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Auditor Report of Stone India Ltd.

Mar 31, 2015

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

Management's Responsibility for the Standalone Financial Statements

The Company's Board ofDirectors is responsible for the matters stated in section 134(5) ofthe Companies Act2013 (" theAct") with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under section 133 of the Act read with Rule 7 of Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditors' Responsibility

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

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

We conducted our audit in accordance with the Standards on Auditing specified under section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

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

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

Basis for Qualified Opinion

i). Attention is drawn to the following notes to the financial statement:

(a) In respect of Rental demands from Kolkata Port Trust on the Company pending decision of the Court exact status of the liability and amount payable has not been ascertained; (Note 6(b))

(b) Managerial remuneration amounting to Rs. 250.86 lacs (including Rs.64.11 lacs for the year) is subject to approval of the Central Government; (Note25(a)

(c) Revenue recognition shortfall against company's exposure of Rs.1216.13 towards a project undertaken by a subsidiary including advances of Rs.1006.99 lacs and investment of Rs.1 lac to the subsidiary, pending implementation thereof, has presently not been ascertained; (Note 15(b)&(c));

(d) Stocks lying with third parties (Note 16(c)) and certain debit/credit balances including capital advance as per NoteNo.15(a)&(b) and certain overdue balance of debtors as given in the Note 17(b) and certain bank balances are subject to confirmation/ reconciliation and the consequential adjustments thereof has not been determined; (Note 29)

(e) Details regarding Micro, Small and Medium Enterprise are not available and as such required disclosure in this respect could not be given; (Note9(a))

(f) Advances include Rs.104.36 lacs under investigation, impact whereof as such could not be commented upon pending completion of proceedings. (Note 19(b))

(g) Non classification of fixed assets and ascertainment of depreciation thereagainst as per Schedule II of the Companies Act, 2013. (Note 12(8))

ii). Impact with respect to above cannot be ascertained and commented upon by us.

Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph, the aforesaid standalone financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at31st March, 2015, and its Profit/Loss and its 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 ofIndia in terms of sub-section (11) of Section 143 of the Act, we, according to information and explanations given to us, give in the Annexure a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.

As requiredbySection 143(3) oftheAct, we report that:

a) We have sought and except for matters mentioned in para (d), (e) and (g) under Basis For Qualified Opinion paragraph have 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 accounts as required by law have been kept by the Company so far as appears from our examination of those books;

c) The Balance Sheet, 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) Except for the matters described in para (c) and (g) in the Basis For Qualified Opinion paragraph, in our opinion, the Balance Sheet, Statement of Profit and loss and Cash Flow Statement comply with the Accounting Standards specified under section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014;

e) The matters described in the Basis for Qualified opinion paragraph above especially those given in Para (a), (c) and (d) therein, in our opinion, may have an adverse effect on the functioning of the Company.

f) On the basis of the written representations received from the directors as on March 31, 2015, taken on record by the Board ofDirectors, 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

g) The qualifications relating to the maintenance of accounts and other matters connected therewith are as stated in the Basis for Qualified Opinion paragraph.

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

i. Pending litigations (other than those already recognized in the accounts) having material impact on the financial position of the Companyhave been disclosed in the financial statement as required in terms of the accounting standards and provisions of the Companies Act, 2013:(Note 28 & 6(b) of the financial statements)

ii. The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses;

iii. There was no amount due which is required to be transferred to the Investors Education Protection Fund by the Company.

Annexure to the Auditor's Report our Report of even date:

i) a. The Company has maintained proper records to show full particulars including quantitative details and situation of its fixed assets.

b. The fixed assets of the Company are physically verified by the management over a phased manner, which we consider reasonable considering the size of the Company and nature of its assets. However, during the year, fixed assets have not been physically verified by the management. However, the necessary reconciliation with the book records with respect to physical verification done in earlier years was yet to be completed and discrepancies if any in this respect as such was not yet ascertainable.

ii) a. The inventory except those lying with third parties (Note 16(c) of the financial statements) and in transit has been physically verified by the management during the year. In our opinion and according to the information and explanations given to us, the frequency of verification, wherever carried out, is reasonable.

b. In our opinion, excepting as given herein above, the procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

c. The Company has maintained proper records of its inventory except for stocks lying with third parties (note 16(c) ofthe financial statements). Pursuant to an exercise for verification and reconciliation thereof initiated in the previous year, even though carried out to a substantial extent, the reconciliation and required adjustment with respect to stock: lying with third parties and those at certain location were in progress at year end. Pending completion of the entire exercise, a provision of Rs. 467 lacs as given in the Note 16(d) of the financial statements has been made. Consequential adjustment against respective inventory items, as explained, will be given effect to on determination thereof.

iii) Except for the advances on account of various costs incurred for undertaking Rail Runner and Bio-toilet project by two subsidiaries, as per the records of the company, it has not granted any loans, secured or unsecured, to any companies, firms or other parties covered in the Register maintained under Section 189 of the Companies Act. Advances given to subsidiaries for undertaking the said projects are in the nature of contribution towards the project and is therefore long term and strategic in nature and there are no terms of repayment etc. in this respect and as such we are unable to comment in this respect.

iv) Having regard to the explanation given that comparative quotations are not available in respect of items of branded/special nature purchased during the year, in our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business with regard to the purchase of inventory and fixed assets and for the sale of goods and services. Further during the course of our audit we have neither come across nor have we been informed of any instances of major weaknesses in the aforesaid internal control procedures and continuing failure on the part of the management to take corrective course of action in this regard.

v) The Company has not accepted any deposits from public covered under Sections 73 to 76 or any other relevant provisions of the Act and rules framed there under.

vi) On the basis of the records produced, we are of the opinion that prima facie the cost records and accounts prescribed by the Central Government under section 148(1) of the Companies Act, 2013 have been maintained for Rail Products. As explained by the management, the same is not required to be maintained for Biotoilets. However, we have not carried out any detailed examination of such records with a view to determine whether they are accurate or complete.

vii) a. According to the information and explanations given to us and as per the records of the Company, the Company except for Employees' State Insurance as mentioned in the Note 10(b) of the financial statements, Income tax, Sales tax, Service Tax, Excise Duty, Cess where there were delays in depositing the dues to appropriate authorities is generally regular in depositing with appropriate authorities undisputed statutory dues including Wealth Tax, Customs, Excise Duty, Provident Fund, Professional Tax, and other material statutory dues applicable to it. However, according to the information and explanation given to us, except those given below, there is no undisputed amounts payable in respect of these which were in arrears, as at 31st March 2015 for a period of more than six months from the date they became payable.

Name of Statute Type Amount (Rs. In Lacs)

Central Excise Act, 1985 Excise Duty 125.40

The Employees' Provident Accumulated shortfall 31.10 Fund&MPAct,1952 (Note 33(i)(a) of financial statements)

The Central ExciseAct, 1944 Service Tax 0.74

Jharkhand VAT Act, 2005 Value Added Tax 2.38

b) According to the information and explanations given to us, there are no dues of Sales tax, Income tax, Customs Duty, Wealth Tax, Excise Duty, Service Tax and Cess, which have not been deposited on account of any dispute except as given below:

Name of Nature Forum where Period to Amount in Statute of Tax dispute is which Rs.Lacs pending related

West Bengal Sales Tax Revisional 2004-05 14.30 Sales Tax Act, Board 1995

West Bengal Sales Tax Additional 2012-13 20.58 ValueAdded Commissioner Tax, 2003

Central Sales Sales Tax Revisional 2003-04, 31.68 TaxAct,1954 Board 2004-05and 2005-06

Central Sales Sales Tax Additional 2006-07 23.72 Tax Act, 1954 Commissioner

Central Sales Sales Tax Additional 2012-13 16.59 Tax Act, 1954 Commissioner

Central Excise Service Tax Appeal filed 2005 to 54.70 Act, 1944 in CESTAT, 2010 Kolkata

c. There is no amount due which were required to be transferred to the Investor Education and Protection Fund in accordance with the provisions of Companies Act, 1956 and rules made thereunder and hence, provisions of Clause vii (c) are not applicable to the Company.

viii) Without considering the matter described in the Basis for Qualified Opinion paragraph effect whereof cannot be ascertained and commented upon, the Company does not have any accumulated losses at the end of the financial year. The Company has incurred cash losses in the current and immediately preceding financial year.

ix) According to the information and explanation given to us, the Company has not defaulted in repayment of dues to bank or financial institutions.

x) The company has not given any guarantee for loan taken by others from bank or financial institutions.

xi) According to the information and explanations given to us, no term loan has been raised during the year and thereby provision of clause (xi) shall not be applicable.

xii) Attention is invited to the Note19(b)of the financial statements regarding defalcation of company's fund which is under investigation. Necessary steps including suspension of an employee, so far identified, have been taken and as explained further administrative and other course of action including recovery of the amount involved are in the process. Except this, during the course of our examination ofbooks of accounts carried out in accordance with generally accepted auditing practices in India, we have neither come across any incidence of fraud on or by the company nor have we been informed of any such case by the management.

For Lodha & Co. Chartered Accountants Firm's Registration

R. P. Singh Place: Kolkata Partner Date: 28th May, 2015 Membership No: 52438


Mar 31, 2014

We have audited the accompanying financial statements of Stone India Limited ("the Company") which comprise the Balance Sheet as at 31st March, 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.

Management''s Responsibility for the Financial Statements

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards referred to in Section 211(3C) of 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. 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 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 auditors'' judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal 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 qualified audit opinion.

Basis for Qualified Opinion

(a) In respect of Rental demands from Kolkata Port Trust on the Company amounting to Rs. 228.97 lacs, pending decision of the Court exact status of the liability and amount payable has not been ascertained; (Note 6A(b))

(b) Payment of managerial remuneration amounting to Rs.186.75 lacs (including Rs.111.58 lacs for the year) is subject to approval of the Central Government; (Note 23(a))

(c) Stocks lying at different locations as stated in the Note 14(c) are under reconciliation. Pending this, the provision of Rs. 250 lacs has been made, the adequacy of which and consequential adjustments arising in this respect cannot be ascertained and commented upon by us;

(d) Revenue recognition shortfall against advances of Rs.1006.99 lacs and investment of Rs.1 lac to a subsidiary in respect of a project undertaken by it, pending implementation thereof, has presently not been ascertained; (Note 13(b))

(e) Certain debit/credit balances including certain overdue balance of debtors as given in the Note 15(b) are subject to confirmation/ reconciliation and the consequential adjustments thereof has not been determined; (Note 27)

(f) Details regarding Micro, Small and Medium Enterprise are not available and as such required disclosure in this respect could not be given; (Note 8(a))

(g) Advances include Rs.104.36 lacs under investigation, impact whereof as such could not be commented upon pending completion of proceedings. (Note 17(b))

Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the matter described in the Basis for Qualified Opinion paragraph effects whereof cannot be ascertained and commented upon, the financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

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

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

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

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2003 as amended by the Companies (Auditor''s Report Order, 2004) (the Order) issued by the Central Government of India in terms of Section 227 (4A) of the Act and according to the information and explanations given to us and also on the basis of such checks as we considered appropriate, we enclose in the Annexure a statement on the matters specified in the said order.

2. As required under provisions of section227(3) of the Companies Act, 1956, we report that:

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

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

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

d. In our opinion, the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement comply with the Accounting Standards referred to in Section 211 (3C) of 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, and taken on record by the Board of Directors, none of the directors, is disqualified as on 31 March 2014, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

Annexure to the Independent Auditor''s Report

(Referred to in paragraph under "Report on Other Legal and Regulatory Requirements" of the report of even date.)

i) a) The Company has maintained proper records to show full particulars including quantitative details and situation of its fixed assets.

b) The fixed assets of the Company are physically verified by the management over a phased manner, which we consider reasonable considering the size of the Company and nature of its assets. As explained, such verification has been carried out by the management. However, the necessary reconciliation with the book records was yet to be completed and discrepancies if any in this respect as such was not ascertainable.

(c) In our opinion, during the year, the company has not disposed off substantial part of its fixed assets.

ii) a) The inventory except those lying with third parties has been physically verified by the management during the year. In our opinion and according to the information and explanations given to us, the frequency of verification, wherever carried out, is reasonable. In respect of stock lying with third parties confirmations were obtained.

b) In our opinion, excepting as given herein above, the procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

c) The Company has maintained proper records of its inventory except for stocks lying with third parties. Pursuant to an exercise for verification and reconciliation thereof initiated in the previous year, even though carried out to a substantial extent, the reconciliation and required adjustment with respect to stock lying with third parties and those at certain location were in progress at year end. Pending completion of the entire exercise, a provision of Rs.250 lacs as given in the Note 14(c) has been made in this respect. Consequential adjustment against respective inventory items, as explained, will be given effect to on determination thereof.

iii) Except for the advances on account of various costs incurred for undertaking Rail Runner and Bio-toilet project by two subsidiaries, as per the records of the company, it has not taken/granted any loans, secured or unsecured, to any companies, firms or other parties covered in the Register maintained under Section 301 of the Act. Advances given to subsidiaries for undertaking the said projects are in the nature of contribution towards the project and is therefore long term and strategic in nature and there are no terms of repayment etc. in this respect. The aggregate amount of advances given to subsidiaries outstanding at the year end and the maximum amount outstanding thereof at any time during the year were Rs. 1125.23 lacs and Rs. 1156.75 lacs respectively. Pending implementation of the project especially the rail runner project (Note 13(b)), it is not possible to comment whether these are prima facie prejudicial to the interest of the Company.

iv) Having regard to the fact that comparative quotations are not available for purchase of certain items of components during the year, in our opinion and according to the information and explanations given to us there are adequate internal control procedures commensurate with the size of the Company and the nature of its business with regard to purchases of inventory, fixed assets and with regard to sale of goods and services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal controls.

v) (a) According to the information and explanations provided to us, particulars of the contracts or arrangement referred to in Section 301 of the Act have been entered in the register maintained under that section.

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

vi) The Company has not received or accepted any deposits during the year.

vii) Internal audit of the Company has been carried out by independent firm of Chartered Accountants in phased manner to cover all key areas over the period of two to three years. Except to the extent that coverage of areas and frequency thereof need to be extended, the internal audit system followed presently is reasonable considering the the size and nature of the business of the Company.

viii) On the basis of the records produced, we are of the opinion that prima facie the cost records and accounts prescribed by the Central Government under section209 (1) (d) of the Companies Act, 1956 have been maintained. However, we have not carried out any detailed examination of such records with a view to determine whether they are accurate or complete.

ix) a) According to the information and explanations given to us and as per the records of the Company, the Company except for Employees'' State Insurance as mentioned in the Note 9(b) of the financial statements, tax deducted at source, excise duty, Professional Tax and sales tax where there were delays in depositing the dues to appropriate authorities is generally regular in depositing with appropriate authorities undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Professional Tax, Wealth tax, Custom Duty, Cess and other material statutory dues applicable to it. However, according to the information and explanations given to us, except those given below, there is no undisputed amounts payable in respect of these which were in arrears, as at 31st March 2014 for a period of more than six months from the date they became payable.

Name of Statute TYPE AMOUNT (Rs. In Lacs)

The Central Excise Service Tax 3.51 Act 1944

The Employees'' Accumulated 36.10 Provident Fund & shortfall MP Act,1952 (Note 30(i)(a) of financial statements)

b) According to information and explanations given to us, there are no dues of Sales Tax, Income Tax, Customs Duty, Wealth Tax, Excise Duty and Cess which have not been deposited on account of any dispute except as given below:

Statute Nature Forum where Period to Amount of Tax dispute is which in Rs. pending related Lacs West Bengal Sales Tax Revisional 2004-05 14.30 Sales Tax Board Act, 1995

West Bengal Sales Tax Additional 2008-09 21.98 Value Added Commissioner Tax, 2003

Central Sales Sales Tax Revisional 2003-04, 31.68 Tax Act, 1954 Board 2004-05 and 2005-06

Central Sales Sales Tax Additional 2006-07 23.72 Tax Act, 1954 Commissioner

Central Sales Sales Tax Additional 2008-09 3.22 Tax Act, 1954 Commissioner

Central Excise Service Tax Appeal to be 2005 to 41.03 Act, 1944 filed in 2010 CESTAT, Kolkata

x) Without considering the matter described in the Basis for Qualified Opinion paragraph effects whereof cannot be ascertained and commented upon, the Company does not have any accumulated losses at the end of the financial year. The Company has incurred cash losses in the current and immediately financial year.

xi) According to the information and explanation given to us, the Company has not defaulted in repayment of dues to banks and financial institutions.

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

xiii) In our opinion, the company is not a chit fund or a nidhi mutual benefit fund/society. Therefore the provision of clause

4(xiii) of the said order is not applicable to the company.

xiv) The Company is not dealing / trading in securities.

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

xvi) As per the information and explanations given to us and based on the documents and records produced to us no term loan has been raised during the year.

xvii) According to the information and explanations given to us and on overall examination of the Balance Sheet of the company, we report that short term funds to the extent of Rs. 221.01 lacs have been used for long-term investments.

xviii) The Company as given in the Note 3B has issued warrants on preferential basis to company covered in the register maintained under Section 301 of the Companies Act, entitling them to obtain allotment of equity shares of the Company. These warrants have been issued at the price determined as per the regulations of Securities and Exchange Board Of India, in our opinion this is not prejudicial to the interest of the Company.

xix) The Company does not have any outstanding debentures during the year.

xx) The Company has not raised any money through a public issue during the year.

xxi) Attention is invited to the Note 17(b) regarding defalcation of company''s fund which is under investigation. Necessary steps including suspension of an employee, so far identified, have been taken and as explained further administrative and other course of action including recovery of the amount involved are in the process. Excepting this, during the course of our examination of books of accounts carried out in accordance with generally accepted auditing practices in India, we have neither come across any incidence of fraud on or by the company nor have we been informed of any such case by the management.

For Lodha & Co. Chartered Accountants Firm ICAI Registration No. :301051E

R. P. Singh Place : Kolkata Partner Date : 30th May, 2014 Membership No. 52438


Mar 31, 2013

Report on the Financial Statements

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

Management''s Responsibility for the Financial Statements

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 ("the Act") 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.

Auditor''s Responsibility

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

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors'' judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal 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 qualified audit opinion.

Basis for qualified Opinion

(a) In respect of Rental demands from Kolkata Port trust on the Company amounting to Rs. 228.97 lacs, pending decision of the Court exact status of the liability and amount payable has not been ascertained; [Note No. 9(a)]

(b) Payment of managerial remuneration amounting to Rs. 128.45 lacs (including Rs. 78.02 lacs for the year) is subject to approval of the Central Government; [Note No. 23(a)]

(c) Stocks lying at different locations as stated in the Note No. 14(c) are under reconciliation with physical balances. Pending this, the consequential adjustments in this respect and adequacy of the provision made by the management cannot be ascertained and commented upon by us;

(d) Revenue recognition shortfall against advances of Rs. 935.80 lacs and investment of Rs. 1.00 lac to a subsidiary in respect of a project undertaken by it, pending implementation thereof, has presently not been ascertained; [(Note No.13(b)]

(e) Confirmation/reconciliation of certain debit/credit balances were not obtained and the amounts of consequential adjustments in this respect have not been determined; (Note No. 27)

(f) Details regarding Micro, Small and Medium Enterprise are not available and as such required disclosure in this respect could not be given. [Note No.8(a)]

Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the matter described in the Basis for Qualified Opinion paragraph effects whereof cannot be ascertained and commented upon, the financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

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

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

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

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2003 ("the Order") issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Act and according to the information and explanation given to us and on the basis of such checks as we considered appropriate, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

2. As required under provisions of section 227(3) of the Companies Act, 1956, we report that:

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

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

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

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

e. On the basis of written representations received from the directors as on 31st March 2013, and taken on record by the Board of Directors, none of the directors, is disqualified as on 31 March 2013, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

Annexure to the Independent Auditor''s Report

(Referred to in paragraph under "Report on Other Legal and Regulatory Requirements" of the report of even date.)

i) a) The Company has maintained proper records to show full particulars including quantitative details and situation of its fixed assets.

b) The fixed assets of the Company are physically verified by the management over a phased manner, which we consider reasonable considering the size of the Company and nature of its assets. As explained, such verification has been carried out by the management. However, the necessary reconciliation with the book records was yet to be completed and discrepancies if any in this respect as such was not ascertainable.

(c) In our opinion, during the year, the company has not disposed off substantial part of its fixed assets.

ii) a) The inventory except those lying with third parties has been physically verified by the management during the year. In our opinion and according to the information and explanations given to us, the frequency of verification, wherever carried out, is reasonable. In respect of stock lying with third parties necessary confirmation from them were obtained.

b) In our opinion, the procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

c) The Company has maintained proper records of its inventory except for stocks lying with third party. In respect of the physical verification carried out at the end of the year, reconciliation with physical balances was under progress and pending this discrepancies with respect to physical balances as stated in Note No. 14(c) have not been determined and as such cannot be commented upon.

iii) Except for the advances on account of various costs incurred for undertaking Rail Runner and Bio-toilet project by two subsidiaries, as per the records of the company, it has not taken/granted any loans, secured or unsecured , to any companies, firms or other parties covered in the Register maintained under Section 301 of the Act. Advances given to subsidiaries for undertaking the said projects are in the nature of contribution towards the project and is therefore long term and strategic in nature. Pending implementation of the project especially the rail runner project (note no 13(b)), it is not possible to comment whether these are prima facie prejudicial to the interest of the Company.

iv) Having regard to the fact that comparative quotations are not available for purchase of certain items of components and fixed assets during the year, in our opinion and according to the information and explanations given to us there are adequate internal control procedures commensurate with the size of the Company and the nature of its business with regard to purchases of inventory, fixed assets and with regard to sale of goods and services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal controls.

v) (a) According to the information and explanations provided to us, particulars of the contracts or arrangement referred to in Section 301 of the Act have been entered in the register required to be maintained under that section.

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

vi) The Company has not received or accepted any deposits during the year.

vii) Internal audit of the Company has been carried out by a firm of Chartered Accountants. In our opinion, the internal audit system is commensurate with the size and nature of the business of the Company.

viii) On the basis of the records produced, we are of the opinion that prima facie the cost records and accounts prescribed by the Central Government under section 209 (1) (d) of the Companies Act, 1956 have been maintained. However, we have not carried out any detailed examination of such records with a view to determine whether they are accurate or complete.

ix) a) According to the information and explanations given to us and as per the records of the Company, the Company except for Employees'' State Insurance as mentioned in Note No. 9 (c ) of the financial statements, tax deducted at source, Income Tax, excise duty, Professional Tax and sales tax where there were delays in depositing the dues to appropriate authorities is generally regular in depositing with appropriate authorities undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, , Professional Tax, Wealth tax, Custom Duty, Cess and other material statutory dues applicable to it. However, according to the information and explanations given to us, except those given below, there is no undisputed amounts payable in respect of these which were in arrears, as at 31st March 2013 for a period of more than six months from the date they became payable.

ACT TYPE AMOUNT TOTAL (Rs. In ''000) (Rs. In ''000)

CENTRAL EXCISE DUTY 6,200.00

INTEREST 535.07 6,735.07

CENTRAL SALES TAX TAX 795.19

INTEREST 42.35 837.54

ENTRY TAX TAX 396.67

INTEREST 28.88 425.55

Total 7,998.15



b) According to information and explanations given to us, there are no dues of Sales Tax, Income Tax, Customs Duty, Wealth Tax, Excise Duty and Cess which have not been deposited on account of any dispute except as given below:

Statute Nature Forum where Period to Amount of Tax dispute is which in ''000 pending related

West Bengal Sales Tax Revisional 2004-05 1430 Sales Tax Board Act, 1995

West Bengal Sales Tax Additional 2008-09 2198 Value Added Commissioner Tax, 2003

Central Sales Sales Tax Revisional 2003-04 2004-05 3071 Tax Act, 1954 Board and 2005-06

Central Sales Sales Tax Additional 2008-09 322 Tax Act,1954 Commissioner

Income Tax Income Tax Appeal to be A.Y. 2006-07 1348 Act, 1961 filed in the High Court

Central Excise Service Tax Appeal filed 2005 to 2010 4103 Act, 1944 in CESTAT, Kolkata



x) The Company does not have any accumulated losses at the end of the financial year. Eventhough, the Company has incurred cash losses in the current financial year, it did not have cash loss in the immediately preceding financial year.

xi) According to the information and explanation given to us, the Company has not defaulted in repayment of dues to banks and financial institutions.

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

xiii) In our opinion, the company is not a chit fund or a nidhi mutual benefit fund/society. Therefore the provision of clause 4(xiii) of the said order is not applicable to the company.

xiv) The Company is not dealing / trading in securities.

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

xvi) As per the information and explanations given to us and based on the documents and records produced to us in respect of term loan raised during the year, the Company has been applied such loan for the purpose for which they were raised.

xvii) According to the information and explanations given to us and on overall examination of the Balance Sheet of the company, we report that no funds raised on short-term basis have been used for long-term investments.

xviii) The Company has not made any preferential allotment of shares to parties and companies required to be covered in the register maintained under section 301 of the Act.

xix) The Company does not have any outstanding debentures during the year.

xx) The Company has not raised any money through a public issue during the year.

xxi) During the course of our examination of books of accounts carried out in accordance with generally accepted auditing practices in India, we have neither come across any incidence of fraud on or by the company nor have we been informed of any such case by the management.





For Lodha & Co.

Chartered Accountants

Firm ICAI Registration No. : 301051E





R.P. Singh

Place:Kolkata Partner

Date :27th May, 2013 Membership No. 52438


Mar 31, 2012

We have audited the attached Balance Sheet of Stone India Limited (the Company) as at 31st March, 2012 and also the Profit & Loss Account of the Company for the year ended on that date, annexed thereto and the cash flow statement for the year ended on that date. 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 any material misstatement. An audit includes examining, on test basis, evidence supporting the amounts and the disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis of our opinion.

1 . As required by the Companies (Auditor's Report) Order, 2003 ("the order") as amended by the Companies (Auditor's Report)(Amendment) Order, 2004 issued by the Central Government in terms of Section 227 (4A) of the Companies Act, 1956 ("the Act") and according to the information and explanations given to us and on the basis of such checks as we considered appropriate, we state that:

i) a) The Company has maintained proper records to show full particulars including quantitative details and situation of its fixed assets.

b) As explained to us, the fixed assets of the Company are physically verified by the management over a phased manner, which we consider reasonable considering the size of the Company and nature of its assets. As explained to us such verification has been carried out by the management and the necessary reconciliation with the book records was under progress at the year end.

c) In our opinion, during the year, the company has not disposed off substantial part of its fixed assets.

ii) a) The inventory has been physically verified by the management during the year. In our opinion and according to the information and explanations given to us, the frequency of verification, wherever carried out, is reasonable.

b) In our opinion, the procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

c) In our opinion, the Company has maintained proper records of its inventory and the discrepancies between the physical stock and book records were not material.

iii) Except for the advances on account of various costs incurred for undertaking Rail Runner and Biomass project by two subsidiaries, as per the records of the company, it has not taken/granted any loans, secured or unsecured, to any companies, firms or other parties covered in the Register maintained under Section 301 of the Act. Advances given to subsidiaries are in the nature of contribution towards the project and is therefore long term and strategic in nature.

iv) Having regard to the fact that comparative quotations are not available in respect of certain items of special nature purchased during the year, in our opinion and according to the information and explanations given to us there are adequate internal control procedures commensurate with the size of the Company and the nature of its business with regard to purchases of inventory, fixed assets and with regard to sale of goods and services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal controls.

v) (a) According to the information and explanations provided to us, particulars of the contracts or arrangement referred to in Section 301 of the Act have been entered in the register required to be maintained under that section.

(b)In our opinion and according to the information and explanations given to us, the transaction made in pursuance of contracts or arrangements entered into the register maintained under Section 301 of the Act and exceeding five lacs in respect of any party during the year, have been made at prices which are resonable having regard to the prevailing market prices at the relevant time.

vi) The Company has not received or accepted any deposits during the year.

vii) The Company has an internal audit system which covers certain specific areas of operations/processes and therefore the scope thereof needs to be enlarged and the system followed needs to be further strengthened.

viii) On the basis of the records produced, we are of the opinion that prima facie the cost records and accounts prescribed by the Central Government under section 209 (1) (d) of the Companies Act, 1956 have been maintained. However, we have not carried out any detailed examination of such records with a view to determine whether they are accurate or complete.

ix) a) According to the information and explanations given to us and as per the records of the Company, the Company except for ESI as mentioned in Note No. 9(c) of the financial statements, tax deducted at source, Income Tax, excise duty, Professional Tax and sales tax where there were delays in depositing the dues to appropriate authorities is generally regular in depositing with appropriate authorities undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees' State Insurance, Professional Tax, Wealth tax, Custom Duty, Cess and other material statutory dues applicable to it. However, according to the information and explanations given to us, there is no undisputed amounts payable in respect of these which were in arrears, as at 31st March 2012 for a period of more than six months from the date they became payable.

b) According to information and explanations given to us, there are no dues of Sales Tax, Income Tax, Customs Duty, Wealth Tax, Excise Duty and Cess which have not been deposited on account of any dispute except as given below:

Statute Nature Forum where Period to Amount of Tax dispute is which in '000 pending related

West Bengal Sales Tax Revisional 2004-05 1430 Sales Tax Board Act, 1995

West Bengal Sales Tax Additional 2008-09 2198 Value Added Commissioner Tax, 2003

Central Sales Sales Tax Revisional 2003-04 2004-05 3071 Tax Act, 1954 Commissioner and 2005-06

Central Sales Sales Tax Additional 2008-09 322 Tax Act, 1954 Commissioner

Income Tax Income Tax Appeal to be A.Y. 2006-07 1348 Act, 1961 filed in the High Court

x) The Company does not have any accumulated losses at the end of the financial year. The Company has not incurred cash losses in the current financial year and in the immediately preceding financial year.

xi) According to the information and explanation given to us, the Company has not defaulted in repayment of dues to banks and financial institutions.

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

xiii) In our opinion, the company is not a chit fund or a nidhi mutual benefit fund/society. Therefore the provision of clause 4(xiii) of the said order are not applicable to the company.

xiv) The Company is not dealing / trading in securities.

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

xvi) As per the information and explanations given to us and based on the documents and records produced to us in respect of fresh term loan raised during the year, the Company has been applied for the purpose for which they were raised.

xvii) According to the information and explanations given to us and on 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.

xviii) The Company has not made any preferential allotment of shares to parties and companies required to be covered in the register maintained under section 301 of the Act.

xix) The Company does not have any outstanding debentures during the year.

xx) The Company has not raised any money through a public issue during the year.

xxi) During the course of our examination of books of accounts carried out in accordance with generally accepted auditing practices in India, we have neither come across any incidence of fraud on or by the company nor have we been informed of any such case by the management.

2. Attention is invited to the following Notes as given in the financial stetements regarding:

(a) Rental demands on the Company amounting to Rs. 228.97 lacs, pending decision of the Court exact status of liability is presently not ascertainable. (Note 9(a))

(b) Payment of managerial remuneration amounting to Rs. 5043 ('000) (including Rs. 3161 ('000) for the year) is subject to approval of the Central Government. (Note 23(a))

3. We further report that overall impact with respect to the Notes given in paragraph (2) above cannot be ascertained and commented upon by us.

4. Further to the 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) The Balance Sheet, the Profit & Loss Account and Cash Flow Statement dealt with by this Report are in agreement with the books of account;

(c) 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 the books;

(d) In our opinion, the Statement of Profit & Loss Account, Balance Sheet and Cash Flow Statement prepared by the Company comply with the various Accounting Standards referred to in Sub-section 3(c) of Section 211 of the Act;

(e) On the basis of written representations received from the directors and taken on record by the Board of Directors, we report that none of the directors of the Company is disqualified as on 31st March 2012 from being appointed as a director under Section 274(1)(g) of the Act;

(f) In our opinion and to the best of our information and according to the explanations given to us, subject to our remarks as given in para 2 above whereby as given in para 3 above, we are unable to ascertain and indicate the impact thereof on these accounts and Note 8(a) to the financial statements regarding non availability of details relating to Micro, Small and Medium Enterprise Development Act, 2000 and read together with the other notes thereon, these accounts 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 Balance Sheet, of the State of Affairs of the Company as at 31st March, 2012;

(b) in the case of Profit & 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.

For Lodha & Co.

Chartered Accountants

Firm ICAI Registration No. : 301051E

H. S.Jha

Place : Kolkata Partner

Date : 4th May, 2012 Membership No. 55854

 
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