Auditor Report of Dalmia DSP Ltd.

Mar 31, 2015

1. We have audited the accompanying financial statements of Kalyanpur Cements 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 information —

Management's Responsibility for the Financial Statements

2. The management and Board of Directors of the Company are responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ('the act') with respect to the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with rule 7 of Companies (Accounts) Rules, 2014. This responsibility 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; design, implementation and maintenance of adequate internal financial controls, that are 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

3. 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 there under. 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

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

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

Opinion

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

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

(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 of the Company for the year ended on that date.

Report on Other Legal and Regulatory Requirements

7. As required by the Companies (Auditor's Report) Order, 2015 ("the Order") issued by the Central Government of India in terms of sub-section (11) of section143 of the Act, we give in the Annexure a statement on the matters Specified in paragraphs 3 and 4 of the Order.

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

a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the 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 aforesaid financial statements comply with the applicable Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules 2014

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

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

i. The Company has pending litigations which impact its financial position.

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

iii. There has not been an occasion in case of the Company during the year under report to transfer any sums to the Investor Education and Protection Fund.

Emphasis on Matters

(i) As stated in para 1.1 and 1.2 of Note 19 to the Balance Sheet, the claims of BSEB are disputed in respect of 33 KV and 132 KV power connections. The nature of dispute & the details relating thereto have been explained in the above paragraphs of Note 19.

(ii) In terms of para 4 of Note 19 to the Balance Sheet, Documents and papers relating to all the immovable properties including land at Banjari are deposited with IFCI Ltd. Which assigned its loan earlier granted to the Company to Arcil - Kalyanpur Cements Ltd. Trust.

(ill) Without qualifying our opinion, though the accounts have been drawn on going concern concept, the accumulated losses at the end of current financial year considering the loss of Rs. 3470.84 Lacs for the year amount to Rs. 34669.64 Lacs against the capital and reserve of Rs. 4836.54 Lacs which leaves a negative networth of Rs.29833.10 Lacs. In view of this negative networth, ability of the Company to continue as a going concern is dependent upon the Company's performance after the scheme sanctioned by BIFR. Reference may be made to clause no. (x) Of annexure to Auditors Report read with para 5 of Note 19 to the Balance Sheet.

Annexure referred to in paragraph 7 Our Report of even date to the members of Kalyanpur Cements Limited ("the Company") on the accounts of the company for the year ended 31 st March, 2015

On the basis of such checks as we considered appropriate and according to the information and explanations given to us during the course of our audit, we report that:

(i) According to the information and as explained to us :

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

b) The fixed assets have been physically verified by the management at reasonable intervals and material discrepancies, if any, have been properly dealt with in the books of account.

(ii) According to the information and as explained to us :

a) Physical verification of inventory has been conducted at reasonable intervals by the management.

b) 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 is maintaining proper records of inventory and no material discrepancies were noticed on physical verification

(iii) The company has not granted any loans, secured or unsecured to/from companies, firms or other parties covered in the register maintained under section 189 of the Act.

(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 Conv„ iy and the nature of its business, for the purchase of fixed assets and for the sale of goods. Further, on the basis of our examination of the books and records of the Company and according to the information and explanations given to us, no major weakness has been noticed or reported.

(v) The Company has not accepted any deposits from the public covered under Section 73 to 76 of the Companies Act, 2013.

(vi) The Company is required to maintain cost records in respect of clinker and cement production. We have broadly reviewed the books and prima facie it appears to us that the books and records are maintained. We have, however, not made a detailed examination of the books to ascertain if they are correctly maintained.

(vii) According to information and as explained to us, there have been delays in depositing undisputed statutory dues including Provident Fund, Employees' State Insurance, Income-tax, Value added tax, Service Tax, Excise Duty, cess and other statutory dues with the appropriate authorities. The extent of arrears as on 31st March, 2015 in respect of dues over six months are as below

a) Royalty on Limestone & Cement Cess - Rs. 1612.90 Lacs

As per information and explanation received, Royalty dues including the dues as per BIFR sanctioned scheme amount to Rs. 1612.90 Lacs .

b) Cement Regulation Account - Rs.208.23 Lacs

The above dues of Cement Regulation Account have been settled in the Scheme sanctioned by BIFR and are payable as per the sanctioned scheme. It has been explained that Company has challenged the said dues in the Hon'ble Delhi High Court and the case is yet to be decided.

c) Provident Fund, EPS - Rs.1530.28 Lacs

d) Tax deducted at Source (TDS) - Rs. 201.88 Lacs

e) VAT dues for the F.Y. 2014-15 - Rs. 1983.95 lacs All the dues except at (b) above are undisputed.

According to information and as explained to us, there has been no instance wherein Income Tax or Sales

Tax or Wealth Tax or Service Tax or duty of Custom or duty of Excise or Value Added Tax or Cess have not been deposited on account of dispute.

There has not been an occasion in case of the Company during the year under report to transfer any sums to the Investor Education and Protection Fund. .

(viii) According to the information and as explained to us, the accumulated losses at the end of financial year are not less than fifty percent of its net worth. It has made Cash Loss in the current as well as in the immediately preceding financial year.

(ix) Some default has taken place in payment of the Central Excise loan of the Government of India disbursed through IFCI Ltd. as referred to in Note 4 to the Balance Sheet.

(x) In our opinion, and according to the information and explanations given to us, the Company has not given any guarantee for loan taken by others from a bank or financial institution during the year.

(xi) In our opinion, and according to the information and explanations given to us, the company has not raised any term loan during the year.

(xii) During the course of our examination of the books and records of the company, carried in accordance with the auditing standards generally accepted in India, we have neither come across any instance of fraud on or by the Company noticed or reported during the course of our audit nor have we been informed of any such instance by the Management.

For M Mukerjee & Company Chartered Accountants

Spandan Sengupta Partner Membership No. 135833 Firm Registration No. 303013E Place: Patna Date: 22.05.2015

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Mar 31, 2014

Report on the Financial Statements

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

Management''s Responsibility for the Financial Statements

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. 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, wherever due to fraud or error.

Auditor''s Responsibility

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

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

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

Opinion

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

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

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

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

Report on Other Legal and Regulatory Requirements

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

2. As stated in para 1.1 and 1.2 of Note 19 of the Balance Sheet, the claims of BSEB are disputed in respect of 33 KV and 132 KV power connections. The extent and nature of disputes as well as the financial implication, if not resolved as antticipated, have been explained by the Management in the said Note.

3. In terms of para 4 of Note 19 to the Balance Sheet, Documents and papers relating to all the immovable properties including land at Banjari are deposited with IFCI Ltd. which assigned its loan earlier granted to the Company to Arc''ll - Kalyanpur Cements Ltd. Trust.

4. Without qualifying our opinion, though the accounts have been drawn on going concern concept, the accumulated losses at the end of current financial year considering the loss of Rs. 3119.28 Lacs for the year amount to Rs. 31198.80 Lacs against the capital and reserve of Rs. 4836.54 Lacs which leaves a negative networth of Rs. 26362.26 Lacs. In view of this negative networth, ability of the Company to continue as a going concern is dependent upon the Company''s performance after the scheme sanctioned by BIFR. Reference may be made to clause no. (x) of annexure to Auditors Report read with para 5 of Note 19 to the Balance Sheet.

5. As required by section 227(3) of the Act, we report that:

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

b in our opinion proper books of account as required by law have been kept by the Company so far as appears from our examination of those books [and proper returns adequate for the purposes of our audit have been received from branches not visited by us;

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

d in our opinion, the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement comply with the Accounting Standards referred to in subsection (3C) of section 211 of the Companies Act, 1956;

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

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

ANNEXURE TO AUDITOR''S REPORT

(i) According to the information and as explained to us :

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

b) The fixed assets have been physically verified by the management at reasonable intervals and material discrepancies, if any, have been properly dealt with in the books of account.

c) . No substantial part of the fixed assets has been disposed off during the year.

(ii) According to the information and as explained to us :

a) Physical verification of inventory has been conducted at reasonable intervals by the management.

b) 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 is maintaining proper records of inventory and no material discrepancies were noticed on physical verification.

(iii) The Company did not grant any loan to Companies, firms or other parties covered under section 301 of the Act for which register has been maintained.

(iv) According to the information and as explained to us, there is an adequate internal control procedure 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. The Company reviews and monitors the internal control procedures and weaknesses of major importance which are addressed promptly.

(v) According to the information and as explained to us : .

a) The particulars of contracts or arrangements referred in section 301 of the Act have been so entered in the Register required to be maintained under that section.

b) Transactions made in pursuance of such contracts or arrangements including those which are above Rs. 5 lakhs per party per annum have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

(vi) According to the information and as explained to us, the Company has not accepted deposits from the public as defined in Sections 58A and 58AA or any other relevant provisions of the Act and the rules framed there under.

(vii) According to the information and as explained to us, the Company has an internal audit system commensurate with the size and nature of its business.

(viii) The Company is required to maintain cost records in respect of clinker and cement production. We have broadly reviewed the books and prima facie it appears to us that the books and records are maintained. We have, however, not made a detailed examination of the books to ascertain if they are correctly maintained.

(ix) According to information and as explained to us, there has been delays in depositing undisputed statutory dues including Provident Fund, Employees'' State Insurance, Income-tax, Sales-tax, Service Tax, Excise Duty, cess and any other statutory dues with the appropriate authorities. The extent of arrears as on 31st March, 2014 in respect of dues over six months are as below

a) Royalty on Limestone - Rs. 1342.20 Lacs

As per information and explanation received, Royalty dues including the dues as per BIFR sanctioned scheme amount to Rs. 1342.20 Lacs .

b) Cement Regulation Account - Rs. 208.23 Lacs

The above (dues of Cement Regulation Account have been settled in the Scheme sanctioned by BIFR and are pay able as per the sanctioned scheme. It has been explained that Company has challenged the said dues in the Hon''ble Delhi High Court and the case is yet to be decided.

c) Provident F und, EPS, - Rs. 1076.51 Lacs

d) Tax deducted at Source (TDS) - Rs. 233.92 Lacs All the dues; except at (b) above are undisputed.

(x) According to the information and as explained to us, the accumulated losses at the end of financial year are not less than fifty percent of its net worth. It has made Cash Loss in the current as well as in the immediately preceding financial year.

(xi) Some defaults have been taken place in payment of dues to Financial Institutions, Banks and Debentureholders as referred to in Note 4 to the Balance Sheet.

(xii) According to the information and as explained to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

(xiii) According to the information and as explained to us, provisions of any special statute applicable to chit fund are not applicable to this company.

(xiv) According to the information and as explained to us, the Company is not dealing or trading in shares, securities, debentures and other investment.

(xv) According to the information and as explained to us, the Company has not given any guarantee for loans taken by others from Banks or Financial Institutions.

(xvi) According to the information and as explained to us, the Company has obtained priority debt of Rs. 175.00 lacs during the year..

(xvii) According to the information and as explained to us, funds raised for short term basis have not been used for long term investment

(xviii) During the year the Company has not made any preferential allotment of shares to parties and companies covered in the Register maintained under section 301 of the Act.

(xix) The Company has not issued any debentures during the year.

(xx) According to the information and as explained to us, the Company has not raised any money by public issue during the year.

(xxi) According to the information and as explained to us, no fraud on or by the Company came either to the notice of the Company or to us.

24, Netaji Subhas Road M. MUKERJEE & CO. Kolkata-700 001 Chartered Accountants FRN : 303013E

Camp - Patna May 23, 2014 SPANDAN SENGUPTA Partner Membership No: 135833

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Mar 31, 2012

We have audited the attached Balance Sheet of KALYANPUR CEMENTS LIMITED as at 31 March, 2012 and also the annexed Profit and Loss Statement 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.

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

2. As required by the Companies (Auditor s Report) (Amendment) Order, 2004 issued by the Government of India in terms of Sub-section (4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraph 4 of the said Order.

3. i) As stated in para 1.1 and 1.2 of Note 19 to the Balance Sheet, the claims of BSEB are disputed in respect of 33 KV and 132 KV power connections. The extent and nature of disputes as well as the financial implication, if not resolved as anticipated, have been explained by the Management in the said Note.

ii) In terms of para 4 of Note 19 to the Balance Sheet, Documents and papers relating to all the immovable properties including land at Banjari are deposited with IFCI Ltd. which assigned its loan earlier granted to the Company to Arcil - Kalyanpur Cements Ltd. Trust.

iii) Without qualifying our opinion, though the accounts have been drawn on going concern concept, the accumulated losses at the end of current financial year considering the loss of Rs. 6097.51 Lacs for the year amount to Rs. 24546.35 Lacs against the capital and reserve of Rs. 4836.54 . Lacs which leaves a negative networth of Rs. 19709.81 Lacs. In view of this negative networth, ability of the Company to continue as a going concern is dependent upon the Company s performance after the scheme sanctioned by BIFR. Reference may be made to clause no. (x) of annexure to Auditors Report read with para 5 of Note 19 to the Balance Sheet.

4. Subject to Para 3(i) to 3(iii) above and further to our comments in the Annexure referred to in Paragraph 2 above, we report that

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

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

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

iv) In our opinion, and subject to our comments in Para 3(i) to 3(iii) the Balance Sheet, Profit & Loss Statement and the Cash Flow Statement dealt with by this report comply with the accounting standards, referred to in Sub-section (3C) of Section 211 of Companies Act, 1956.

v) On the basis of written representations received from the directors, as on 31st March,12 and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March 12 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 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 Balance Sheet, of the state of affairs of the Company as at 31st, March, 2012.

b. In the case of the Profit and Loss Statement, of the loss for the year ended on that date and

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

ANNEXURE TO AUDITOR S REPORT

(i) According to the information and as explained to us :

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

b) The fixed assets have been physically verified by the management at reasonable intervals and material discrepancies, if any, have been properly dealt with in the books of account.

c) No substantial part of the fixed assets has been disposed off during the year.

(ii) According to the information and as explained to us :

a) Physical verification of inventory has been conducted at reasonable intervals by the management.

b) 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 is maintaining proper records of inventory and no material discrepancies were noticed on physical verification.

(iii) The Company did not grant any loan to Companies, firms or other parties covered under Section 301 of the Act for which register has been maintained.

(iv) According to the information and as explained to us, there is an adequate internal control procedure 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. The Company reviews and monitors the internal control procedures and weaknesses of major importance which are addressed promptly.

(v) According to the information and as explained to us :

a) The particulars of contracts or arrangements referred in Section 301 of the Act have been so entered in the Register required to be maintained under that section.

b) Transactions made in pursuance of such contracts or arrangements including those which are above Rs. 5 lakhs per party per annum have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

(vi) According to the information and as explained to us, the Company has not accepted deposits from the public as defined in Sections 58A and 58AA or any other relevant provisions of the Act and the rules framed there under.

(vil) According to the information and as explained to us, the Company has an internal audit system commensurate with the size and nature of its business.

(viii) The Company is required to maintain cost records in respect of clinker and cement production. We have broadly reviewed the books and prima facie it appears to us that the books and records are maintained. We have, however, not made a detailed examination of the books to ascertain if they are correctly maintained.

(ix) According to information and as explained to us, there have been delays in depositing undisputed statutory dues including Provident Fund, Employees State Insurance, Income-tax, Value added tax, Service Tax, Excise Duty, Cess and other statutory dues with the appropriate authorities. The extent of arrears as on 31st March, 2012 in respect of dues over six months are as below

a) Royalty on Limestone " Rs. 633.69 Lacs

As per information and explanation received, Royalty dues including the dues as per BIFR sanctioned scheme amount to Rs. 633.69 Lacs .

b) Cement Regulation Account " Rs. 208.23 Lacs

The above dues of Cement Regulation Account have been settled in the Scheme sanctioned by BIFR and are payable as per the sanctioned scheme.

c) Provident Fund, EPS, " Rs.436.44 Lacs

d) Tax deducted at Source (TDS) - Rs. 104.13

All the dues are undisputed.

(x) According to the information and as explained to us, the accumulated losses at the end of financial year are not less than fifty percent of its net worth. It has made Cash Loss in the current as well as in the immediately preceding financial year.

(xi) Some defaults have taken place in payment of dues to Financial Institutions, Banks, Debenture holders and the Central Govt, as referred to in Note 3 & 4 to the Balance Sheet.

(xii) According to the information and as explained to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

(xiii) According to the information and as explained to us, provisions of any special statute applicable to chit fund are not applicable to this company.

(xiv) According to the information and as explained to us, the Company is not dealing or trading in shares, securities, debentures and other investment.

(xv) According to the information and as explained to us, the Company has not given any guarantee for loans taken by others from Banks or Financial Institutions.

(xvi) According to the information and as explained to us, the Company has not taken term loan during the year.

(xvii) According to the information and as explained to us, funds raised for short term basis have not been used for long term investment,

(xviii) During the year the Company has not made any preferential allotment of shares to parties and companies covered in the Register maintained under Section 301 of the Act.

(xix) The Company has not issued any debentures during the year.

(xx) According to the information and as explained to us, the Company has not raised any money by public issue during the year. 7

(xxi) According to the information and as explained to us, no fraud on or by the Company came either to the notice of the Company or to us.

M. MUKERJEE & CO.

Chartered Accountants

24, Netaji Subhas Road

Kolkata-700 001 (SPANDAN SENGUPTA)

Camp - Patna Partner

25th May, 2012 Chartered Accountant

Membership No : 135833 FRN-303013E

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Mar 31, 2010

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

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

2. As required by the Companies (Auditors Report) (Amendment) Order, 2004 issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraph 4 of the said Order.

3. (i) As stated in para B 1.1 of Schedule 16, the claims of BSEB are disputed in respect of 33 KV and 132 KV power connections.

The above disputes as informed by the Company are now nearing resolution as explained in para B 1.1 of Schedule 16.

(ii) As stated in Para B 1.2 of Schedule 16, the claims of Cement Regulation Account are disputed.

(iii) As stated in para B 1.4 of Schedule 16, sales tax liability amounting to Rs 439.25 lacs (including Rs 198.27 lacs of penalty and interest) is disputed.

(iv) In terms of Note B 13 of Schedule 16 to the Accounts, the documents relating to the title of all immovable properties including land at Banjari were deposited with IFCI Limited, which has assigned its loan earlier granted to the Company to ARCIL-Kalyanpur Cements Ltd Trust. Although documents and papers relating to the title of immovable properties could not be produced before us for our verification we were assured that the Company enjoyed peaceful possession of the said immovable properties.

(v) Pursuant to the Bihar Governments Notification SO No 174 dated 18th Oct04 granting sales tax exemption- for a period of five years, an amount equivalent to Rs 1207.11 Lacs for the year upto 17th October, 2009 was written back in the books of accounts of the company as on 31st March10. ( previous year Rs 7547.60 Lacs). However the Honble Supreme Court has dismissed the appeal of Bihar Government thereby upholding the eligibilty of the Company for sales tax exemption under the Industrial Policy, 1995. But the Supreme Court has also ordered the company to pay the sales tax to the Government of Bihar which was exempted earlier as aforesaid for five years. Hence the entire amount of Rs 8754.71 lacs written back since five years upto 17th Oct 2009 have been reversed by the Company and provided as liability in the current year which has the effect of increasing the accumulated losses to the extent mentioned in Para B 4 of Schedule 16 to the Accounts.

(vi) Without qualifying our opinion, though the accounts have been drawn on going concern concept, profit for the current year was Rs. 490.62 Lacs, which together with net carry forward loss of Rs. 18412.08 Lacs, as increased by reversal of write back of sales tax dues as mentioned in point 3 (v) above amounts to Rs. 25469.06 Lacs against the capital and reserve of Rs. 4836.54 Lacs leaving a negative networth, of Rs. 20632.52 Lacs. In view of this negative networth, ability of the Company to continue as a going concern is dependent upon the Companys performance after the scheme of compromise. Reference may be made to clause no. (x) of annexure of Auditors Report read with Note B15 of Schedule 16 to the Accounts.

4. Subject to Para 3(i) to 3(iv) above and further to our comments in the Annexure referred to in Paragraph 2 above, we report that

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

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

(iii) The Balance sheet, Profit and Loss Account and the Cash Flow statement dealt with by this report are in agreement with the books of account.

(iv) In our opinion, and subject to our comments in Para 3(i) to 3(v) the Balance Sheet, Profit & Loss Account and the Cash Flow Statement dealt with by this report comply with the accounting standards, referred to in sub-section (3C) of section 211 of Companies Act, 1956.

(v) On the basis of written representations received from the directors, as on 31st March; 10 and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March 10 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 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 Balance Sheet, of the state of affairs of the Company as at 31 March, 2010.

b. In the case of the Profit and Loss Account, of the profit for the year ended on that date and

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

ANNEXURE TO AUDITORS REPORT

(i) According to the information and as explained to us :

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

(b) The fixed assets have been physically verified by the management at reasonable intervals and material discrepancies, if any, have been properly dealt with in the books of account.

(c) No substantial part of the fixed assets has been disposed off during the year.

(ii) According to the information and as explained to us :

(a) Physical verification of inventory has been conducted at reasonable intervals by the management.

(b) 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 is maintaining proper records of inventory and no materia) discrepancies were noticed on physical verification.

(iii) The Company did not grant any loan to Companies, firms or other parties covered under section 301 of the Act for which register has been maintained,

(iv) According to the information and as explained to us, there is an adequate internal control procedure 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. The Company reviews and monitors the internal control procedures and weaknesses of major importance which are addressed promptly.

(v) According to the information and as explained to us :

(a) The particulars of contracts or arrangements referred in section 301 of the Act have been so entered in the Register required to be maintained under that section.

(b) Transactions made in pursuance of such contracts or arrangements including those which are above Rs. 5 lakhs per party per annum have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

(vi) According to the information and as explained to us, the Company has not accepted deposits from the public as defined in Sections 58A and 58AA or any other relevant provisions of the Act. and the rules framed there under.

(vii) According to the information and as explained to us, the Company has an internal audit system commensurate with the size and nature of its business.

(viii) The Company is required to maintain cost records in respect of clinker and cement production. We have broadly reviewed the books and prima facie it appears to us that the books and records are maintained. We have, however, not made a detailed examination of the books to ascertain if they are correctly maintained.

(ix) According to information and as explained to us, barring few exceptions, the Company generally is regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income-tax, Sales-tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, cess and any other statutory dues with the appropriate authorities. The extent of arrears as on 31st March, 2010 in respect of dues over six months are as below :-

(a) Sales Tax (Retained) - Rs. 2190.16 Lacs

Granted by State Government as per Industrial Policy 1989.

As per information and explanation received, the sales tax dues upto 30.09.02 have been stayed by the Honble Board for Industrial and Financial Reconstruction(BIFR). vide the order dated 20.09.2002. Such dues would be ordered to be recovered as per the Rehabilitation Scheme to be finalized by BIFR. In addition, BIFR, in the DRS circulated by it, has provided for payment of these dues in installments.

(b) Sales Tax Exemption amount - Rs. 7939.71 Lacs

BIFR, in the DRS circulated by it, has provided for payment of these dues in installments.

(c) Royalty on Limestone - Rs. 316.28 Lacs

As per information and explanation received, BIFR, in its DRS, has provided for payment of these dues in installments.

(d) Cement Regulation Account - Rs. 208.23

The above dues of Cement Regulation Account have been challenged in Delhi High Court.

All the dues except at (d) above are undisputed.

(x) According to the information and as explained to us, the accumulated losses at the end of financial year are not less than fifty percent of its net worth. It has made Cash Profit in the current financial year but cash loss in the immediately preceding financial year.

(xi) There has been no default in payments made to financial institutions, banks and debenture holders during the year.

(xii) According to the information and as explained to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

(xiii) According to the information and as explained to us, provisions of any special statute applicable to chit fund are not applicable to this company.

(xiv) According to the information and as explained to us, the Company is not dealing or trading in shares, securities, debentures and other investment.

(xv) According to the information and as explained to us, the Company has not given any guarantee for loans taken by others from Banks or Financial Institutions.

(xvi) According to the information and as explained to us, the Company has not taken term loan during the year.

(xvii) According to the information and as explained to us, funds raised for short term basis have not been used for long term investment

(xviii)During the year the Company has not made any preferential allotment of shares to parties and companies covered in the Register maintained under section 301 of the Act.

(xix) The Company has not issued any debentures during the year.

(xx) According to the information and as explained to us, the Company has not raised any money by public issue during the year.

(xxi) According to the information and as explained to us, no fraud on or by the Company came either to the notice of the Company or to us.

M. MUKERJEE & CO. Chartered Accountants

(RANA CHATTERJEE) Partner Membership No : 53209 Firm Registration No. 303013E

24, Netaji Subhas Road Kolkata-700 001

Camp - Patna 29th May, 2010