Auditor Report of Surana Industries Ltd.

Mar 31, 2015

We have audited the accompanying standalone financial statements of Surana Industries Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2015, 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 infor- mation.

Management's Responsibility for the Standalone Financial Statements

The Company's Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the preparation 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.

Auditor's Responsibility

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

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

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

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company's preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on whether the Company has in place an adequate internal financial 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 on the standalone financial statements.

Basis for Qualified Opinion

1. Capital work in progress relating to the Pelletisation and Beneficiation ("P&B") Project, stated in note 12 includes:

(a) Interest on borrowings aggregating to Rs. 407,645,055 (including Rs. 223,386,319 for the year) relating to the periods during which the project has been stalled, which is a departure from Accounting Standard 16 (AS-16) on "Borrowing Costs". Had the interest capitalized during the period in which the project was stalled been charged to the Statement of Profit & Loss, the loss for the year and, the Deficit in the Statement of Profit and Loss, will be higher by Rs. 407,645,055 and Capital Work in Progress will be lower by Rs. 407,645,055.

(b) Preoperative expenses incurred in relation to the project aggregating to Rs.6,835,660 (including Rs.1,982,051 for the year) relating to the periods during which the project has been stalled, which is a departure from Accounting Standard 10 (AS-10) on "Fixed Assets". Had such expenditure capitalized during the period in which the project was stalled been charged to the Statement of Profit & Loss, the loss for the year and the Deficit in the Statement of Profit and Loss, will be higher by Rs.6,835,660and Capital Work in Progress will be lower by Rs. 6,835,660.

2. Current investments include investments made in :

a. Surana Power Limited ("SPL"), a subsidiary, amounting to Rs. 4,185,000,000 valued at cost, in respect of which no operations have been carried out since August 2013 and its ongoing 2 X 210 MW power project has been stalled for want of additional funds.

b. Surana Mines and Minerals Limited ("SMML"), a wholly owned subsidiary based in Singapore, amounting to Rs. 584,826,430 valued at cost, in respect of which no financial statements or other information is available after March 31, 2014.

c. Surana Green Power Limited ("SGPL"), a wholly owned subsidiary amounting to Rs. 561,536,000 valued at cost.

As stated in note No. 13, the Company is planning to dispose these investments, which are stated at cost without assessment of their net realizable value. As per Accounting Standard 13 - Accounting for Investments, these investments should be valued at the lower of cost and net realizable value. In the absence of the net realizable value, we are unable to comment on the adjustments, if any, that may be required to the carrying value of the investments as at March 31,2015.

3. Attention is invited to note 16 relating to inventory aggregating to Rs. 2,586,942,410, the quantity, quality and realizable value of which were not assessed and determined. As per Accounting Standard 2- Inventories, these inventories should be valued at the lower of cost and net realizable value. In the absence of the net realizable value, we are unable to comment on the adjustments that may be required to the carrying values of these inventories as at March 31,2015.

Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matters described in paragraphs1 (a) and 1 (b), and the possible effects of the matters described paragraphs 2 and 3 in the Basis for Qualified Opinion paragraph above, the aforesaid standalone financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at March 31,2015, and its loss and its 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, 2015 ("the Order") issued by the Central Government in terms of Section 143(11) of the Act, we give in the Annexure a statement on the matters specified in paragraphs 3 and 4 of the Order.

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

(a) We have sought and except for the matters described in the Basis for Qualified Opinion paragraph, obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.

(b) Except for the effects of the matters described in paragraphs1 (a) and 1 (b), and the possible effects of the matters described in paragraphs 2 and 3 in the Basis for Qualified Opinion paragraph above, in our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books.

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

(d) Except for the effects of the matters described in paragraphs1 (a) and 1 (b), and the possible effects of the matters described in paragraphs 2 and 3 in the Basis for Qualified Opinion paragraph above, in our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

(e) The matters described in the Basis for Qualified Opinion paragraph above read with the matters stated in clauses (i), (ii),

(iv) and (ix)of the Annexure to the Auditor's Report referred to in paragraph 1 under 'Report on Other Legal and Regulatory Requirements' section of our report, 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 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.

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

(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. The Company has disclosed the impact of pending litigations on its fi- nancial position in its financial statements(Refer to Note 27B to 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 has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

ANNEXURE TO THE INDEPENDENT AUDITOR'S REPORT

(Referred to in paragraph 1 under 'Report on Other Legal and Regulatory Requirements' section of our report of even date)

(i) 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) During the year, the Company has not carried out a physical verification of its fixed assets. The Company does not have a regular programme for verification of its fixed assets.

(ii) In respect of its inventories:

a) As explained to us and read with our observations in paragraph 3 of the Basis for Qualified Opinion paragraph, the inventories were not physically verified / weighed during the year by the Management.

b) In our opinion and according to the information and explanations given to us and read with our observations in paragraph 3 of the Basis for Qualified Opinion paragraph, the procedures of physical verification of inventories followed by the Management were not reasonable and adequate and needs to be improved further taking into account the size of the Company and the nature of its business.

c) In our opinion and according to the information and explanations given to us, the Company has maintained records of its inventories. For the reasons stated in paragraphs (ii) (a) and (ii) (b)above and read with our observation in paragraph 3 of the Basis for Qualified Opinion paragraph we are unable to comment on the discrepancies noticed on physical verification of inventories and updation of inventory records.

(iii) The Company has not granted any loans, secured or unsecured, to companies, firms or other parties covered in the Register maintained under Section 189 of the Companies Act, 2013.

(iv) In our opinion and according to the information and explanations given to us, the internal control systems need to be strengthened to make it commensurate with the size of the Company and the nature of its business for the purchase of inventory and fixed assets and for the sale of goods and services and during the course of the audit, we have not observed any continuing failure to correct majorweaknesses in such internal control system.

(v) In our opinion and according to the information and explanations given to us, the Company has not accepted deposits from public during the year.

(vi) We have broadly reviewed the cost records maintained by the Company pursuant to the Companies (Cost Records and Audit) Rules, 2014, as amended and prescribed by the Central Government under sub-section (1) of Section 148 of the Companies Act, 2013 and are of the opinion that, prima facie, the prescribed cost records have been made and maintained. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

(vii) According to the information and explanations given to us in respect of statutory dues:

(a) The Company has not been generally regular in depositing undisputed dues, including Provident Fund, Employees' State Insurance, Income Tax, Sales Tax, Service Tax, Customs Duty, Value Added Tax, Excise Duty, Cess and other material statutory dues applicable to it with the appropriate authorities and there were inordinate delays in a number of cases in respect of Provident Fund, Tax Deducted at Source, Service Tax and Value Added Tax.

(b) There were no undisputed amounts payable in respect of Provident Fund, Employees' State Insurance, Income Tax, Sales Tax, Service Tax, Customs Duty, Value Added Tax, Excise Duty, Cess and other material statutory dues in arrears as at March 31, 2015 for a period of more than six months from the date they became payable, other than those disclosed below:

Name of Statute Nature of Dues Amount Involved (Rs.)

Provident Fund Provident Fund 1,445,879

Income Tax Act, 1961 Tax deducted at Source 1,276,094

Income Tax Act, 1961 Tax deducted at Source 54,499

Income Tax Act, 1961 Tax collected at Source 211,466

Finance Act, 1994 Service Tax 1,787,824

Finance Act, 1994 Service Tax 1,792,951

Total 6,568,713

Name of Statute Period to which the Due Date Amount Relates

Provident Fund Before March 31, 2014 Before March 31, 2014

Income Tax Act, 1961 Before March 31, 2014 Before March 31, 2014

Income Tax Act, 1961 April 2014 to August 2014 May 2014 to September 2014

Income Tax Act, 1961 Before March 31, 2014 Before March 31, 2014

Finance Act, 1994 Before March 31,2014 Before March 31, 2014

Finance Act, 1994 April 2014 to August May 2014 to September 2014 2014 (c) Details of dues of Employees' State Insurance, Excise Duty, Customs Duty, Value Added Tax and Central Sales Tax which have not been deposited as on March 31, 2015 on account of disputes are given below:

Period to Nature of Forum where which the Amount Name of Statute Dues Dispute is amount Involved Pending relates (Rs.) to

Employees' State Employee Insurance State Honourable Act, 1948 High 2010-11 6,111,988 Insurance Court of Chennai

Central Excise Central Commissioner 2006 13,832,710 Act, 1944 Excise of Central Excise, Com- missioner II, Chennai

Central Central Honourable 1999-2000 2,868,511 Excise Excise High Act, 1944 Court of Chennai

Central Central Appeal will 2013 2,800,000 Excise Excise be filed Act, 1944 before CESTAT, Bangalore

Central Central Honourable 1997-2000 9,388,727 Excise Excise High Act, 1944 Court of Chennai

Central Central Commissioner 2010 50,359,737 Excise Excise of Act, 1944 Central Excise, Com- missioner II, Chennai

Central Central Commissioner 2010 15,000,000 Excise Excise of Act, 1944 Central Excise, Com- missioner I, Chennai

Central Central CESTAT, 2011 235,265,808 Excise Excise Bangalore Act, 1944

Central Central Commissioner 2012-13 56,756,116 Excise Excise (Appeals) Act, 1944

Customs Act, Customs Honourable 1999-2000 2,086,066 1962 Duty High Court of Chennai

Customs Customs Honourable 1998-1999 782,445 Act, 1962 Duty High Court of Chennai

Customs Customs Honourable 2000-03 10,000,000 Act, 1962 Duty High Court of Chennai

Customs Customs Honourable 2005-06 13,829,000 Act, 1962 Duty Supreme Court

Various Value Honourab|e 2008-09 192,742 states High Court (Sales Tax Added Tax of Chennai Acts)

Various Value Honourable 2009-10 234,547 states High Court (Sales Tax Acts) Added of Chennai Tax

Various Value Writ filed 2006-07 to 181,785,401 states before (Sales Tax Acts) Added Tax Honourable 2010-11 and High Court Central Sales Tax, 1956 of Chennai

Various Value Pending 2007-08 & 10,867,454 states before Sales (Sales Tax Acts) Added Tax Tribunal 2008-09 Tax Gulbarga

Various Value Pending before 2010-11 858,052 states Added Tax Sales Tax (Sales Tax Tribunal Acts) Gulbarga

Various Value Honourable 2010-11 28,454,281 states Added High Court (Sales Tax Tax of Chennai Acts)

Various Value Honourable 2011-12 5,950,109 states Added High Court (Sales Tax Tax of Chennai Acts)

Various Value Honourable 2012-13 7,535,500 states Added High Court (Sales Tax Tax of Chennai Acts)

Various Value Honourable 2013-14 4,597,143 states Added High Court (Sales Tax Tax of Chennai Acts)

Total 659,556,337

(d) The Company has been regular in transferring amounts to the Investor Education and Protection Fund in accordance with the relevant provisions of the Companies Act 1956 (1 of 1956) and Rules made thereunder within time.

(viii) After considering the effect of our audit qualifications reported in paragraphs (1)(a) and (1)(b) of the Basis for Qualified Opinion of our Audit Report and without considering the possible effects of our audit qualifications reported in paragraphs (2) and (3) of the Basis for Qualified Opinion of our Audit Report which is not quantifiable, the accumulated losses of the Company at the end of the financial year are less than fifty per cent of its net worth and the Company has incurred cash losses during the financial year covered by our audit 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 dues to banks and financial institutions, as stipulated in the Master Re- structuring Agreement (MRA) (refer to note 5(i) of the financial statements) except that there has been a default in repayment of interest amounting to Rs.48,700,000 outstanding as at March 31, 2015 payable to a financial institution (refer to note 5 (iv) of the financial statements). The Company has not issued any debentures.

(x) In our opinion and according to the information and explanations given to us, the terms and conditions of the guarantees given by the Company for loans taken by others from banks and finan- cial institutions are not, prima facie, prejudicial to the interest of the Company.

(xi) In our opinion and according to the information and explanations given to us, the term loans have been applied by the Company during the year for the purposes for which they were obtained, other than temporary deployment pending application.

(xii) To the best of our knowledge and according to the information and explanations given to us, no fraud by the Company and no material fraud on the Company has been noticed or reported during the year.

For DELOITTE HASKINS & SELLS LLP Chartered Accountants (Firm's Registration No. 117366W/W-100018)

Sd/- Geetha Suryanarayanan Partner Date : May 30, 2015 (Membership No. 29519) Place : Chennai

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Mar 31, 2013

1. Report on the Financial Statements

We have audited the accompanying fnancial statements of Surana Industries Limited, which comprise the Balance Sheet as at March 31, 2013, and the Statement of Proft and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

2. Management’s Responsibility for the Financial Statements

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

3. Auditors’ Responsibility

Our responsibility is to express an opinion on these fnancial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Acccountants of India. Those Standards require that we co mply with e thical requirements and plan and perform the audit to obtain reasonable assurance about whether the fn a n cial statements are free from material mis- statement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fnan- cial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the fnancial statements, whether due to fraud or errror. In making those risk assess ments, the auditor considers internal control relevant to the Company’s pre p aratio n a n d fair p r e s entation o f the fnancial statements in order to design audit procedures that are appropriate in the circ umsta nces. An a udit also includesev aluating the appropriate n ess o f accounting policies usedand the rea- sonableness of the accounting estimates made by manage- ment, as well as evaluating the overall presentation of the fnancial statements.

We believe that the audit evidence we have obtained is suf- fcient and appropriate to provide a basis for our audit opinion / qualifed audit opinion / adverse audit opinion.

4. Opinion

In o ur op iniona nd to theb est of our informationand according to the explanations given to us, the financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

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

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

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

5. Repor to nO the Legal and Regulatory Requirements

1. As required by the Companies (Auditors’ Report) Order, 2003 ("the Order") issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Act, we give in the Annexure, a statement on the matters specifed 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 explana- tions which to the best of our knowledge and belief were necessary for the purpose of our audit;

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

c. the Balance Sheet, Statement of Proft and Loss, and C ash Flow Statement dealt with by this Re- port are in agreement with the books of account

d. in our opinion, the Balance Sheet, Statement of Pro ft and Los s, and Cash Flow Statem ent co m - ply with the Accounting Standards referred to in subsection (3C) of section 211 of the Companies Act, 1956;

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

ANNEXURE REFERRED TO IN POINT PARAGRAPH 5 (1) OF OUR REPORT OF EVEN DATE

i. a. The Company is maintaining proper Records showing full particulars, including quantitative details and situation of Fixed Assets.

b. Fixe d As sets were Physically Verifed during the year by the Management, with a programme of verifcation which in our opinion provides for physical verifcation of all the fxe da sse ts a t reasonable intervals.

c. As per information and explanations given to us, substantial amount of Fixed Assets have not been sold during the cu r rrent yea r afffecting the Going c o ncern assumption.

ii. In respect of its inventory:

(a) According to the information and explanations given to us, the inventories were physically verified during the year by the Management at reasonable intervals. Also the Material discrepancies have been properly dealt with in the books of accounts.

(b) In our opinion and according to the information and explanations given to us, the procedures of physical verifcation of inventories followed by the Management were reasonablea n d ad equate in relation to the sizeo f the Company and the nature of its business.

(c) In our opinion and according to the information and explanations given to us, the Company has maintained proper records of inventories.

iii. According to information and explanations given to us, the company has not granted / received any loans to parties / companies cove red u nder register maintained under section 301 of the Companies Act, 1956.

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 purchase of Inventories and Fixed Assets and for the Sa le of G oods and Services and we have not observe d anycon tinuing failure to correct major weaknesses in InternalC ontrols.

v. In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits fro m the public. We are informed by the Management that no order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal under Sections 58A and 58AA of the Companies Act, 1956.

vi. In our opinion, the Company has an adequate Internal Audit Systemc o m m ensurate with the size of the co mpany and the nature of its business.

vii. We have broadly reviewed the books of account and records maintained by the Company relating to the manufacture of steel, pursu ant to the R u les madeb y the C entral 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. We have, however, not made a detailed examination of the records with a view to determining whether they are accurate or complete.

viii. a) According to the information and explanations given to us, the Company has delayed in depositing undisputed statutory dues including Provident Fund, Employee State Insurance, Sales Tax, Service Tax, Customs Duty, Excise Duty, Income Tax, Cess and other material statutory dues with the appropriate authorities during the year. We are informed that the Company is not c overed under operation of the Employees’ State Insurance Act at Raichur location.

b) According to the information and explanations given to us undisputed amounts payable in respect of Service Tax of Rs.262132, Employee Provident Fund of Rs 252964 and Professional Tax of Rs 212950 were in arrears as at 31.3.2013 for a period of more than six months from the date of becoming payable. However the amounts have been subsequently remitted.

x. According Company does not have accumulated loss and has not incurred any Cash Loss during the current fnancial year of our audit and in the immediately preceding fnancial year.

xi. According to information and explanations given to us, the company has made delay in repayment of dues to Banks during the period J anuary 2013 to March 2013.

xii. According to the inf ormation and explanations given to us, 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 The provisions of clause 4 (xiii) of the Order relating to Chit Funds are not applicable to the Company.

xiv The Company is not dealing or trading in Shares, Security, Debentures and Other Investments.

xv According to the information and explanations given to us, the Company has given Guarantee for loans taken by Surana Green Energy limited to IFCI venture capital funds Limited for sanction of Loan amount of Rs 12.5 crores dur- ing the fnancial year. The company’s maximum liability is to thee xten t of Loan am ount and accumulatedou tstanding Interest.

xvi. To the best ofou r knowledge and belief and according to the information a nd explanations given to us, in our opinion, term loans availed by the company were, prima facie, applied bythec o mpanyd uring the year, for the purpose for which the loans were obtained, other than temporary deployment pending application.

xvii. According to the information and explanations given to us and o n a n o verall e xamin ation of the Balance Sheet of the Company, funds raised on short term basis have, prima facie, not been used during the year for long term invest- ment.

xviii. Accordin g to the information and explanations given to us, the Company has not made preferential allotment of Shares to parties covered under section 301.

xix. The Company ha s not issued debentures during the year and th erefore the question of creating security or charge in respect thereof does not arise.

xx. The Company has not m ade public issue of securities during theyear a n d the refore the question of disclosing the end- use of money raised by way of public issue does not arise.

xxi. During the course of our examination of the books and recordso f the co mpany, carried out in accordance with the generally accepted auditing practices in India, and according to the inform ation and explanations given to us, we have not come across a ny instanceo f material fraud on or by the company, noticedo r reported during the year.

As per our report of even date attached.

For C.S.P.JAIN & CO., For R.SUbRAMANIAN & COMPANY

Chartered Accountants Chartered Accountants

C.S.PRITHVIRAJ JAINA S. RAMATHAN

Proprietor Partner

M No. 11529 M. No : 11072

Firm No : 001227S Firm No: 004137S

Place:Chennai

Date :29-05-2013

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Mar 31, 2012

1. We have audited the attached Balance Sheet of SURANA INDUSTRIES LIMITED, as at 31st March 2012, the Profit and Loss Account for the year ended on that date and the Cash Flow Statement for the year ended on 11 date both annexed tinkered. 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 reason Cie assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence sup porting the amounts and disclosures in the financial statements. An audit also includes assessing the account principles used and significant estimates made by management, as well as evaluating the overall financial tenement 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 Indie in terms or sub-section (4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order to the extent applicable.

4. Further to for comments in the Annexure referred to in paragraph (3) above, we report that:

(a) We had 0xtell the information and explanations, which the the best of our knowledge and belied were necessary for the purposes of our audit;

(b) In our opinion, proper books of account as required by law have been kept fly the Company so for as appears from our examination of the books;

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

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

(e) On the basis on written representations received from the directors, as on 31st March, 2012 and taken on record by the Board of Directors, we report that none of the directions is disqualified as on 31st March, 2012 from booing appointed as a director in terms of clause (g) of7 sub-section (1) of Sedation 274 of the Companies Are 1056.

(f) In our opinion, and to the best of our information and according to the explanations given to us, they said accounts 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 31st March, 2012;

(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 the Cash Flow Statement, of the cast flews for the year ended on that date.

M/s SURANA INDUSTRIES LIMITED

[Referred to in paragraph (3) of our report of even date]

The nature of the Company's business/activities during the year is such that clauses (xii), (xiii) and (xiv) of paragraph 4 of the Companies (Auditor's Project) Order, 2003 are not applicable to the Company

(i) (a) The Company is maintaining proper records

which is being 2pdated showing full particulars including) quantitative details and situation of fixed assets.

(b) Fixed Assets have not been physically verified during the year by the Management. The management is and the process of preparing a programme for verification of all the fixed assets at reasonable intervals

(c) During the Year, the company has not disposed consubstantial part of Plant and Machinery.

(ii) (a) Accord to the information and explanations given to us, the company has conducted physical verification of inventories at reasonable intervals. No material discrepancies have been noticed on such Physical verification.

(b) In our opinion and according to the information anti explanations given to us, the procedures of ph mystical verification of inventories followed by the management were reasonable and adequate in relate to the size of the Company and the nature of7 its business.

(c) In our opinion and according to the information and explanations given to us, the Company has maintained piper records of the its

(iii) (a) The company has granted loans to his subsidiary's Mts. Surana Power Limited, M/s. Surana Green Power Limited, M/s. Suraoa Mines & Minerals Limited covered in the register maintained under section 301 of the Companies Act, 1956. Tire maximum amount involved during the year balance of loans granted to such patties was

(Amount in Rs)

1. Surana Power Ltd - 5,03,83,872

2. Surana Green Power Ltd. - 4,58,68,937

3. Surana Mines & Minerals Ltd. - 54,29,645

(b) In our opinion, the rate of interest and other terms and conditions of such loans are not, prim a facie, prejudicial to the interest of the company.

(c) The parties have repaid the principia amounts as stipulated and have also been retard in the payment of interest to the company.

(d) There is no overdue amount in excess of Rs. 5,00,000 art in respect of loans granted to companies firms or other parties listed in the register maintained under section 301 of7 the Companies Act 1956.

(e) The company had taken loan from three companies covered in the register maintained under section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs. 20 crores and the year-end balance of loans taken from such parties was Rs. NIL.

(f) in our opinion, the rate of interest and other terms and conditions on which loans have been taken from companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956 are not, prima facie, project.cia1 to the interest of the company.

(g) The company is regular in repay the principal amounts as stipulated and has been regular in the payment of interest.

(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 inventories and fixed assets and for the sale of goods and services and we have not observed any continuing faunae to correct major weaknesses in such internal contro1 system.

(V) (a) According to the information and explanations given to us, we are of the opinion that the particulars of all contracts or arrangements that need to be entered into the register maintained under section 301 of the Companies Act, 1956 have been so entered.

(b) 6 our opinion arid according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under section 301 op the Companies /Act, 1956 and exceeding the value of rupees five lakhs in respect of any party during the year have been made at prices which are reasonable having regard to prevailing market prices at the relevant time.

(vi) The Company has not accepted deposits from the Pubic.

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

(viii) We have broadly reviewed the books of account and records maintained by the Company relating to the manufacture or steel and electricity, pursuant to the Rules made by the Central Government for the maintenance of cost records under Section 209(1)(d) of the Companies Act, 1956 and are of7 the opinion that prima facie, the prescribed accounts and records have been made and maintained. We have, however, not made a detailed examination of the records with a view to determining whet ethyl are accurate or complete.

(ix) (a) According to the information and explanations given to us, the Company is generally regular in depositing undisputed statutory dues including Provident Fund Investor Education and Protection Fund, Income Tax, Sales Tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, Cess and other material statutory dues with the appropriate authorities snaring the year. We are informed that the Company is not covered under operation of the Employees' State Insurance Act at Richer location.

(b) According to the information and explanations given to us, nr undisputed amounts payable in respect of Income Tax, Wealth Tax, Sales Tax, Custom Duty, Excise Duty, Cess and other material statutory dues, were in arrears, as at 31st March, 2012 for a period of more than six months from the date they became payable.

(c) According to the information and explanations given to us, details of dues or sales tax, wealth tax, service tax, customs duty. excise duty and cess which have not been deposited as on 31st March, 2012 on account any disputer

period to

Name of the Statute (Nature of the which the Forum where matter is Amount Dues) amount pending relates

Excise Department

Compounded levy demanded by the Dept., from Sept.97 to Mar '00 under 1997 Rs.93,88,727 (Paid

Hon'ble High Court, Rule 5 of Hot Re-rolling Steel Mills 2000 Chennai Rs.33,48,742 as deposit in annual capacity Determination the year 2004- 2005 (amendment rule 1997)

1999- Hon'ble High Court, Rebate Claim Rs.28,68,511/- 2000 Chennai

Commissioner of Central Rs.88,32,710 (Paid

Shortage of Material 2005 Excise, Commissioners II, Rs.88,32,710 in the year Chennai 2007 - 2008)

Commissioner of Central

Supply to SEZ Developers 2010 Excise, Commissioners II, Rs.5,03, 59,737/-

Chennai

Commissioner of Central

Detention of Material 2010 Excise, Commissioners I, Rs.1,50, 00,000/-

Chennai

Reversal of Cenvat Credit 2011 CESTAT Bangalore Rs.11,76, 32,904/-_

Customs Department

2000 - Hon'ble High Court,

Penalty levied by DRI Intelligence 2003 Chennai ' Rs.1,00, 00,000/-

Misclassification of material 2005- Hon'ble Supreme Court 2006 Rs.1,38, 29,000/-

Income Tax Department 1995 - Won the case before Rs.66,50. 190 (Peid

Disallowances of lease rental paid to 1996 to ITAT, pending before the Rs.32,31,967 during the

NBFCs 1997 - assessing officer for year 2006 - 2007) 1998 revision order

Sales Tax Department Writ is being filed before Reversal of Input VAT credit on sales 2010-11 Hon'ble Madras High Rs. 4,03, 12,000 made to SEZ developers . court

(x) The company does not have any accumulated losses and not incurred cash loss during the financial year covered by our audit and in the immediately preceding financial year.

(xi) In our opinion and according to the information and explanations given to us, the Company has not defaulted in copayment of dues to financial institutions, banks or debenture holders.

(xii) In our opinion and according to information and explosions given to us, the terms and conditions of the guarantees given by the Company for loans tauten by others from banks or financial institutions.

(xiii) To the best of our knowledge and operand according to the information and explanations given to us, in our opinion, terns loans availed by the Company were, prima facie, applied the Company doing the year for the purposes for which the loans were obtained.

(xiv) According the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, funds raised on short-term basis have, prima facie, not been used during the year for long term investment.

(xv) No preferential allotment of shares was made during the current year to the Parries / Companies covered under the register maintained 301 the Companies act.

(xvi) According to the information and explanations given to us and the records examined by us, the Company has not issued any Debentures during the year.

(xvii)During the period covered by our audit report, the Company has not raised any money by public issue.

(xviii) To the best our knowledge and belief and according to the information and explanations given to use no fraud on or by the Company was noticed or reported during the year.

For R. SUBRAMANIAN & COMPANY

Chartered Accountants, for C.S.P JAIN & CO

Chartered Accountants

A. S. RAMANATHAN

Partner

Membership No.: 11072 C.S.PRTHVRAJ JAN

Firm No : 004137S Proprietor

Membership No. 11529

Place : Chennai Firm No. 001227S

Dated : 28th May, 2012

---

Mar 31, 2010

1. We have audited the balance sheet of Surana power limited as on 31st march 2010 and cash flow for the period April 2009 to March 2010 annexed thereto. The financial statements are the responsibility of the management. Our responsibility is to express an opinion on these financial statements based on our audit. No profit and loss account has been prepared since the company is yet to commence its revenue operations and necessary details as per part II of schedule VI of the companies Act, 1956 have been disclosed in schedule 9 as "Project development expenditure".

2. We have conducted our audit in accordance with the auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. Audit also includes assessing of assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall performance of financial statement preparation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditors Report) Order, 2003, issued by the Central Government 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.

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

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

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

iii) The Balance Sheet and Cash Flow statement dealt with by this report are in agreement with the books of account;

iv) In our opinion, the Balance Sheet and Cash Flow statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956;

v) On the basis of the written representations received from the directors as on March 31,2010 and taken on record by the board of directors, we report none of the directors is disqualified as on March 31,2006 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956;

vi) In our opinion and to the best of our information and according to the explanations given to us, the said accounts together with the notes thereto, give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31,2010; and

b) In the case of the Cash Flow statement, of the cash flows for the period April 1st 2009 to March 31st 2010.

ANNEXURE TO THE AUDITORS REPORT M/s SURANA POWER LIMITED

1. In respect of the fixed assets, The Company is setting up a power plant at Raichur. The plant is at the stages of completion. The fixed asset register is to be updated. The company has not disposed off major portion of the fixed assets during the year. Physical verification of the assets was carried out by the management in accordance with the system of periodical verification of the fixed assets once in two/three years. In our opinion the frequency of verification is reasonable considering the size of the company and nature of the industry. According to the information and explanations given to us, no material discrepancies were noticed on such verification.

2. In respect of inventory, the company does not have any inventory. Therefore the provisions of clause 4 (ii) of the companies (Auditors Report) order 2003 are not applicable to the company

3. According to the information and explanation given to us the company has not granted nor taken any loan secured or unsecured to or from companies, firms or other parties covered in the register maintained under section 301 of the companies act, 1956.

4. In our opinion and according to the information and explanations given to us, there is an internal control system to commensurate with the size of the company and the nature of business and for purchase of fixed assets. During the financial period the company did not undertake any activity of purchase of inventory and sale of goods and services. During the course of the audit we have not observed any major weakness in the internal control system.

5. The company has not accepted any deposits from the public during the period.

6. As per the information and explanation made available to us, the maintenance of cost records have not been prescribed by the central government under clause (d) of subsection (1) of section 209 of the companies act 1956.

7. According to the records of the company, the company is generally regular in depositing with appropriate authorities undisputed statutory dues.

8. According to the records of the company, there are no dues in respect of disputed liability in respect of provident fund, sales tax, wealth tax, customs duty, service tax and other statutory dues which has not been disposed on account of dispute

9. The company does not have any accumulated losses at the end of the year and the company has not incurred any cash losses during the period

10. According to the information and explanation given to us the company has not defaulted in repayment of dues to any financial institution, banks or debenture holders.

11. Based on our examination of the documents and records, the company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

12. The company is not a chit fund/ nidhi/ mutual benefit fund/ society to which special provisions of a special statue relating to chit fund are applicable. Therefore, the provisions of clause 4 (xiii) of the Companies (Auditors Report)Order, 2003 are not applicable to the company

13. Company is not engaged in dealing or trading in shares, securities, debentures and other investments.

14. According to the information and explanation given to us the company has not given guarantee for the loans taken by others from bank or financial institution

15. In our opinion and according to the information and explanation given to us, on an overall basis the term loans have been applied for the purpose for which they were obtained.

16. According to information and explanation given to us and based on the our examination of the books of account of the company, short term loan of Rs 100 crore

For R. Subramanian and company Chartered Accountants

A. S. Ramanathan

Partner

MN011072

Firm No 0041375

Place: Chennai Dated: 15-05-2010