accepted any deposits as defined under section 58A of the Companies Act''1956. Therefore, the provisions of Clause (vi) of paragraph 4 of the Order are not applicable to the Company.

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

8. We have broadly reviewed the Books of Account maintained by the Company as prescribed by the Central Government for maintenance of cost records under section 209 (1) (d) of the Companies Act, 1956 and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. However, we have not carried out a detailed examination of the accounts and records with a view to determine whether they are accurate or complete.

9. In respect of Statutory Dues:

(a) According to the books and records of the company, the company is regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees'' State Insurance, Income Tax, Sales Tax, Customs Duty, Excise Duty, Cess and other statutory dues with appropriate authorities. According to the information and explanations given to us, there are no undisputed amounts payable in respect of such statutory dues which have remained outstanding as at 31st March, 2013 for a period exceeding six months from the date they became payable.

(b) The disputed statutory dues that have not been deposited on account of disputed matters pending before appropriate authorities are as under:

Name of the Period to Amount in Nature Statute which the of Dues amount relates

CST Act Sales Tax 2002-03 22,43,895/-

CST Act Sales Tax 2004-05 28,27,172/-

CST Act Sales Tax 2005-06 47,85,829/-

CST Act Sales Tax 2006-07 4,34,677/-

AP VAT Act Sales Tax 2011-12 13,94,858/-

AP VAT Act Sales Tax 2011-12 3,66,07,561/-

Customs Act Customs duty 2003-04 54,35,648/-

Central Excise Act Excise Duty 2007-08 86,30,228/-

Central Excise Act Excise Duty 2008-09 1,91,708/-

Central Excise Act Excise Duty 2009-10 3,893/-

Central Excise Act Excise Duty 2010-11 14,35,189/-

Central Excise Act Excise Duty 2011-12 31,78,578/-

Buildings and Other Construction Workers Welfare Cess Act, 1996 Cess 2010-11 1,27,98,000/-

AP Registration & Stamps Act Stamp duty 2008-09 44,99,900/-

Deposits/ Forum where the dispute is Paid in pending (Rs.)

CST Act 2,80,487/- Appellate Deputy Commis sioner, Visakhapatnam

CST Act 3,53,397/- Appellate Deputy Commissioner, Visakhapatnam

CST Act 11,96,457/- STAT-Visakhapatnam.

CST Act 1,08,669/- STAT-Visakhapatnam

CST Act 3,48,715/- The Hon''ble High Court of Andhra Pradesh

AP VAT Act 45,75,945/- Appellate Deputy Commissioner, Visakhapatnam

AP VAT Act NIL Hon''ble High Court of Andhra Pradesh

Central Excise Act NIL CESTAT-Bangalore

Central Excise Act NIL CESTAT-Bangalore

Central Excise Act NIL Commissioner of Central Excise, Visakhapatnam.

Central Excise Act NIL Hon''ble High Court of Andhra Pradesh

Central Excise Act NIL Hon''ble High Court of Andhra Pradesh

Central Excise Act NIL Hon''ble High Court of Andhra Pradesh

Central Excise Act NIL The District Registrar, Vizianagaram.

10. The Company has accumulated losses and has not incurred cash losses in the current 9 months financial period and immediately preceding 15 months financial period.

11. In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of its dues to banks and financial institutions.

12. Based on audit procedures and according to the information and explanations given to us, the Company has not granted any loans or advances on the basis of security by way of pledge of shares, debentures or 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 or trading in shares, securities, debentures or other investments and hence, the requirements of clause 4(xiv) of the Companies (Auditor''s Report) order, 2003 are not applicable to the Company.

15. According to the information and explanations given to us, the company has given guarantee to Rs.. 288 Crores to the associate company for loans taken from banks, and financial institutions. The terms and other conditions, in our opinion are not prima facie prejudicial to the interest of the company.

16. In our opinion, the term loans raised during the 9 months period have been applied for the purpose for which they were raised.

17. In our opinion and according to the information and explanations given to us and on an overall examination of the balance sheet of the company, we report that, the funds raised on short-term basis have not been used for long-term investments.

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.

19. No debentures have been issued by the company and hence, the question of creating securities in respect thereof does not arise.

20. The company has not raised any monies by way of public issues during the 9 months period.

21. On the basis of our examination and according to the information and explanations given to us, no material fraud, on or by the Company, has been noticed or reported during the 9 months period. For Pavuluri & Co

Chartered Accountants

Firm Registration No: 012194S

CA. P.A.RAMAIAH

Camp: Visakhapatnam Partner

Date: May 27, 2013 M.No.: F-203300


Jun 30, 2012

1. We have audited the attached Balance Sheet of STEEL EXCHANGE INDIA LIMITED as at 30.06.2012 and also the Statement of Profit and Loss for the 15 months period 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. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies' (Auditor's Report) Order, 2003, issued by the Central Government of India, in terms of Section 227(4A) of the Companies Act'1956, we enclose in the Annexure a statement on the matters specified in paragraph 4 and 5 of the said order.

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

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

b) In our opinion, proper books of accounts as required by law have been kept by the company so for as it appears from our examination of those books.

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

d) In our opinion, the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt with by this report comply with the mandatory Accounting Standards referred to in Sub-Section 3(C) of Section 211 of the Companies Act' 1956.

e) On the basis of the written representations received from the directors, as on 30th June' 2012 and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 30th June 2012 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act'1956.

f) In our opinion and to the best of our information and according to the explanations given to us, the said accounts read in conjunction with the schedule annexed therewith 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.

i) In the case of the Balance Sheet, of the state of affairs of the Company as at 30th June 2012;

ii) In the case of the Statement of Profit and Loss, of the Profit of the Company for the 15 months period ended on that date; and

iii) In the case of the cash flow statement, of the cash flows for the 15 months period ended on that date.

ANNEXURE TO AUDITORS' REPORT STEEL EXCHANGE INDIA LIMITED Referred to in paragraph 3 of our report of even date,

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

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

(c) According to the information and explanations furnished to us, the Company has not disposed of a substantial part of its fixed assets during the financial period except for the disposal of Wire drawing unit 1 located at Auto Nagar, Visakhapatnam as per the note refer to at 2.10 of the Notes to Financial Statements.

2. (a) The inventories have been physically verified by the management during the year at reasonable intervals.

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

(c) The company has maintained proper records of inventories and discrepancies noticed on physical verification of inventories as compared to book records were not material.

3. (a) The Company has granted loans to one party covered in the Register maintained under Section 301 of the Companies Act, 1956. The maximum amount involved during the period is Rs. 9.09 Crores and the balance of loan granted to such parties as at 30.06.2012 was Rs. 5.21 Crores.

(b) In our opinion the rate of interest and other terms and conditions on which loans have been granted to companies, firms or other parties listed in the registers maintained under Section 301 are not, prima facie, prejudicial to the interest of the company.

(c) The parties have been regular in the payment of interest and there is no stipulation for the repayment of Principal and Interest.

(d) There is no overdue amount of loans granted to companies, firms or other parties listed in the registers maintained under section 301 of the Companies Act, 1956.

(e) According to the information and explanation given to us, the Company has, during the financial period, not taken any loans, secured or unsecured from companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Accordingly, paragraph 4 (iii) (e)(f)(g) of the Order is not applicable.

4. In our opinion, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business with regard to purchase of inventories, fixed assets and for the sale of goods. During the course of our audit, we have not observed any continuing failure to correct major weakness in internal control.

5. (a) According to the information and explanation given to us we are of the opinion, that the transactions that need to be entered into the register maintained under section 301 of the Companies Act, 1956 have been so entered. (b) In our opinion and according to the information and explanation 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 aggregating during the year to Rs.5,00,000/- or more in respect of any party have been made at prices which are reasonable having regard to prevailing market prices at the relevant time.

6. In our opinion and according to the information and explanation given to us, the Company has not accepted any deposits as defined under section 58A of the Companies Act'1956.

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

8. We have broadly reviewed the Books of Account maintained by the Company as prescribed by the Central Government for maintenance of cost records under section 209 (1) (d) of the Companies Act, 1956 and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. However, we have not carried out a detailed examination of the accounts and records.

9. (a) According to the books and records of the company, the company is regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees' State Insurance, Income Tax, Sales Tax, Customs Duty, Excise Duty, Cess and other statutory dues with appropriate authorities. According to the information and explanations given to us, there are no undisputed amounts payable in respect of such statutory dues which have remained outstanding as at 30th June, 2012 for a period exceeding six months from the date they became payable.

(b) Disputed Statutory dues such as sales Tax income tax has been disclosed in Note no:2.28 of notes to accounts

Name of the Nature of Dues Period to which Statute the amount relates

CST Act Sales Tax 2002-03, 2004-05

APVAT Act Sales tax 2011-12

Customs Act Customs duty 2003-04

Central Excise Act Excise duty 2008-09

Central Excise Act Excise duty 2009-10, 2011-12

Central Excise Act Excise duty 2010-11

Central Excise Act Excise duty 2007-08

Building and Other Cess 2010-11 Construction Workers' Welfare Cess Act,1996

Name of the Amount in Deposits/ Forum where the dispute is Rs. Paid pending

CST Act 50,71,067 633,884 Appl. Dy. Commissioner Visakhapatnam

APVAT Act 13,94,858 NIL Appl. Dy. Commissioner Visakhapatnam

Customs Act 54,35,648 NIL Hon'ble High Court of Andhra Pradesh

Central Excise Act 1,91,708 NIL Appeal to CESTAT, Bangalore

Central Excise Act 123,075 NIL Commissioner of Central Excise Visakhapatnam

Central Excise Act 14,35,189 NIL Hon'ble High Court of Andhra Pradesh

Central Excise Act 86,30,228 NIL Appeal to CESTAT, Bangalore

Building and other 1,27,98,000 NIL Hon'ble High Court Constrcution Workers' of Andhra Pradesh welfare Cess Act,1996

10. The Company has accumulated losses at the end of the financial period consequent to the absorption of accumulatec losses of GSAL (India) Limited upon its amalgamation with the Company and has not incurred cash losses in the current financial period and immediately preceding financial year.

11. In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of its dues to banks and financial institutions.

12. The Company has not granted any loans or advances on the basis of security by way of pledge of shares, debentures or 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 or trading in shares, securities, debentures or other investments and hence, the requirements of clause 4(xiv) of the Companies (Auditor's Report) order, 2003 are not applicable to the Company.

15. In our opinion and according to the information and explanations given to us, the terms and conditions which the Company has given a Guarantee for loan taken others from banks, and financial institutions are not, prima facie, prejudicial to the interest of the company.

16. In our opinion, the term loans have been applied for the purpose for which they were raised.

17. In our opinion and according to the information and explanations given to us and on an overall examination of the balance sheet of the company, we report that funds raised on short-term basis have not been used for long-term investments. No long-term funds have been used to finance short-term assets.

18. The company has made a preferential allotment of shares to a company covered in the register maintained under Section 301 of the Companies Act, 1956 during the 15 months period and the price at which the shares are allotted is not, prima facie, prejudicial to the interest of the company.

19. No debentures have been issued by the company and hence, the question of creating securities in respect there of does not arise.

20. The company has not raised any money by way of public issues during the 15 months period.

21. On the basis of our examination and according to the information and explanations given to us, no fraud, on or by the Company, has been noticed or reported during the 15 months period. For Pavuluri & Co

Chartered Accountants

Firm Registration No: 012194S

CA. P.A.RAMAIAH

Camp: Visakhapatnam Partner

Date: August 27, 2012 M.No.: F-203300


Mar 31, 2011

We have audited the attached Balance Sheet of STEEL EXCHANGE INDIA LIMITED as at 31.03.2011 and also the Profit and Loss Account for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company's Management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

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

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

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

b) In our opinion, proper books of accounts as required by law have been kept by the company so for as it appears from our examination of those books.

c) The Balance Sheet and Profit & Loss account dealt with by this report are in agreement with the books of account.

d) In our opinion, the Balance Sheet and Profit and Loss account dealt with by this report comply with the mandatory Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act'1956.

e) On the basis of the written representations received from the directors, as on 31 st March '2011 and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March '2011 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act' 1956.

f) In our opinion and to the best of our information and according to the explanations given to us, the said accounts read jn conjunction with the schedule 20 - statement on significant account policies and notes to accounts annexed therewith and 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.

i) In the case of the Balance Sheet, of the state of affairs of the Company as at 31 st March' 2011;

ii) In the case of the Profit and Loss Account, of the Profit 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.

ANNEXURE TO AUDITORS' REPORT STEEL EXCHANGE INDIA LIMITED Referred to in paragraph 3 of our report of even date,

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

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

2. (a) The inventories have been physically verified by the management during the year at reasonable intervals.

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

(c) The company has maintained proper records of inventories and discrepancies noticed on physical verification of inventories as compared to book records were not material.

3. (a) The Company has granted loans to two parties covered in the Register maintained under Section 301 of the Companies Act, 1956. The balance outstanding as on 01.04.2010 is Rs. 15.91 Crores and the yearend balance of loan granted to such parties was Rs.12.21 Crores.

(b) According to the information and explanation given to us, the company has charged interst at the rate of 12% p.a on the above loans.

4. In our opinion, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business with regard to purchase of inventories, fixed assets and for the sale of goods.

5. (a) According to the information and explanation given to us we are of the opinion, that the transactions that need to be entered into the register maintained under section 301 of the Companies Act, 1956 have been so entered.

(b) In our opinion and according to the information and explanation 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 aggregating during the year to Rs.5,00,000/- or more in respect of any party have been made at prices which are reasonable having regard to prevailing market prices at the relevant time.

6. In our opinion and according to the information and explanation given to us, the Company has not accepted any deposits as defined under section 58A of the Companies Act'1956.

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

8. We have broadly reviewed the Books of Account maintained by the Company as prescribed by the Central Government for maintenance of cost records under section 209 (1) (d) of the Companies Act, 1956 and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. However, we have not carried out a detailed examination of the accounts and records.

9. (a) According to the books and records of the company, the company is regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees' State Insurance, Income Tax, Sales Tax, Customs Duty, Excise Duty, Cess and other statutory dues with appropriate authorities. According to the information and explanations given to us, there are no undisputed amounts payable in respect of such statutory dues which have remained outstanding as at 31st March, 2011 for a period exceeding six months from the date they became payable.

(b) Disputed Statutory dues such as sales Tax income tax has been disclosed in Point no 14 of Schedule 20.

Name of the Nature of Dues Amount in Rs. Deposits/ Pending with Statute Paid

CST Act Sales Tax of 2002-2003 22,43,895 2,80,487 Appl. Dy. Commissioner Visakhapatnam

Customs Act Customs duty pertaining Hon'ble High Court of Andhra to 2003-04 54,35,648 NIL Pradesh

CST Act Sales Tax of 2004-05 28,27,172 3,53,397 Appl. Dy. Commissioner Visakhapatnam

10. The Company has no accumulated losses and has not incurred cash losses in the current financial year and immediately preceding financial year.

11. In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of its dues to banks and financial institutions.

12. The Company has not granted any loans or advances on the basis of security by way of pledge of shares, debentures or 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 or trading in shares, securities, debentures or other investments and hence, the requirements of clause 4(xiv) of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company.

15. According to the information and explanations given to us, the company has not given any guarantee for loans taken by others from banks, and financial institutions.

16. In our opinion, the term loans have been applied for the purpose for which they were raised.

17. In our opinion and according to the information and explanations given to us and on an overall examination of the balance sheet of the company, we report that funds raised on short-term basis have not been used for long-term investments. No long-term funds have been used to finance short-term assets.

18. The company has made a preferential allotment of share to parties and companies covered in the register maintained under Section 301 of the Companies Act, 1956 during the year.

19. No debentures have been issued by the company and hence, the question of creating securities in respect there of does not arise.

20. The company has not raised any money by way of public issues during the year.

21. On the basis of our examination and according to the information and explanations given to us, no fraud, on or by the Company, has been noticed or reported during the year.

For Pavuluri & Co

Chartered Accountants

Firm Registration No: 012194S

CA. P.A.RAMAIAH

Camp: Malliveedu, L.Kota (M), Vizianagaram (Dt) Partner

Date: 27.08.2011 M.No.:203300


Mar 31, 2010

We have audited the attached Balance Sheet of STEEL EXCHANGE INDIA LIMITED as at 31.03.2010 and also the Profit and Loss Account for the year ended on that date annexed thereto. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

As required by the Companies (Auditors Report) Order, 2003, issued by the Central Government of India, in terms of Section 227(4A) of the Companies Act1956, we enclose in the Annexure a statement on the matters specified in paragraph 4 and 5 of the said order.

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

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

b) In our opinion, proper books of accounts as required by law have been kept by the company so for as it appears from our examination of those books.

c) The Balance Sheet and Profit & Loss account dealt with by this report are in agreement with the books of account.

d) In our opinion, the Balance Sheet and Profit and Loss account dealt with by this report comply with the mandatory Accounting Standards referred to in Sub-Section 3(C) of Section 211 of the Companies Act1956.

e) On the basis of the written representations received from the directors, as on 31 st March 2010 and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March 2010 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act1956.

f) In our opinion and to the best of our information and according to the explanations given to us, the said accounts read in conjunction with the schedule annexed therewith and subject to Note No.9 of Schedule -19 regarding non provision of doubtful debts, 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.

i) In the case of the Balance Sheet, of the state of affairs of the Company as at 31 st March2010;

ii) In the case of the Profit and Loss Account, of the Profit of the Company for the year ended on that date; and

iii) In the case of the cash flow statement, of the cash flows for the year ended on that date.

ANNEXURE TO AUDITORS REPORT STEEL EXCHANGE INDIA LIMITED Referred to in paragraph 3 of our report of even date,

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

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

(c) According to information and explanations furnished to us the company has disposed off the fixed assets of the Re-Rolling Mill at Ongole during the year.

2. (a) The inventories have been physically verified by the management during the year at reasonable intervals.

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

(c) The company has maintained proper records of inventories and discrepancies noticed on physical verification of inventories as compared to book records were not material.

3. (a) The Company has granted loans to two parties covered in the Register maintained under Section 301 of the Companies Act, 1956. The balance outstanding as on 01.04.2009 is Rs. 13.51 Crores and the yearend balance of loan granted to such parties was Rs.15.91 Crores.

(b) According to the information and explanation given to us, the company has charged interest on the above loans.

(c) The Company has taken loan from two parties covered in the Register maintained under Section 301 of the Companies Act, 1956. The yearend balance of loan taken from such parties was Rs. 14.44 Crores.

4. In our opinion, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business with regard to purchase of inventories, fixed assets and for the sale of goods.

5. (a) According to the information and explanation given to us we are of the opinion, that the transactions that need to be entered into the register maintained under section 301 of the Companies Act, 1956 have been so entered.

(b) In our opinion and according to the information and explanation 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 aggregating during the year to Rs.5,00,000/- or more in respect of any party have been made at prices which are reasonable having regard to prevailing market prices at the relevant time.

6. In our opinion and according to the information and explanation given to us, the Company has not accepted any deposits as defined under section 58A of the Companies Act1956.

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

8. We have broadly reviewed the Books of Account maintained by the Company as prescribed by the Central Government for maintenance of cost records under section 209 (1) (d) of the Companies Act, 1956 and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. However, we have not carried out a detailed examination of the accounts and records.

9. (a) According to the books and records of the company, the company is regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income Tax, Sales Tax, Customs Duty, Excise Duty, Cess and other statutory dues with appropriate authorities. According to the information and explanations given to us, there are no undisputed amounts payable in respect of such statutory dues which haveremained outstanding as at 31st March, 2010 for a period exceeding six months from the date they became payable.

(b) Disputed Statutory dues such as sales Tax income tax has been disclosed in Point no 13 of Schedule 19.

Name of the Nature of Dues Amount in Rs. Deposits/

Statute Paid

CST Act Sales Tax of 1999-2000 16,61,238 NIL

APGST Act Sales Tax of 1999-2000 22,81,823 NIL

APGSTAct Sales Tax of 2000-2001 75,89,631 NIL

APGST Act Sales Tax of 2001-2002 28,48,015 14,24,007

CSTAct Sales Tax of 2002-2003 22,43,895 2,80,487

Customs Act Customs duty pertaining

to 2003-04 54,35,648 NIL

CSTAct Sales Tax of 2004-05 28,27,172 3,53,397

Name of the Pending with Statute

CST Act Sales Tax appellate Tribunal, Hyderabad

APGST Act Sales Tax appellate Tribunal, Hyderabad

APGST Act Sales Tax appellate Tribunal, Hyderabad

APGST Act Sales Tax appellate Tribunal, Hyderabad

CST Act Appl. Dy. Commissioner Visakhapatnam

Customs Actb Honble High Court of Andhra Pradesh

CST Act Appl. Dy. Commissioner Visakhapatnam

10. The Company has no accumulated losses and has not incurred cash losses in the current financial year and immediately preceding financial year.

11. In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of its dues to banks and financial institutions.

12. The Company has not granted any loans or advances on the basis of security by way of pledge of shares, debentures or 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 or trading in shares, securities, debentures or other investments and hence, the requirements of clause 4(xiv) of the Companies (Auditors Report) order, 2003 are not applicable to the Company.

15. According to the information and explanations given to us, the company has not given any guarantee for loans taken by others from banks, and financial institutions.

16. In our opinion, the term loans have been applied for the purpose for which they were raised.

17. In our opinion and according to the information and explanations given to us and on an overall examination of the balance sheet of the company, we report that funds raised on short-term basis have been used for long-term investments. No long-term funds have been used to finance short-term assets.

18. The company has made a preferential allotment of share to parties and companies covered in the register maintained under Section 301 of the Companies Act, 1956 during the year.

19. No debentures have been issued by the company and hence, the question of creating securities in respect there of does not arise.

20. The company has not raised any money by way of public issues during the year.

21. On the basis of our examination and according to the information and explanations given to us, no fraud, on or by the Company, has been noticed or reported during the year.



For Pavuluri & Co

Chartered Accountants

Firm Registration No: 012194S

CA. P.A.RAMAIAH

Place: Hyderabad Partner

Date: 29.05.2010 M.No.:203300



 
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