Auditor Report of Gem Spinners India Ltd.

Mar 31, 2015

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

Management's Responsibility for the Financial Statements.

The 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 and presentation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Principles generally accepted in India, including the Accounting Standards specified under Section 133 of the act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility includes maintenance of adequate accounting records in accordance with the provisions of the act for safeguarding the assets of the company and for preventing and detecting frauds and other irregularities, selection and application of appropriate accounting policies making judgments and estimates, that are reasonable and prudent and the design, implementation and maintenance of adequate 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 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 that ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company's preparation of the financial statements that give 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 operating effectiveness of the such control. An audit also includes evaluating the appropriateness of 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 financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the company as at 31st March 2015, its Profit / loss and its cash fl ow 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 of India in terms of sub-section (11) of section 143 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 3 and 4 of the Order.

2. As required by section 143(3) of the Companies Act 2013, we 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, the statement of Profit and loss, and the cash flow statement dealt with by this Report are in agreement with the books of account.

d) In our opinion, the Balance Sheet, Statement of Profit and Loss & the Cash Flow Statement comply with the Accounting Standards specified under the Section 133 of the act, read with rule 7 in 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 sub- section (2) of section 164 of the act.

f) 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 is not having any pending litigations on its financial position in its financial statements for the year ending 31st March 2015;

ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts;

iii. There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company.

The Annexure referred to in Our Independent Auditors' Report to the members of the company on the financial statements for the year ended 31st March 2015, we report that

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

(b) The company has a regular program of physical verification of its fixed assets by which all fixed assets are verified in a phased manner at reasonable intervals by the management. According to the information and explanations given to us, no material discrepancies where observed by the management on such verification.

(ii) (a) The stock of inventory has been physically verified by the management at reasonable intervals during the year. In our opinion the frequency of Verification is reasonable.

(b) In our opinion and according to the information and explanations given to us the procedures of physical Verification of inventory followed by the management are reasonable and adequate in relation to the size and nature of its business.

(c) The company is maintaining proper records of inventory. No material discrepancy was noticed on such physical verification.

(iii) According to the information and explanations given to us and on the basis of our examination of the books of accounts, 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. Consequently the provisions of clause (iii) (a) (b) and (c) are not applicable to the company.

(iv) In our opinion and according to the explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business, with regard to purchase of inventory and fixed assets and for the sale of goods and services. We have not observed any major weakness in the internal control system during the course of the audit.

(v) The company has not accepted any deposits from the Public during the year.

(vi) Central Government has prescribed maintenance of cost records under sub- section (1) of section 148 of the Companies Act and such accounts and records have been prepared and maintained by the company.

(vii)(a)According to the information and explanations given to us and on the basis of our examination of the records of the company, amount deducted or accrued in the books of account in respect of undisputed statutory dues including provident fund, income-tax, sales tax, wealth tax, service tax, value added tax, cess and other material statutory dues have been regularly deposited by the Company with the

appropriate authorities. As explained to us, the Company is having the following dues:

Name of Nature of Amount Period to Forum where the Statute dues which the dispute is amount pending relates

ESIC ESI 0.12 2014-15 ESIC

According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, income tax, sales tax wealth tax, service tax, value added tax, cess and other material statutory dues were in arrears as at 31st March, 2015 for a period of more than six months from the date they became payable.

(b) However, according to the information and explanations given to us, the following dues of income tax and employees' state insurance have not been deposited by the company on account of disputes.

Name of Nature of Amount Period to Forum where the Statute dues which the dispute is amount pending relates

Service Service Tax 58.60 2004-07, CESTAT Tax 2008-09, 2010-11 2011-12

Sales Tax Sales Tax 11.42 2005-06 Commercial to Tax 2009-10

(c) According to the information and explanations given to us, the amounts which were required to be transferred to Investor Education and Protection Fund in accordance with the relevant provisions of the Companies Act, 1956 (1 of 1956) and rules made there under has been transferred to such fund within time.

(viii) The Company has accumulated losses of Rs. 3262.15 lakhs as at March 31, 2015 and 3252.29 lakhs as at March 31, 2014 and has incurred cash Profit of Rs. 816.88 lakhs in the financial year ended March 31, 2015 as against a cash Profit of Rs, 220.47 lakhs in the immediately preceding financial year.

(ix) The company did not have any outstanding dues to financial institutions, banks during the year.

(x) In our opinion and according to the information and explanations given to us the company has not given any guarantee for loans taken by others from banks or financial institutions.

(xi) The Company did not have any term loans outstanding during the year.

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

For Vijay Sarathy & Co.,

Chartered Accountants

Firm Registration No: 004695S



P.Srikanth

Place: Chennai Partner

Date: 14.08.2015 M. No: 204279

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Mar 31, 2014

We have audited the accompanying financial statements of Gem Spinners India Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2014, 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 ("the Act") and in accordance with the accounting principles generally accepted in India. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with the 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:

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

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

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

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2003 ("the Order") issued by the Central Government of India in terms of 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 required by section 227(3) of the Act, we report that:

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

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

c. the Balance Sheet, 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 the Cash Flow Statement comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956; and

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 sub-section (1) of Section 274 of the Companies Act, 1956.

Annexure to the Independent Auditors'' Report

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

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:

1. (i) the company is maintaining proper records showing full particulars including quantitative details and situation of fixed assets.

(ii) the fixed assets are being physically verified under a phased programme of verification, which, in our opinion, is reasonable having regard to the nature and value of its fixed assets. However, no material discrepancies have been noticed during the year on such verification.

(iii) the company has not disposed off substantial part of its fixed assets during the year.

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

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

(iii) in our opinion, the company is generally maintain- ing proper records of its inventories and no material discrepancies were noticed on physical verification.

3. On the basis of our examination of the books of account, the Company has taken unsecured loan

from companies, firms or other parties covered in the register maintained under section 301 of the Act.

4. In our opinion, there is generally an 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. Further, on the basis of our examination of the books and records of the company, we have neither come across nor have been informed of any continuing failure to correct major weaknesses in the aforesaid internal control system.

5. (i) Based on the audit procedures applied by us, the particulars of contracts or arrangements referred to in Section 301 of the Act that needed to be entered into the register, maintained under the said section have been so entered.

(ii) Where each of such transactions is in excess of Rs.5 lakhs in respect of any party, the transactions have been made at prices which are prima facie reasonable having regard to the prevailing market prices at the relevant time.

6. The company has complied with the directives issued by the Reserve Bank of India and the provisions of Section 58A and 58AA or any other relevant provisions of the Act and the Companies (Acceptance of Deposit) Rules, 1975 with regard to deposits accepted from public.

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

8. We have broadly reviewed the cost records maintained by the Company pursuant to the

Companies (Cost Accounting Records) Rules, 2011 prescribed by the Central Government of India under Section 209(1)(d) of the Companies Act, 1956 and are of the opinion that prima facie the prescribed accounts and 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.

9. (i) The Company is generally regular in depositing

undisputed statutory dues including provident fund, investor education and provident fund, employees'' state insurance, income tax, sales tax, wealth tax, service tax, customs duty, excise duty, cess and other material statutory dues as applicable with the appropriate authorities during the year.

(ii) No undisputed amounts payable in respect of statutory dues were outstanding as at March 31, 2014 for a period of more than six months from the date they became payable.

(iii) There are no dues of Income tax, wealth tax, excise duty, service tax, customs duty which have not been deposited on account of any dispute. Details of dues towards sales / service tax that have not been deposited on account of any dispute, for which stay has been obtained, are (Nature of dues, dues, period to which the amount relates, forum where dispute is pending) - Service tax Rs. 50.10 Lakhs, Financial year 2004-07, 2008-09 & 2010-11, CESTAT. Sales tax 11.42 Lakhs, Financial year 2005-06 to 2008-09. Commercial tax.

10. The Company have an accumulated losses of Rs.3252.29 lakhs as at March 31, 2014 and Rs. 3242.10 lakhs as at March 31, 2013 and has incurred a cash profit of Rs.220.47 lakhs during the financial year ended March 31, 2014 and has incurred a cash loss of Rs.32.33 lakhs in the immediately preceding financial year.

11. In our opinion, the Company has not defaulted in repayment of dues to any financial institution, bank or debenture holders during the year.

12. The Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities during the year.

13. The Company is not a chit fund or Nidhi / mutual benefit fund/society. Accordingly the provisions of Clause 4(xiii) of the CARO are not applicable to the company.

14. The Company is not dealing or trading in shares, securities, debentures and other investments. Accordingly the provisions of clause 4(xiv) of the CARO are not applicable to the company.

15. The Company has not given any guarantees for loans taken by others from banks or financial institutions.

16. The term loans availed by the company were, prima facie, applied for the purpose for which they were obtained.

17. On an overall examination of the financial statements of the company, funds raised on short term basis have prima facie, not been used for long term investment.

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

19. The Company has not issued any debentures during the year.

20. The Company has not raised any money by public issues during the year.

21. Based on the audit procedures performed and considering the size and nature of the company''s operations, no fraud of material significance on or by the company has been noticed or reported during the year.

For Vijai Sarathy & Co., For CNGSN & Associates Chartered Accountants Chartered Accountants Firm Regn. No. 004695S Firm Regn. No. 004915S

Place : Chennai - 17 P.Srikanth C.N.Gangadaran Date : 12.08.2014 Partner Partner M. No. 204279 M. No. 11205

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Mar 31, 2013

Report on the Financial Statements

We have audited the accompanying financial statements of Gem Spinners India Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2013, 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 t of the Companies Act, 1956 ("the Act") and in accordance with.the accounting principles generally accepted in India. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor''s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with the 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:

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 loss of the Company for the year ended on that date; and

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

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2003 ("the Order") issued by the Central Government of India in terms of 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 required by section 227(3) of the Act, we report that:

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

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

c. the Balance Sheet, 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 the Cash Flow Statement comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956; and

Annexure to the Independent Auditors'' Report

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

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:

1. (i) the company is maintaining proper records showing full particulars including quantitative details and situation of fixed assets.

(ii) the fixed assets are being physically verified under a phased programme of verification , which, in our opinion, is reasonable having regard to the nature and value of its fixed assets. However, no material discrepancies have been noticed during the year on such verification.

(iri) the Company has not disposed off substantial part of its fixed assets during the year.

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

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

(iii) in our opinion, the company is generally maintaining proper records of its inventories and no material discrepancies were noticed on physical verification.

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.

3.- On the basis of our examination of the books of account, the Company has neither granted nor taken any loans, secured or unsecured, to / from companies, firms or other parties covered in the register maintained under section 301 of the Act.

4. In our opinion, there is generally an 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. Further, on the basis of our examination of the books 2nd records of the company, we have neither come across nor have been informed of any continuing failure to correct major weaknesses in the aforesaid internal control system.

5. (i) based on the audit procedures applied by us, the particulars of contracts or arrangements referred to in Section 301 of the Act that needed to be entered into the register, maintained under the said section have been so entered.

(ii) where each of such transactions is, in excess of Rs.5 lakhs in respect of any party, the transactions have been made at prices which are prima facie reasonable having regard to the prevailing market prices at the relevant time.

6. The company has complied with the directives issued by the Reserve Bank of India and the provisions of Section 58A and 58AA or any other relevant provisions of the Act and the Companies (Acceptance of Deposit) Rules," 1975 with regard to deposits accepted from public.

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

8. We have broadly reviewed the cost records maintained by the Company pursuant to the Companies (Cost Accounting Records) Rules, 2011 prescribed by the Central Government of tndia under Section 209(1 )(d) of the Companies Act, 1956 and are of the opinion that prima facie the prescribed accounts and 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.

9. (i) the Company is generally regular in depositing undisputed statutory dues including provident fund, investor education and provident fund, employees'' state insurance, income tax, sales tax, wealth tax, service tax, customs duty, excise duty, cess arid other material statutory dues as applicable with the appropriate authorities during the year.

(ii) no undisputed amounts payable in respect of statutory dues were outstanding as at March 31, 2013 for a period of more than six months from the date they became payable.

(iii) there are no dues of Income tax, wealth tax, excise- duty, service tax, customs duty which have not been deposited on account of any dispute. Details of dues towards sales tax that have not been deposited on account of any dispute, for which stay has been obtained, are (Nature of dues, dues, period to which the amount relates, forum where dispute is pending) Service Tax, Rs. 40.11 Lakhs, Financial year 2004 - 2007 & 2008 - 2009, CESTAT.

10. The Company have an accumulated losses of Rs.3242.10 lakhs as at March 31, 2013 and Rs. 3180.16 lakhs as at March 31,2012 has incurred cash loss of Rs. 32.33 Lakhs during the financial year ended March 3t, 2013 and has incurred a cash loss of Rs. 366.60 Lakhs in the immediately preceding financial year.

11. In our opinion, the Company has not defaulted in repayment of dues to any financial institution, bank or debenture holders during the year.

12. The Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities during the year.

13. The Company is not a chit fund or Nidhi / mutual benefit fund/society. Accordingly the provisions of Clause 4(xiii) of the CARO are not applicable to the company.

14. The Company is not dealing'' or trading in shares, securities, debentures and other investments. Accordingly the provisions of clause 4(xiv) of the CARO are not applicable to the company.

15. The Company has not given any guarantees for loans taken by others from banks or financial institutions.

16. The term loans availed by the company were, prima facie, applied for the purpose for which they were obtained.

17. On an overall examination of the financial statements of the company, funds raised on short term basis have prima facie, not been used for long term investment.

18. The Company has made a preferential allotment of Rs. 2 Crores equity shares during the year.

19. The Company has not issued any debentures during the year.

20. The Company has not raised any money by public issues during the year.

21. Based on the audit procedures performed and considering the size and nature of the company''s operations, no fraud of material significance on or by the company has been noticed or reported during the year.

By Order of the Board

For Gem Spinners-jndia Ltd

Place : Chennai - 86 A. Vani

Date : 27.05.2013 Company Secretary

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Mar 31, 2012

1. We have audited the attached Balance Sheet of Gem Spinners India Ltd, as at March 31, 2012 and the related Profit and Loss Account and Cash Flow Statement for the year ended on the date annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with 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 misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

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

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

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

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

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

d. In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Act;

e. On the basis of written representations received from the directors, as on March 31, 2012 and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2012 from being appointed as a Director in terms of Clause (g) of sub-section (I) of Section 274 of the Act;

f. In our opinion and to the best of our information and according to the explanations given to us, the said financial statements together with the notes thereon and attached thereto give in the prescribed manner the information required by the Act, 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 2012.

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 Cash Flow Statement, of the cash flow for the year ended on that date. ANNEXURE 'A' TO THE AUDITORS' REPORT

Referred to in paragraph 4 of the Auditors' Report of even date to the members of Gem Spinners India Ltd on the financial statements for the year ended 31st March, 2012.

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

(b) The fixed assets are physically verified by the management during the year and no material discrepancies were noticed on such verification as compared to the available records, which in our opinion, is reasonable having regard to the size of the Company and the nature of its assets.

(c) In our opinion and according to the information and explanations given to us, a substantial part of fixed assets has not been disposed off by the company during the year.

2. (a) The inventory (excluding stocks with third parties) has been physically verified by the management during the year and in our opinion, the frequency of verification was reasonable.

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

(c) (c) On the basis of our examination of the inventory records, in our opinion, the company is maintaining proper records of inventory. The discrepancies noticed on physical verification of inventory as compared to the book records which has been dealt with in the books of account were not material.

3. (a) The Company has not granted any loans, secured or unsecured from Companies covered in the register maintained under Section 301 of the Companies Act, 1956.

(b) The Company has not taken any loans secured or unsecured from Companies covered in the register maintained under Section 301 of the Companies Act, other than interest free unsecured loan from the Directors of the Company.

4. In our opinion and according to the information and explanations given to us, having regard to the explanation that certain items purchased/sold are of special nature for which suitable alternative sources do not exist for obtaining comparative quotations, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business for the purchase of inventory, fixed assets and for the sale of goods. Further, on the basis of our examination of the books and records of the Company, and according to the information and explanations given to us, we have neither come across nor have been informed of any continuing failure to correct major weaknesses in the aforesaid internal control procedures.

5. (a) In our opinion and according to the information and explanations given to us, the transactions that need to be entered into the register in pursuance of Section 301 of the Companies Act, 1956 have been so entered.

(b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements entered into the register in pursuance of Section 301 of the Companies Act, 1956 and exceeding the value of Rupees Five Lakhs in respect of any party during the year, have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time or the prices at which the transactions for similar goods have been made with other parties.

6. The Company has not accepted any deposits from the public within the meaning of Section 58A and 58AA of the Act and the rules framed there under.

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

8. We have broadly reviewed the books of account maintained by the Company in respect of products where, pursuant to the Rules made by the Central Government of India, the maintenance of cost records has been prescribed under clause (d) of sub-section (I) of Section 209 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 not, however, made a detailed examination of the records with a view to determine whether they are accurate or complete.

9. (a) According to the information and explanations given to us and the records of the Company examined by us, in our opinion, the Company is generally regular in depositing the undisputed statutory dues including provident fund, investor education and protection fund, employees' state insurance, income-tax, VAT, wealth tax, customs duty, excise duty, Service Tax, cess and other material statutory dues as applicable with the appropriate authorities.

10. The Company has accumulated losses as at March 31, 2012 and it has incurred cash losses in the financial year ended on that date but not incurred cash losses in the immediately preceding financial year.

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

12. The provisions of any special statute applicable to chit fund/nidhi/mutual benefit fund/societies are not applicable to the Company.

13. In our opinion the Company is not a dealer or trader in shares, securities, debentures and other investments.

14. In our opinion, and according to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions during the year.

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

16. On the basis of an overall examination of the balance sheet of the Company, in our opinion and according to the information and explanations given to us, there are no funds raised on a short- term basis, which have been used for long-term investment.

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

18. The Company has not raised any money by public issue during the year

19. During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of material fraud on or by the Company, noticed or reported during the year, nor have we been informed of such case by the management.



For Vijai Sarathy & Co., For CNGSN & Associates

Chartered Accountants Chartered Accountants

R. Parthasarathy C.N. Gangadaran Partner Partner

Place : Chennai - 600 017 Date : 06.08.2012

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Mar 31, 2010

1. We have audited the attached Balance Sheet of Gem Spinners India Ltd, as at March 31, 2010 and the related Profit and Loss Account and Cash Flow Statement for the year ended on the date annexed thereto. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with 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 misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

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

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

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

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

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

d. In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Act;

e. On the basis of written representations received from the directors, as on March 31, 2010 and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2010 from being appointed as a Director in terms of Clause (g) of sub-section (I) of Section 274 of the Act;

f. In our opinion and to the best of our information and according to the explanations given to us, the said financial statements together with the notes thereon and attached thereto give in the prescribed manner the information required by the Act, 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 2010

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 Cash Flow Statement, of the cash flow for the year ended on that date.

ANNEXURE A TO THE AUDITORS REPORT

Referred to in paragraph 4 of the Auditors Report of even date to the members of Gem Spinners India Ltd on the financial statements for the year ended 31st March , 2010.

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

(b) The fixed assets are physically verified by the management during the year and no material discrepancies were noticed on such verification as compared to the available records, which in our opinion, is reasonable having regard to the size of the Company and the nature of its assets.

(c) In our opinion and according to the information and explanations given to us, a substantial part of fixed assets has not been disposed off by the company during the year.

2. (a) The inventory (excluding stocks with third parties) has been physically verified by the management during the year and in our opinion, the frequency of verification was reasonable.

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

(c) On the basis of our examination of the inventory records, in our opinion, the company is maintaining proper records of inventory. The discrepancies noticed on physical verification of inventory as compared to the book records which has been dealt with in the books of account were not material.

3. a) The Company has not granted any loans, secured or unsecured from Companies covered in the register maintained under Section 301 of the Companies Act, 1956.

b) The Company has not taken any loans secured or unsecured from Companies covered in the register maintained under Section 301 of the Companies Act, other than interest free unsecured loan from the Directors of the Company.

4. In our opinion and according to the information and explanations given to us, having regard to the explanation that certain items purchased/sold are of special nature for which suitable alternative sources do not exist for obtaining comparative quotations, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business for the purchase of inventory, fixed assets and for the sale of goods. Further, on the basis of our examination of the books and records of the Company, and according to the information and explanations given to us, we have neither come across nor have been informed of any continuing failure to correct major weaknesses in the aforesaid internal control procedures.

5. (a) In our opinion and according to the information and explanations given to us, the transactions that need to be entered into the register in pursuance of Section 301 of the Companies Act , 1956, have been so entered.

(b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements entered into the register in pursuance of Section 301 of the Companies Act, 1956 and exceeding the value of Rupees Five Lakhs in respect of any party during the year, have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time or the prices at which the transactions for similar goods have been made with other parties.

6. The Company has not accepted any deposits from the public within the meaning of Section 58A and 58AA of the Act and the rules framed there under.

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

8: We have broadly reviewed the books of account maintained by the Company in respect of products where, pursuant to the Rules made by the Central Government of India, the maintenance of cost records has been prescribed under clause (d) of sub-section (I) of Section 209 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 not, however, made a detailed examination of the records with a view to determine whether they are accurate or complete.

9. (a) According to the information and explanations given to us and the records of the Company examined by us, in our opinion, the Company is generally regular in depositing the undisputed statutory dues including provident fund, investor education and protection fund, employees state insurance, income-tax, VAT, wealth tax, customs duty, excise duty, Service Tax, cess and other material statutory dues as applicable with the appropriate authorities.

10. The Company has accumulated losses as at March 31,2010 and it has incurred cash losses in the financial year ended on that date but not incurred cash losses in the immediately preceding financial year.

11. According to the records of the company examined by us and the information and explanations given to us, the Company has defaulted in repayment of dues to Financial Institution as at the balance sheet date.

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

13. The provisions of any special statute applicable to chit fund / nidhi / mutual benefit fund / societies are not applicable to the Company.

14. In our opinion the Company is not a dealer or trader in shares, securities, debentures and other investments.

15. In our opinion, and according to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions during the year.

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

17. On the basis of an overall examination of the balance sheet of the Company, in our opinion and according to the information and explanations given to us, there are no funds raised on a short-term basis, which have been used for long-term investment.

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

19. The Company is a sick company within the meaning of 3(1) (o) the Sick Industrial Companies (Special Provisions) Act 1985. As the networth of the company is fully eroded the Company made a reference to the Board for Industrial and Financial Reconstructions for registering the unit as "Sick" under the Sick Industrial Companies (Special Provisions) Act 1985.

20. The Company has not raised any money by public issue during the year

21. During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of material fraud on or by the Company, noticed or reported during the year, nor have we been informed of such case by the management.

For Vijai Sarathy & Co., For CNGSN & Associates

Chartered Accountants Chartered Accountants

Place: Chennai - 17 R. Parthasarathy C.N.Gangadaran

Date : 12.08.2010 Partner Partner