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Auditor Report of Tata Steel BSL Ltd.

Mar 31, 2017

INDEPENDENT AUDITORS'' REPORT

The Members of Bhushan Steel Ltd.

Report on the Standalone Ind AS Financial Statements

We have audited the accompanying standalone Ind AS financial statements of Bhushan Steel Ltd. ("the Company"), which comprise the Balance Sheet as at 31st March, 2017, and the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Cash Flows and the Statement of Changes in Equity for the year then ended, and a summary of the significant accounting policies and other explanatory information (herein after referred to as "Standalone Ind AS Financial Statements).

Management''s Responsibility for the Standalone Ind AS Financial Statements

The Company''s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these standalone Ind AS financial statements that give a true and fair view of the state of affairs (financial position), profit or loss (including other comprehensive income), cash flows and changes in equity of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) prescribed under section 133 of the Act read with rules issued there under.

This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone Ind AS financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor''s Responsibility

Our responsibility is to express an opinion on these standalone Ind AS 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 of the standalone Ind AS financial statements 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 standalone Ind AS financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the standalone Ind AS financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the standalone Ind AS 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 standalone Ind AS financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company''s Board of Directors, as well as evaluating the overall presentation of the standalone Ind AS financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone Ind AS financial statements.

Basis of Qualified Opinion

The Supreme Court of India, vide its order dated 24.09.2014, cancelled number of coal blocks allocated to various entities, which includes one coal block allocated to the company, which was under development. Subsequently, the Government of India has issued the Coal Mines (Special Provision) Act, 2015, which inter-alia deal with the payment of compensation to the effected parties in regard to investment in the coal blocks.

No effect has been taken on the value of investment made by the company in the de-allocated coal blocks amounting to ''56289.96 lacs (including expenditure incurred of ''13546.46 lacs and advance given of ''42743.50 lacs). In the opinion of the management, the company will receive back the payments / expenditure paid / made, including borrowing cost and other incidental expenditure, relating to de-allocated coal block. The company has filed its claim for compensation with the Government of India, Ministry of Coal. Subsequently, the company has filed a petition before the Hon''ble Delhi High Court for early recovery of amount, in which notice has been issued to the Union of India and the matter is still pending for disposal.

We are unable to comment on the impact on the value of investment made by the company in the de-allocated coal blocks and their consequent impact on the losses for the financial year ended March 31, 2017.

Qualified Opinion

In our opinion, and to the best of our information and according to the explanations given to us, except for the matter described in the Basis of Qualified Opinion paragraph above, the aforesaid standalone Ind AS 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 including the Ind AS, of the state of affairs of the Company as at 31st March, 2017, and its loss (including other comprehensive income), its cash flows and the changes in equity for the year ended on that date.

Emphasis of Matter

1. We draw attention on Note No. 50 to the Ind AS financial statements, which indicates that the company has negative net worth as at

31.03.2017. Further, it has incurred net cash losses of ''2,43,278 lacs in the current financial year and ''2,46,462 lacs in the immediate preceding financial year. The current liabilities of the company exceeded its current assets as at the balance sheet date by ''21,74,381 lacs. These conditions may cast doubt about the Company''s ability to continue as a going concern. However, the financial statements of the company are prepared on a going concern basis for the reasons stated in the said Note.

2. Indian Accounting Standard (Ind AS) - 101 requires to provide details of material adjustments relating to Balance Sheet and Statement of Profit and Loss in compliance to all applicable Ind AS in the Equity Reconciliation Statement as on 01.04.2015 and 31.03.2016 with respect of reported and restated figures; the company has disclosed net effect of these adjustments due to transition to Ind AS in the Equity Reconciliation Statement. (Refer Note No. 45 to the Ind AS financial statements)

Our opinion is not modified in respect of these matters.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2016 ("the Order") issued by the Central Government in terms of Section 143(11) of the Act, we give in "Annexure A" a statement on the matters specified in paragraphs 3 and 4 of the Order.

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

(a) We have sought and except for the possible effect of the matter described in the Basis of Qualified Opinion paragraph above, obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of

our audit;

(b) Except for the possible effect of the matter described in the Basis of Qualified Opinion paragraph above, 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 including other Comprehensive Income, the statement of cash flows and the statement of changes in equity dealt with by this Report are in agreement with the books of account;

(d) Except for the possible effect of the matter described in the Basis of Qualified Opinion paragraph above, in our opinion, the aforesaid standalone Ind AS financial statements comply with the Indian Accounting Standards specified under section 133 of the Act read with Rules issued there under;

(e) The matters described in the ''Basis of Qualified Opinion'' and ''Emphasis of Matter'' paragraphs above, in our opinion may have an adverse effect on the functioning of the Company;

(f) On the basis of written representations received from the directors as on March 31, 2017, taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2017, from being appointed as a director in terms of sub-section

(2) of Section 164 of the Act; whereas in fact, the company has defaulted in redeeming certain debentures on due date and in payment of interest thereon. However, according to information and explanations given to us, LIC has shown its willingness to restructure it as per S4A scheme of RBI vide its letter dated 12.04.2017. Meanwhile as per directions of RBI dated 13.06.2017, the lenders are considering to refer the matter of restructuring of borrowings to National Company Law Tribunal (NCLT) for final resolution.

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

(h) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in "Annexure B"; and

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

i. the Company has disclosed the impact of pending litigations on its financial position in its standalone Ind As financial Statements - Refer Note - 42 to the standalone Ind AS financial statements;

ii. the company has made provisions, as required under applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts - Refer Note - 43 to the standalone Ind AS financial statements;

iii. there has been no delay in transferring amounts, required to be transferred to the Investor Education and Protection Fund by the Company; and

iv. the Company has provided requisite disclosures in its standalone Ind AS financial statements as regards to holdings as well as dealings in Specified Bank Notes as defined in the Notification S.O. 3407(E) dt. 8th November, 2016 of the Ministry of Finance, during the period from 8^th November, 2016 to 30^th December, 2016. Based on audit procedure performed and the representation provided to us by the management, we report that the disclosure are in accordance with the books of account maintained by the Company as produced to us by the management. - Refer Note 11 to the standalone Ind AS financial statements.

The Annexure ''A'' referred to in our Independent Auditors'' Report to the members of the Company on the standalone Ind AS financial statements of Bhushan Steel Ltd. for the year ended 31st March, 2017, we report that:

(i) In respect of its property, plant and equipment:

(a) The Company is maintaining proper records showing full particulars including quantitative details and situation of property, plant and equipment on the basis of available information;

(b) The property, plant and equipment covering significant value were physically verified during the year by the management at such intervals which in our opinion, provides for the physical verification of all the property, plant and equipment at reasonable intervals having regard to the size of the Company and nature of its business. According to the information and explanations given to us, no material discrepancies were noticed on such verification;

(c) According to the information and explanations given to us and on the basis of our examination of the records of the Company, the title deeds of immovable properties are held in the name of company except in respect of guest house building at Mumbai having Gross block of Rs,74.00 lacs and Net block of Rs,65.64 lacs as at 31st March, 2017.

(ii) According to the information and explanations given to us, the inventory of finished goods, semi-finished goods and raw material at works were, during the year physically verified by the management. In respect of stores spare and stock at yards in the custody of the third party and stock in transit were verified with the confirmation or statement of account or correspondence of the third parties or certification by management or reports of inspection and different audits carried out by the banks. In our opinion and according to the information and explanations given to us, the interval of such physical verification is reasonable having regard to the size of the Company and nature of its business and according to the information and explanations given to us, no material discrepancies were noticed on such verification.

(iii) According to the information and explanations given to us, the Company has not granted secured or unsecured loan to a company, firm, LLP or other entity covered in the register maintained under Section 189 of the Companies Act, 2013. Accordingly, the provisions of sub-paragraph (a) and (b) of the Order are not applicable.

(iv) In our opinion and according to the information and explanations given to us, the Company has generally complied with the provisions of section 185 and 186 of Companies Act, 2013 with respect to the loans, investments, guarantees and security.

(v) According to the information and explanations given to us, the Company has not accepted any deposits during the year. Hence, the directives issued by the Reserve Bank of India and the provisions of section 73 to 76 or any other relevant provisions of the Companies Act, 2013 and the rules framed there-under are not applicable to the Company.

(vi) In our opinion and according to the information and explanations given to us, specified accounts and records as prescribed by the Central Government in terms of sub-section (1) of section 148 of the Companies Act, 2013 have been prima facie made and maintained by the company. However, we have not, nor we are required, carried out any detailed examination of such accounts and records.

(vii) (a) According to the information and explanations given to us and

on the basis of our examination of the records, the Company has generally been regular in depositing undisputed statutory dues including provident fund, employees'' state insurance, income-tax, sales-tax, service tax, duty of customs, value added tax, cess and any other material statutory dues with some delays to the appropriate authorities to the extent these are applicable except deposit of duty of excise, where payment is continuously irregular.

According to the information and explanations given to us, no undisputed dues were in arrears as at 31st March, 2017 for a period of more than six months from the date they become payable except dues of excise including interest of Rs,9,861.41 lacs and electricity duty of Rs,399.21 lacs.

(b) According to the information and explanations given to us, the following dues of sales tax, duty of excise, service tax, value added tax and other statutory dues have not been deposited by the Company on account of disputes:

Name of the Statute	Nature of Dues	Amount (Rs, In Lacs)	Period to which the amount pertains	Forum where the dispute is pending
The Central Excise Act, 1944	Excise Duty	55.80	April,2010 -March,2013	Commissioner (Appeals)
		133.83	April,2011-March,2015	Commissioner of Central Excise, Ghaziabad
		15.20	April,2013-June,2014	Commissioner (Appeals), Noida
		1.48	May,1998-October,1998	Supreme Court
		20,506.35	Aug''05 to Jul'' 09, Aug ''09 to Mar''10, Apr''09 to Jan''10 & Apr''10 to Jan''11	CESTAT, Kolkata
		24.79	Feb''10 to Nov''11, Apr''10 to Jan''11 & Apr''08 to Mar''11	Commissioner (Appeals), Bhubaneswar
		531.87	July''13-March''14	Commissioner of Central Excise , Raigad
		0.86	June,2001-July,2001	Allahabad High Court
		2,491.95	2006-2007, 2009-2010, & April,2006-Mar,2009	CESTAT, New Delhi
Custom Act, 1962	Custom Duty	371.80	30th Jun''2009, 2009-10	Commissioner of Custom, Vizag
Finance Act, 1994 [Service Tax Provisions]	Service Tax	5,532.51	Dec''05 to Aug''08, Oct''09 to Sep''10	CESTAT, Kolkata
		4.41	2006-07 to 2007-08 & Mar''11	Commissioner (Appeal), Bhubaneswar
		52.33	Dec''04-Nov''07	Commissioner of Central Excise , Raigad

Name of the Statute	Nature of Dues	Amount (Rs, In Lacs)	Period to which the amount pertains	Forum where the dispute is pending
Uttar Pradesh Tax on entry of goods into Local Areas Act,2007	Entry Tax	25.30	2000-01	High Court of Allahabad
	Entry Tax	31451.22	2007-2008,2008-2009,2012-2013 & 2013-2014	Additional Commissioner (Appeal), Ghaziabad
Odisha Entry Tax Act, 1999	Entry Tax	44,295.33	Dec''07 to Mar''12	Supreme Court
Odisha Entry Tax Act, 1999	Entry Tax	3,983.71	Apr''05 to Jan''08 & Apr''10 to Mar''12	Addl. Commissioner of Sales Tax (Appeal), Cuttack
Sales Tax Acts of various States	Local Sales Tax	47,136.88	Apr''05 to Mar''12	Orissa High Court at Cuttack
		49.92	July''06 to Nov''10	Additional Commissioner of Sales Tax (Appeals) Cuttack
		2875.07	2011-2012,2012-2013,2013-2014, Apr''14-October,2014	Allahabad High Court
		8484.69	January,2008-March,2008,2008-2009 2010-2011 & April,2016- June, 2016,2015-2016	Additional Commissioner (Appeal), Ghaziabad
		15,390.19	2012-2013,2013-2014	Assessing Authority
		45.97	2006-2007	Additional Commissioner (Appeal), Ghaziabad
		82.69	1991-1992 &2007-2008	Tradetax Tribunal Ghaziabad
Central Sales Tax Act,1956	CST	327.06	2006-2007	Additional Commissioner (Appeal), Ghaziabad
		26,844.21	2012-2013 & 2013-2014	Assessing Authority
		182.42	2007-2008	Tradetax Tribunal Ghaziabad
		6253.66	January,2008-March,2008, 20082009,2010-2011	Additional Commissioner (Appeal), Ghaziabad
		10,927.13	June,2014-June,2015	Commercial Tax Tribunal
		2,083.55	2002-03, 2003-04,2004-2005 & April,2006 to October,2006	High Court of Allahabad
Orissa Minor Minerals Concession Rules, 2004	Royalty	5,434.74	2006-2014	Odisha High Court
Income Tax Act,1961	Income Tax	11,694.20	2008-2009,2009-2010,2012 2013,2013-2014,2014-2015	Commissioner of Income Tax (Appeals)

(viii) Based on our audit procedure and according to the information and explanations given to us, we are of the opinion that the Company has defaulted in repayment of loans / borrowings to the financial institutions, banks, Government or debenture holders as per details given here-under:

	Particulars	Amount of Default as on Balance Sheet Date (Rs, in lacs) Principal Interest		Maximum Period of Default (in Days) Principal Interest
(i) Name of the Lenders : In case of :
A. Banks (INR loans)
1	Allahabad Bank	-	13,555.89	-	426
2	Andhra Bank	1,087.50	5,776.54	366	427
3	Axis Bank	50.00	16,007.46	275	366
4	Bank of Baroda	300.00	15,074.04	275	488
5	Bank of India	31,143.00	22,623.52	428	460
6	The Bank of Tokyo-Mitsubishi UFJ Ltd.	365.00	1,040.01	91	367
7	Bank of Maharashtra	-	17,878.40	-	488
8	Canara Bank	1,550.00	16,706.22	366	458
9	Central bank of India	-	17,287.83	-	518
10	Corporation bank	-	10,505.93	-	366
11	Dena Bank	2,084.86	7,067.85	275	426
12	ICICI Bank	374.72	5,862.08	351	276
13	Indian Bank	-	9,247.58	-	457
14	Indian Overseas Bank	-	6,569.76	-	518
15	Jammu & Kashmir Bank	-	10,069.69	-	518
16	Karur Vyasa Bank Limited	-	1,332.46	-	244

	Particulars	Amount of Default as on Balance Sheet		Maximum Period of Default
			Date (Rs, in lacs)		(in Days)
		Principal	Interest	Principal	Interest
17	Lakshmi Vilas Bank	-	108.03	-	60
18	Oriental Bank of Commerce	225.00	14,210.14	275	457
19	Punjab & Sind Bank	1,785.71	10,303.99	365	518
20	Punjab National Bank	-	15,548.53	-	518
21	Saraswat Co-operative Bank	-	2,607.20	-	366
22	State Bank of Bikaner and Jaipur	237.50	1,083.38	91	91
23	State Bank of India	6,750.00	22,873.05	366	426
24	State Bank of Hyderabad	1,325.00	8,713.12	366	426
25	State Bank of Mysore	4,836.00	5,007.80	511	305
26	State Bank of Patiala	1,700.00	12,496.46	366	397
27	State Bank of Travancore	1,087.50	6,913.34	366	397
28	South Indian Bank	-	467.09	-	91
29	Syndicate Bank	400.00	18,626.93	275	488
30	UCO Bank	-	13,080.99	-	426
31	Union Bank of India	200.00	11,809.25	275	518
32	United Bank of India	-	10,190.42	-	610
33	Vijaya Bank	-	5,895.18	-	518
Total (A)		55,501.79	3,36,540.16
B. Foreign Currency Loans
1	AXIS Bank	-	1,459.95	-	411
2	Credit Agricole Corporate and Investment Bank	5,511.03	0.65	1,027	75
3	Deutsche Zentral Genossenschafts Bank	26,872.23	-	1128	-
4	Deutsche Bank	9,963.04	329.99	549	183
5	DBS Bank	-	1,099.06	-	369
6	HSH Nordbank	42,063.69	462.67	1,158	1,158
7	ICICI Bank	8,034.60	5,245.92	241	367
8	ING Bank	270.02	0.34	1,006	-
9	State Bank of India (Consortium)	24,557.62	19,726.72	489	489
Total (B)		1,17,272.23	28,325.30
C.	Financial Institutions
1	EXIM Bank	-	4,602.84	-	367
2	Industrial Development Bank of India	3,925.00	21,881.34	456	518
3	Industrial Financial Corporation of India	438.50	3,515.97	238	214
4	DBS Bank	3,333.33	2,102.77	366	426
5	L&T Finance Ltd	-	185.70	-	60
6	SICOM Ltd.	-	0.62	-	1
7	STCI Finance Ltd	-	194.19	-	32
Total (C)		7,696.83	32,483.43
(ii) Secured Debentures		29,078.01	37,848.27	231	840
Total (D)		29,078.01	37,848.27
Grand Total (A B C D)		2,09,548.86	4,35,197.16

The Company is enjoying working capital facility (funded and nonfunded) and there is outstanding balance of Rs,13,02,454.78 lacs as at 31st March, 2017 against which, interest of Rs,1,28,246.42 lacs is overdue.

(ix) According to the information and explanations given to us, the Company has raised money by way of term loans during the year and to the best of our knowledge and according to the information and explanations given to us, the amount received by means of these loans have been pooled and utilized through Trust Retention Account (TRA) maintained by State Bank of India, the lead banker, on behalf of all other consortium members.

(x) To the best of our knowledge and according to the information and explanations given to us, no material fraud by the company or on the Company by its officers or employees has been noticed or reported during the course of our audit.

(xi) According to our information and explanations given to us and based on our examination of the records of the Company, managerial remuneration has been paid / provided in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Act except the payment of leave encashment, provident fund and taxable car perquisites for which clarification sought by the management from Central Government is awaited. (Refer Note - 54 to the standalone Ind AS financial statements)

(xii) In our opinion and according to the information and explanations given to us, the Company is not a Nidhi company. Accordingly, para 3 (xii) of the Order is not applicable to the Company.

(xiii) According to the information and explanations given to us and based on our examination of the records of the company, transactions with the related parties are in compliance with sections 177 and 188 of the Act where applicable and details of such transactions have been disclosed in the standalone Ind AS financial statement as required by the applicable accounting standards.

(xiv) According to the information and explanations given to us and based on our examination of the records of the company, the company has made private placement of redeemable cumulative preference shares during the year under review and in our opinion, the requirement of section 42 of the Act have been complied with and the amount raised have been used for the purposes for which the funds were raised.

(xv) According to the information and explanations given to us and based on our examination of the records of the company, the company has not entered into non-cash transactions with directors or persons connected with him.

(xvi) As per our information, the company is not required to be registered under Section 45-1A of the Reserve Bank of India Act, 1934.

Annexure - B to the Auditors'' Report

Report on the Internal Financial Controls under Clause (i) of Subsection 3 of Section 143 of the Companies Act, 2013 ("the Act")

We have audited the internal financial controls over financial reporting of Bhushan Steel Limited ("the Company") as of 31^st March 2017 in conjunction with our audit of the standalone Ind AS financial statements of the Company for the year ended on that date.

Management''s Responsibility for Internal Financial Controls

The Company''s management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India (''ICAI''). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to company''s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013.

Auditors'' Responsibility

Our responsibility is to express an opinion on the Company''s internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls over Financial Reporting (the "Guidance Note") and the Standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the standalone Ind AS financial statements, whether due to fraud or error. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company''s internal financial controls system over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A company''s internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company''s internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company''s assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting

Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion, to the best of our information and according to the explanation given to us, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at 31^st March 2017, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.

For MEHRA GOEL & CO. For MEHROTRA & MEHROTRA

Chartered Accountants Chartered Accountants

(FRN:000517N) (FRN:000226C)

sd/- sd/-

R.K. Mehra M.P. Mehrotra

Partner Partner

M. No: 006102 M. No : 005699

Place: New Delhi

Dated: 5th July, 2017

Mar 31, 2015

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

Management's Responsibility for the Standalone Financial Statements

The Company's Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act,2013 ("The Act") with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities, selection and application of appropriate accounting policies, making judgments and estimates that are reasonable and prudent, and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

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

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

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 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 Directors, as well as evaluating the overall presentation ofthe financial statements.

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

Basis of Qualified Opinion

The Supreme Court of India,vide its order dated 24/09/2014, cancelled number of coal blocks allocated to various entities which includes one coal block allocated to the company and one of its associated company, which were under development. Subsequently, the Government of India has issued the Coal Mines (Special Provision) Act, 2015, which inter-alia deal with the payment of compensation to the effected parties in regard to investment in the coal blocks.

No effect has been taken on the value of investment made by the company in the de-allocated coal blocks amounting to Rs. 56289.96 Lacs (including expenditure incurred Rs. 13546.46 Lacs and advance given Rs. 42743.50 Lacs) and Rs. 666.00 Lacs in Equity shares/ advance for share capital in the associated company whose coal blocks have been de-allocated. In the opinion of the management the Company/associated company will receive back the payments/expenditure paid/ made, including borrowing cost and other incidental expenditure,relating to de-allocated coal blocks.

We are unable to comment on the impact on the value of investment made by the company and its associate in the de-allocated coal blocks and their consequent impact on the Losses for the financial year ended March 31, 2015.

Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the matter described in the Basis of Qualified Opinion paragraph above, the aforesaid standalone financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, ofthe state of affairs of the Company as at 31st March, 2015, and its loss and its cash flows for the year ended on that date.

Emphasis of Matter

a) We draw attention to Note 50 to the financial statements that the managerial remuneration paid for the current financial year is subject to approval of Central Government.

b) We draw attention to Note 48 to the financial statements that in accordance with "5/25" scheme of Reserve Bank of India, the consortium of banks led by State Bank of India as lead Bank has allowed flexible structuring of long term loans by aligning their debt repayment obligations with cash flow generated during their economic life. Pending approval ofthe scheme by the authorities of respective consortium banks, the company has classified long term borrowings maturity period in accordance with the said scheme.

Our opinion is not modified in respect of above matters.

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, to the extent applicable.

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

a. We have sought and, except for the possible effect ofthe matter described in the Basis of Qualified Opinion paragraph above, obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;

b. Except for the possible effect of the matter described in the Basis of Qualified Opinion paragraph above, 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. Except for the possible effect of the matter described in the Basis of Qualified Opinion paragraph above, in our opinion, the aforesaid standalone financial statement comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014;

e. The matters described in the 'Basis for Qualified Opinion' and 'Emphasis of Matter' paragraphs above, in our opinion may have an adverse effect on the functioning of the Company;

f. 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;

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

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

i The Company has disclosed the impact of pending litigations on its financial position in its financial statements - Refer Note -29 to the financial statements.

ii The Company has made provision, as required under applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts. - Refer Note - 52 to the financial statements.

iii There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

ANNEXURE

(Referred to in paragraph 1 of our report of even date)

i) In Respect of its Fixed Assets :

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

b) The Fixed Assets covering significant value were physically verified during the year by the Management at such intervals which in our opinion, provides for the physical verification of all the Fixed Assets at reasonable interval having regard to the size of the Company and nature of its business. According to the information and explanations given to us by the Management, no material discrepancies have been noticed on such verification.

ii) In Respect of its Inventory :

a) As per information and explanations given to us, the inventory of finished goods, semi-finished goods and raw material at works were, during the year, physically verified by the management. In respect of Stores and Spare Parts and stock at yards in the custody of the third party and stocks in transit were verified with the confirmation or statement of account or correspondence of the third parties or subsequent receipt of goods.

b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories of the Company followed by the Management are reasonable and adequate in relation to the size of the Company and nature of its business.

c) In our opinion and according to the information and explanations given to us, the Company has maintained proper records of its inventories, no material discrepancies were noticed on such physical verification.

iii) In our opinion and according to information and explanations given to us, the company has not granted any loans, secured or unsecured to companies, firms or other parties listed in the register maintained under Section 189 ofthe Companies Act, 2013.

iv) In our opinion and according to the information and explanations given to us, having regard to explanation that some of the items purchased are of special nature and suitable alternative sources are not readily available for obtaining comparable quotations, there is an adequate internal control system commensurate with the size of the company and the nature of its business with regard to the purchase of inventory, fixed assets and for the sale of goods and services. During the course of our Audit we have not observed any continuing failure to correct major weaknesses in such internal control system.

v) To the best of our knowledge, the company has not accepted any deposits covered under section 73 or any other provisions of the Companies Act, 2013.

vi) To the best of our knowledge, the Central Government has prescribed the maintenance of cost records under Section 148 (1) of the Companies Act, 2013, which have been maintained by the company and these have been broadly reviewed by us and we are ofthe opinion that, prima facie, the prescribed accounts and records have been made and maintained. However, we have not, nor we are required, carried out any detailed examination of such accounts and records.

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

a) The Company has generally been regular in depositing undisputed dues including Provident Fund, Investors' Education and Protection Fund, Employees' State Insurance, Income Tax, Sales Tax, Value Added Tax, Wealth Tax, Duty of Custom, Duty of Excise, Cess, Service Tax and any other statutory dues applicable to it with the appropriate authorities and there were no undisputed dues in arrears as at 31st March, 2015 for a period of more than six months from the date they become payable.

b) The disputed statutory dues of income tax or sales tax or wealth tax or service tax or duty of customs or duty of excise or value added tax or cess aggregating Rs. 96723.64 Lacs (net of paid under protest) that have not been deposited on account of disputed matters pending before appropriate authorities are as under:

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

The Central Excise Excise Duty Apr.'98&0ct.2000 to Nov.2000 Act, 1944 Aug'05 to Jul'09, Aug'09 to Mar'10, Apr'09 to Jan'10 & Apr'10 to Jan'11

Feb'10 to Nov'11, Apr'10 to Jan'11 & Apr'08 to Mar'11

F.Y. 2001-2002, Mar'05 to Jan'10, Jul'01 to Mar'06, Apr'06 to Mar'09, 2006-07 to 2009-10, Oct'96 to Sep'00, Oct'00 to Dec'00, May'08 to Mar'09, Mar'05 to Jan'10 & Apr'11 to Nov'11

Apr'12 to Mar'13

Oct'03 to Sep'05, 2001-02 & Feb'07 to Dec'll

Jan'12 to Oct'12

Custom Act, 1962 Custom Duty 30th Jun'2009, 2009-10

Finance Act,1994 Service Tax Dec'05 to Aug'08, Oct'09 (Service Tax to Sep'10 Provisions) 2006-07 to 2007-08 & Mar'll

Dec'04 to Nov'07

Income Tax Act, 1961 Income Tax 2005-06, 2006-07, 2008-09, 2009-10

Sales Tax Acts of Local Sales Apr'05 to Mar'12 various states Tax 2002-03, 2003-04, 2004-05, Apr'06 to Oct'06 & 2006-07

2005-06, Oct'08 & Sep'08, 2006-07, Jan'13 to Mar'13, Jan'08 to Mar'08, Apr'13 to Nov'13, 2007- 08, 2008-09 & 2009-10,Jan'15

1991-92, 2007-08

Dec'13, Jan'14 to Mar'14

Apr'14, May'14

Central Sales Central Sales 2002-03, 2003-04, 2004-05, Tax Act, 1956 Tax Apr'06 to Oct'06 & 2006-07

2005-06, 2006-07, Jan'08 to Mar'08, 2007-08, 2008- 09 & 2009-10 & Jul'06 to Nov'10

2007-08

Uttar Pradesh Entry Tax 1995-96 Tax on Entry of Goods into Local 2004-05 Tax Act,1999 Act, 2007 2006-07 & 2007-08

Odisha Entry Entry Tax Dec'07 to Mar'12 Tax Act,1999 Apr'05 to Jan'08 & Apr'10 to Mar'12

Orissa Minor Royalty - Minerals Concession Rules, 2004

Name of the Statute Amount Forum where the dispute is (Rs. In pending Lacs)

The Central Excise 0.26 High Court of Allahabad Act, 1944 14357.21 CESTAT, Kolkata

70.04 Commissioner (Appeal), Bhubaneswar

3388.14 CESTAT, New Delhi

243.99 Commissioner (Appeal), Ghaziabad

413.76 CESTAT

26.66 Commissioner Excise Appeals Zone II

Custom Act, 1962 246.41 Commissioner of Custom, Vizag

Finance Act,1994 3633.47 CESTAT, Kolkata (Service Tax Provisions) 109.14 Commissioner (Appeal), Bhubaneswar

52.33 CESTAT

Income Tax Act, 1961 6106.48 Commissioner of Income Tax (Appeals)

Sales Tax Acts of 11112.54 Orissa High Court at Cuttack various states 444.85 High Court of Allahabad

12699.11 Additional Commissioner(Appeal)

106.28 Trade Tax Tribunal

754.41 Commissioner Commercial(Appeal)

362.48 Joint Commissioner (Appeal)

Central Sales 2151.22 High Court of Allahabad Tax Act, 1956 8567.35 Additional Commissioner (Appeal)

257.26 Trade Tax Tribunal

Uttar Pradesh 7.66 High Court of Allahabad Tax on Entry of Goods into Local 384.71 Supreme Court Tax Act,1999 Act, 2007 6815.81 Additional Commissioner(Appeal)

Odisha Entry 19937.61 Supreme Court Tax Act,1999 2778.37 Additional Commissioner of Sales Tax (Appeal) Cuttack

Orissa Minor 1696.09 Orissa High Court Minerals Concession Rules, 2004

c) The company has transferred the amount required to be transferred to Investors' Education and Protection Fund in accordance with the relevant provisions of the Companies Act, 1956 (1 to 1956) and rules made thereunder within time.

viii) The Company has no accumulated losses, but has incurred cash loss during the financial year covered by our Audit. The Company has not incurred any cash loss in the immediate preceding financial year.

ix) In our opinion and according to the information and explanations given to us, there were delays in repayment of term loans and interest not resulting in default of repayment of dues to Financial Institutions or Banks or Debenture holders.

x) To the best of our knowledge and according to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from Banks / Financial Institutions.

xi) To the best of our knowledge and according to the information and explanations given to us, the term loans were applied for the

purpose for which the loans were obtained, other than temporary deployment pending actual application.

xii) Based upon the audit procedure performed and information and explanations given by the Management, we report that no fraud on or by the Company has been noticed or reported during the year.

For MEHRA GOEL & CO. For MEHROTRA & MEHROTRA Chartered Accountants Chartered Accountants Registration No.: 000517N Registration No.: 000226C

Sd/- Sd/- R.K. Mehra M.P. Mehrotra Partner Partner M. NO.: 006102 M. NO. : 005699

Place: New Delhi

Dated: 27th May, 2015

Mar 31, 2014

We have audited the accompanying financial statements of Bhushan Steel Limited ("the Company"), 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 ("the Act") read with General Circular 15/2013 dated 13th September, 2013 of the Ministry of Corporate Affairs in respect of section 133 of the Companies Act, 2013. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditors'' Responsibility

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

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor''s judgement, 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, but not for the purpose of expressing an opinion on the effectiveness of the Company''s internal control. 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 suffcient 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 profit for the year ended on that date; and

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

Report on Other Legal and Regulatory Requirements

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, the Statement of profit and Loss and the Cash Flow Statement dealt with by this Report are in agreement with the books of account;

d. In our opinion, the Balance Sheet, the Statement of profit and Loss, and the Cash Flow Statement comply with the Accounting Standards referred to in subsection (3C) of section 211 of the Companies Act, 1956 read with General Circular 15/2013 dated 13th September, 2013 of the Ministry of Corporate Affairs in respect of section 133 of the Companies Act, 2013; 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

(Referred to in paragraph 1 of our report of even date) i) In Respect of its Fixed Assets :

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

b) The Fixed Assets covering significant value were physically verifed during the year by the Management at such intervals which in our opinion, provides for the physical verifcation of all the Fixed Assets at reasonable interval having regard to the size of the Company and nature of its business. According to the information and explanations given to us by the Management, no material discrepancies have been noticed on such verifcation.

c) No substantial parts of fixed assets have been disposed off during the year.

ii) In Respect of its Inventory :

a) As per information and explanations given to us, the inventory of fnished goods, semi-fnished goods and raw material at works were, during the year, physically verifed by the management. In respect of Stores and Spare Parts and stock at yards in the custody of the third party and stocks in transit were verifed with the confirmation or statement of account or correspondence of the third parties or subsequent receipt of goods.

b) In our opinion and according to the information and explanations given to us, the procedures of physical verifcation of inventories of the Company followed by the Management are reasonable and adequate in relation to the size of the Company and nature of its business.

c) In our opinion and according to the information and explanations given to us, the Company has maintained proper records of its inventories, no material discrepancies were noticed on such physical verifcation.

iii) In our opinion and according to information and explanations given to us, the company has not taken / granted any loans, secured or unsecured from / to companies, firms or other parties listed in the register maintained under Section 301 of the Companies Act, 1956.

iv) In our opinion and according to the information and explanations given to us, having regard to explanation that some of the items purchased are of special nature and suitable alternative sources are

not readily available for obtaining comparable quotations, there is an adequate internal control system commensurate with the size of the company and the nature of its business with regard to the purchase of inventory, fixed assets and for the sale of goods and services. During the course of our Audit we have not observed any continuing failure to correct major weaknesses in such internal control system.

v) In respect of contracts or arrangements entered in the register maintained in pursuance of Section 301 of Companies Act, 1956, to the best of our knowledge and belief and according to the information and explanations given to us :- a) The particular of contracts or arrangements referred to Section

301 that needed to be entered in the register maintained under

the said Section have been so entered.

b) Where each of such transaction is in excess of Rs.5 Lacs in respect of any party, the transaction have been made at a price which are prima facie reasonable having regard to the prevailing market prices at the relevant time.

vi) To the best of our knowledge, the company has not accepted any deposits covered under section 58A and 58AA or any other provisions of the Companies Act, 1956.

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

viii) To the best of our knowledge, the Central Government has prescribed the maintenance of cost records under Section 209 (1) (d) of the Companies Act, 1956, which have been maintained by the company and these have been broadly reviewed by us and we are of the opinion that, prima facie, the prescribed accounts and records have been made and maintained. However, we have not, nor we are required, carried out any detailed examination of such accounts and records.

ix) According to the information and explanations given to us, in respect of statutory dues :

a) The Company has generally been regular in depositing undisputed dues including Provident Fund, Investors'' education and Protection Fund, employees'' State Insurance, Income Tax, Sales Tax/VAT, Wealth Tax, Custom Duty, excise Duty, Cess, Service Tax and any other statutory dues applicable to it with the appropriate authorities.

b) There were no undisputed amounts payable in respect of Income Tax, Wealth Tax, Service Tax, excise Duty, Cess, and other material statutory dues in arrears as at 31st March, 2014 for a period of more than six months from the date they become payable.

c) The disputed statutory dues aggregating Rs.79131.59 Lacs (net of paid under protest) that have not been deposited on account of dispute matters pending before appropriate authorities are as under :

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

The Central excise excise Duty Apr-May 1998 & Oct. 2000 to Nov.2000 Act1944 Aug''05 to Jul''09, Aug''09 to Mar''10, Apr''09 to Jan''10 & Apr''10 to Jan''11

Feb''10 to Nov''11, Apr''10 to Jan''11 & Apr''08 to Mar''11

FY.2001-2002, Mar''05 to Jan''10,Jul''01 to Mar''06, Apr''06 to Mar''09, 2006-07 to 2009-10, Oct''96 to Sep''00, Oct''00 to Dec''00, May''08 to Mar''09, Mar''05 to Jan''10 & Apr''11 to Nov''11

Apr''11 to Feb''12

Oct''03 to Sep''05, 2001-02 & Feb''07 to Dec''11 Jan''12 to Oct''12

Custom Act, 1962 Custom Duty 30th Jun''2009 Finance Act,1994 service tax Dec''05 to Aug''08, Oct''09 to Sep''10 (service tax 2006-07 to 2007-08 & Mar''11 Provisions) 2006-07

Dec''04 to Nov''07

Income Tax Act 1961 income tax 2008-09, 2009-10

Sales Tax Acts of Local Sales Apr''05 to Dec''08 various states tax 2002-03, 2003-04, 2004-05, Apr''06 to Oct''06 & 2006-07

2005-06, Oct''08 & Sep''08, 2006-07, Jan''13 to Mar''13, Jan''08 to Mar''08, Apr''13 to Nov''13, 2007-08, 2008-09 & 2009-10

Penalty on 1991-92 Trade tax

Central Sales Tax Act Central 2002-03, 2003-04, 2004-05, Apr''06 to Sales tax Oct''06 1956 & 2006-07

2005-06, 2006-07, Jan''08 to Mar''08, 2007-08, 2008-09 & 2009-10 Jul''06 to Nov''10

Uttar Pradesh Tax on entry tax 1995-96 entry of Goods into 2004-05 Local Areas Act, 2007

2006-07 & 2007-08

Odisha entry Tax entry tax Dec''07 to Mar''12 Act,1999 Apr''05 to Jan''08

Orissa Minor Minerals Royalty - Concession Rules, 2004

Name of the Statute Amount Forum where the dispute is pending (In Lacs)

The Central Excise Act 0.76 High Court of Allahabad 1944 14357.21 CeSTAT, Kolkata 70.04 Commissioner (Appeal), Bhubaneswar 4060.80 CeSTAT, New Delhi 2.32 Commissioner (Appeal), Ghaziabad 1921.00 Cestat 26.66 Commissioner excise Appeals Zone II

Custom Act 1962 198.65 Commissioner of Custom, Vizag

Finance Act 1994 3388.22 CeSTAT, Kolkata 109.14 Commissioner (Appeal), Bhubaneswar 0.23 CeSTAT, New Delhi 52.33 Cestat

Income Tax Act 1961 6115.58 Commissioner of Income Tax

Sales Tax Act 550.98 Orissa High Court at Cuttack 444.85 High Court of Allahabad 9540.19 Additional Commissioner (Appeal) 0.75 Trade Tax Tribunal

Central Sales Tax 2151.22 High Court of Allahabad Act 1956 7903.58 Additional Commissioner (Appeal) 34.77 Additional Commissioner (Appeal)

Uttar Pradesh Tax 7.66 High Court of Allahabad 384.71 supreme Court 6798.77 Additional Commissioner (Appeal)

Odisha Eantry Tax 19087.28 supreme Court Act 1999 227.80 Additional Commissioner of Sales Tax (Appeal) Cuttack

Orissa Minor Minerals 1696.09 Orissa High Court

x) The Company has no accumulated losses and has not incurred any cash loss during the financial year covered by our Audit and in the immediate preceding financial year.

xi) In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to Financial Institutions or Banks or Debenture holders.

xii) On the basis of verifcation of accounts and records maintained by the Company and to the best of our knowledge and belief, the Company has not granted any loan or advance on the basis of security by way of pledge of shares, debentures and other securities.

xiii) The Company is not a chit fund / nidhi / mutual benefit fund / society. Therefore, the provision of clause 4(xiii) of the Companies (Auditors'' Report) Order, 2003 is not applicable to the Company.

xiv) To the best of our knowledge and according to information given to us, the Company is not a dealer or trader in securities. The Company has invested in marketable securities and mutual funds. According to the information and explanations given to us, proper records have been maintained of the transactions and contracts, and timely entries have been made therein. The investments in marketable securities and mutual funds have been held by the Company in its own name.

xv) To the best of our knowledge and according to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from Banks / Financial Institutions.

xvi) To the best of our knowledge and according to the information and explanations given to us, the term loans were applied for the purpose for which the loans were obtained, other than temporary deployment pending application.

xvii) In our opinion and according to the information and explanations given to us and on an overall examination of Balance Sheet, we report that funds raised on short term basis have not been used during the year for long term investments.

xviii) According to the information and explanations given to us, the Company has made preferential allotment of Preference Shares during the year to parties and companies covered in the Register maintained under section 301 of the Companies Act, 1956. In our opinion and according to information and explanations given to us, the price, at which Preference Shares have been issued, is not prejudicial to the interest of the Company.

xix) To the best of our knowledge and according to the information and explanations given to us, the Company has created securities /

charges as on the date of our report, in respect of Secured Debentures issued to the satisfaction of the Trustee of the Debentures.

xx) The Company has raised money by way of right issue of equity shares during the year. We have verifed the end use of monies raised by right issue of equity shares and the same has been disclosed in Note 31(a).

xxi) Based upon the audit procedure performed and information and explanations given by the Management, we report that no fraud on or by the Company has been noticed or reported during the year.

for MEHRA GOEL & CO. Chartered Accountants Registration No.: 000517N

Sd/- R.K. Mehra partner M. N0.: 6102

Place: New Delhi Dated: 30th May, 2014

Mar 31, 2013

Report on the Financial Statements

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

Management''s Responsibility for the Financial Statements

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

Auditors'' Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material 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 ofthe financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness ofaccounting policies used and the reasonableness ofthe 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 Profit for the year ended on that date; and

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

Report on Other Legal and Regulatory Requirements

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 ofthose books;

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

d. In our opinion, the Balance Sheet, the Statement of Profit and Loss, and the Cash Flow Statement comply with the Accounting Standards referred to in subsection (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, 2013, and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2013, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

ANNEXURE

(Referred to in paragraph 1 of our report of even date)

i) In Respect of its Fixed Assets :

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

b) The Fixed Assets covering significant value were physically verified during the year by the Management at such intervals which in our opinion, provides for the physical verification of all the Fixed Assets at reasonable interval having regard to the size of the Company and nature of its business. According to the information and explanations given to us by the Management, no material discrepancies have been noticed on such verification.

c) No substantial parts of fixed assets have been disposed off during the year.

ii) In Respect of its Inventory :

a) As per information and explanations given to us, the inventory of finished goods, semi-finished goods and raw material at works were, during the year, physically verified by the management. In respect of Stores and Spare Parts and stock at yards in the custody of the third party and stocks in transit were verified with the confirmation or statement of account or correspondence of the third parties or subsequent receipt of goods.

b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories of the Company followed by the Management are reasonable and adequate in relation to the size ofthe Company and nature of its business.

c) In our opinion and according to the information and explanations given to us, the Company has maintained proper records of its inventories, no material discrepancies were noticed on such physical verification.

iii) In our opinion and according to the information and explanations given to us, the company has not taken / granted any loans, secured or unsecured from / to companies, firms or other parties listed in the register maintained under Section 301 ofthe Companies Act, 1956.

iv) In our opinion and according to the information and explanations given to us, having regard to explanation that some ofthe items purchased are of special nature and suitable alternative sources are not readily available for obtaining comparable quotations, there is an adequate internal control system commensurate with the size of the company and the nature of its business with regard to the purchase of inventory, fixed assets and for the sale of goods and services. During the course of our Audit we have not observed any continuing failure to correct major weaknesses in such internal control system.

v) In respect of contracts or arrangements entered in the register maintained in pursuance of Section 301 of Companies Act, 1956, to the best of our knowledge and belief and according to the information and explanations given to us :-

a) The particular of contracts or arrangements referred to Section 301 that needed to be entered in the register maintained under the said Section have been so entered.

b) Where each of such transaction is in excess of Rs.5 Lacs in respect of any party, the transaction have been made at a price which are prima facie reasonable having regard to the prevailing market prices at the relevant time.

vi) To the best of our knowledge, the company has not accepted any deposits covered under section 58A and 58AA or any other provisions of the Companies Act, 1956.

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

viii) To the best of our knowledge, the Central Government has prescribed the maintenance of cost records under Section 209 (1) (d) ofthe Companies Act, 1956, which have been maintained by the company and these have been broadly reviewed by us and we are of the opinion that, prima facie, the prescribed accounts and records have been made and maintained. However, we have not, nor we are required, carried out any detailed examination of such accounts and records.

ix) According to the information and explanations given to us, in respect of statutory dues :

a) The Company has generally been regular in depositing undisputed dues including Provident Fund, Investors'' Education and Protection Fund, Employees''State Insurance, Income Tax, Sales Tax/VAT, Wealth Tax, Custom Duty, Excise Duty, Cess, Service Tax and any other statutory dues applicable to it with the appropriate authorities.

b) There were no undisputed amounts payable in respect of Income Tax, Wealth Tax, Service Tax, Excise Duty, Cess, and other material statutory dues in arrears as at 31st March, 2013 for a period of more than six months from the date they become payable.

c) The disputed statutory dues aggregating Rs.44435.13 Lacs (net of paid under protest) that have not been deposited on account of disputed matters pending before appropriate authorities are as under:

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

The Central Excise Excise Duty Apr-May 1998 & Oct. 2000 to Nov. 2000 Act, 1944 Aug''05 to Jul''09, Aug''09 to Mar''10, Apr''09 to Jan''10 & Apr''10 to Jan''11

Feb''10 to Nov''ll, Apr''10 to Jan''ll & Apr''08 to Mar''ll

F.Y. 2001-2002, Mar''05 to Jan''10, Jul''01 to Mar''06, Apr''06 to Mar''09, 2006-07 to 2009-10, Oct''96 to Sep''00, Oct''00 to Dec''00, May''08 to Mar''09, Mar''05 to Jan''10 & Apr''ll to Nov''ll

Apr''ll to Feb''12

Oct''03 to Sep''05, 2001-02 & Feb''07 to Dec''ll

Finance Act,1994 Service Tax Dec''05 to Aug''08, Qct''09 to Sep''10 (Service Tax Provi- 2006-07to 2007-08&Mar''ll sions) 2006-07

Dec''04 to Nov''07

Income Tax Act, Income Tax 2007-08 1961

Sales Tax Acts of Local Sales Tax Apr''05 to Dec''08 various states

2002-03, 2003-04, 2004-05, Apr''06 to Oct''06 & 2006-07

2005-06, 0ct''08 & Sep''08

Penalty on 1991-92 Trade Tax

Central Sales Tax Central Sales 2002-03, 2003-04, 2004-05, Apr''06 to Oct''06 & Act, 1956 Tax 2006-07

2005-06

Uttar Pradesh Tax Entry Tax 1995-96 on Entry of Goods 2004-05 into Local Areas Act, 2007

Odisha Entry Tax Entry Tax Dec''07 to Mar''12 Act, 1999 Apr''05 to Jan''08

Orissa Minor Miner- Royalty - als Concession Rules, 2004

Name of the Statute Amount Forum where the (Rs. In dispute is pending Lacs)

The Central Excise Act,1944 0.96 High Court of Allahabad

14357.21 CESTAT, Kolkata

70.04 Commissioner (Appeal), Bhubaneswar

3570.05 CESTAT, New Delhi

3.57 Commissioner (Appeal), Ghaziabad

1921.00 CESTAT

Finance Act 1994 1699.77 CESTAT, Kolkata

107.63 Commissioner (Appeal), Bhubaneswar

0.23 CESTAT, New Delhi

52.33 CESTAT

Income Tax Act, 1961 40.90 Commissioner of Income Tax (Appeals)

Sales Tax Act of various States 550.98 Orissa High Court at Cuttack

415.98 High Court of Allahabad

90.52 Addl. Commissioner (Appeal)

0.75 Trade Tax Tribunal

Central Sales Tax Act, 1956 2180.08 High Court of Allahabad

391.11 Additional Commissioner (Appeal)

Uttar Pradesh Tax on Entry of Goods into Local Areas Act, 2007 7.66 High Court of Allahabad

384.71 Supreme Court

Odisha Entry Tax Act,1999 16749.44 Supreme Court

144.12 Additional Commissioner of Sales Tax (Appeal), Cuttack

Orissa Minor Miner als Concession Rules, 2004 1696.09 Orissa High Court

x) The Company has no accumulated losses and has not incurred any cash loss during the financial year covered by our Audit and in the immediate preceding financial year.

xi) In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to Financial Institutions or Banks or Debenture holders.

xii) On the basis of verification of accounts and records maintained by the Company and to the best of our knowledge and belief, the Company has not granted any loan or advance on the basis of security by way of pledge of shares, debentures and other securities.

xiii) The Company is not a chit fund / nidhi / mutual benefit fund / society. Therefore, the provision of clause 4(xiii) of the Companies (Auditors'' Report) Order, 2003 is not applicable to the Company.

xiv) To the best of our knowledge and according to information given to us, the Company is not a dealer or trader in securities. The Company has invested in marketable securities and mutual funds. According to the information and explanations given to us, proper records have been maintained of the transactions and contracts, and timely entries have been made therein. The investments in marketable securities and mutual funds have been held by the Company in its own name.

xv) To the best of our knowledge and according to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from Banks/ Financial Institutions.

xvi) To the best of our knowledge and according to the information and explanations given to us, the term loans were applied for the purpose for which the loans were obtained, other than temporary deployment pending application.

xvii) In our opinion and according to the information and explanations given to us and on an overall examination of Balance Sheet, we report that funds raised on short term basis have not been used during the year for long term investments.

xviii) According to the information and explanations given to us, the Company has made preferential allotment of Preference Shares during the year to parties and companies covered in the Register maintained under section 301 of the Companies Act, 1956. In our opinion and according to the information and explanations given to us, the price, at which Preference Shares have been issued, is not prejudicial to the interest ofthe Company.

xix) To the best of our knowledge and according to the information and explanations given to us, the Company has created securities/ charges as on the date of our report, in respect of Secured Debentures issued to the satisfaction of the Trustee of the Debentures.

xx) The Company has raised money by way of right issue of equity shares during the year. We have verified the end use of monies raised by right issue of equity shares and the same has been disclosed in Note 30(a).

xxi) Based upon the audit procedure performed and the information and explanations given by the Management, we report that no fraud on or by the Company has been noticed or reported during the year.

For MEHRA GOEL & CO.

Chartered Accountants

Registration No.: 000517N

Sd/-

R.K. Mehra

Partner

M. N0.: 6102

Place: New Delhi

Dated: 27th May, 2013

Mar 31, 2012

We have audited the attached Balance Sheet of BHUSHAN STEEL LIMITED as on 31st March, 2012 and also the Statement of Profit and Loss and the Cash Flow Statement of the Company for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company's Management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

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

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

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

b) In our opinion, proper books of 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 accounts, the Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statement dealt with by the report comply with the requirements of Accounting Standards referred to in sub section (3C) of section 211 of the Companies Act, 1956;

e) On the basis of the written representations received from the Directors as on 31st March, 2012 and taken on record by the Board of Directors, we report that none of the Directors is disqualified as on 31st March, 2012 from being appointed as a Director in terms of clause (g) of Subsection (1) of Section 274 of the Companies Act, 1956;

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

i) in the case of the Balance Sheet, of the state of affairs of the company as at 31st March, 2012;

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

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

ANNEXURE (Referred to in paragraph 1 of our report of even date)

i) In Respect of its Fixed Assets :

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

b) The Fixed Assets covering significant value were physically verified during the year by the Management at such intervals which in our opinion, provides for the physical verification of all the Fixed Assets at reasonable interval having regard to the size of the Company and nature of its business. According to the information and explanations given to us by the Management, no material discrepancies have been noticed on such verification.

c) No substantial parts of fixed assets have been disposed off during the year. ii) In Respect of its Inventory :

a) As per information & explanations given to us, the inventory of finished goods, semifinished goods and raw material at works were, during the year, physically verified by the management. In respect of Stores and Spare Parts and stock at yards in the custody of the third party and stocks in transit were verified with the confirmation or statement of account or correspondence of the third parties or subsequent receipt of goods.

b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories of the Company followed by the Management are reasonable and adequate in relation to the size of the Company and nature of its business.

c) In our opinion and according to the information and explanations given to us, the Company has maintained proper records of its inventories, no material discrepancies were noticed on such physical verification.

iii) In our opinion and according to information & explanations given to us, the company has not taken/granted any loans, secured or unsecured from / to companies, firms or other parties listed in the register maintained under Section 301 of the Companies Act, 1956.

iv) In our opinion and according to the information and explanations given to us, having regard to explanation that some of the items purchased are of special nature and suitable alternative sources are not readily available for obtaining comparable quotations, there is an adequate internal control system commensurate with the size of the company and the nature of its business with regard to the purchase of inventory, fixed assets and for the sale of goods and services. During the course of our Audit we have not observed any continuing failure to correct major weaknesses in such internal control system.

v) In respect of contracts or arrangements entered in the register maintained in pursuance of Section 301 of Companies Act, 1956, to the best of our knowledge and belief and according to the information and explanations given to us :

a) The particular of contracts or arrangements referred to Section 301 that needed to be entered in the register maintained under the said Section have been so entered.

b) Where each of such transaction is in excess of Rs.5 Lacs in respect of any party, the transaction have been made at a price which are prima facie reasonable having regard to the prevailing market prices at the relevant time.

vi) To the best of our knowledge, the company has not accepted any deposits covered under section 58A and 58AA or any other provisions of the Companies Act, 1956.

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

viii) To the best of our knowledge, the Central Government has prescribed the maintenance of cost records under Section 209 (1) (d) of the Companies Act, 1956, which have been maintained by the company and these have been broadly reviewed by us and we are of the opinion that, prima facie, the prescribed accounts and records have been made and maintained. However, we have not, nor we are required, carried out any detailed examination of such accounts and records.

ix) According to the information and explanations given to us, in respect of statutory dues :

a) The Company has generally been regular in depositing undisputed dues including Provident Fund, Investors' Education and Protection Fund, Employees' State Insurance, Income Tax, Sales Tax/VAT, Wealth Tax, Custom Duty, Excise Duty, Cess, Service Tax and any other statutory dues applicable to it with the appropriate authorities.

b) There were no undisputed amounts payable in respect of Income Tax, Wealth Tax, Service Tax, Excise Duty, Cess, and other material statutory dues in arrears as at 31st March, 2012 for a period of more than six months from the date they become payable.

c) The disputed statutory dues aggregating Rs.37727.34 Lacs that have not been deposited on account of disputed matters pending before appropriate authorities are as under:

Name of the Stat Nature of Period to which the amount ute Dues pertains

The Central Excise Excise Duty AprMay'98 & Oct. 2000 to Nov. 2000 Act, 1944 Aug'05 to Jul'09 & Apr'09 to Jan'10

F.Y. 20012002,Mar'05 to Jan'10,Jul'01 to Mar'06, Oct'1996 to Sep'2000, 200809

200809

200809

Mar'03 to Apr'03, Oct'03 to Sep'05

200809

Finance Act, 1994 Service Tax Dec'04 to Nov'07, Jun'06 to Jan'08, (Service Tax Nov'06 to Mar'07, Oct'09 to Sep'10, Provisions) Dec'05 to Aug'08, Oct'09 to Sep'10

Income Tax Act, 1961 Income Tax 200708

Sales Tax Acts of vari Local Sales Tax 200203, 200304, 200405 & Apr'06to ous states Oct'06

200809 200607

Jan'08 to Dec'08 Penalty on Trade 199192 Tax (Net of Rs.0.38 Lacs paid under protest) Central Sales Tax Act, Central Sales 200203, 200304, 200405 & 1956 Tax Apr'06 to Oct'06

Uttar Pradesh Tax on Entry Tax 199596, Entry of Goods into 200405 Local Areas Act, 2007 200506 to Jan'08

Odisha Entry Tax Entry Tax (Net Dec'07 to Mar'12 Act,1999 ofRs.1650Lacs paid under protest)

Orissa Minor Minerals Royalty Concession Rules, 2004

Customs Act, 1962 Custom Duty 200809 201011

Name of the Statue Amount Forum where the dispute is (Rs. In Lacs) pending

The Central Excise Act, 1944 0.96 High Court of Allahabad

14077.80 CESTAT, Kolkata 3393.71 CESTAT, New Delhi

3.93 Commissioner (Appeal) Chan digarh

0.64 Commissioner (Appeal) Central Excise, Ghaziabad 316.65 Commissioner of Central Excise,Raigad Commissionerat, Panvel, New Mumbai.

1.31 Assistant Commissioner of Central Excise, Cuttack Finance Act, 1994 (Service Tax Provisions) 3098.26 CESTAT

Income Tax Act, 1961 804.21 Commissioner of Income Tax (Appeals)

Sales Tax Acts of vari ous states 448.63 High Court of Allahabad

35.11 Addl. Commissioner (Appeal)

136.52 Commissioner of Taxes

543.62 Orissa High Court

0.75 Trade Tax Tribunal

Central Sales Tax Act, 1956 2240.64 High Court of Allahabad

Uttar Pradesh Tax on Entry of Goods into Local Areas Act, 2007 392.37 High Court of Allahabad

144.12 Addl. Commissioner of Sales Tax (Appeal)

Odisha Entry Tax Act,1999 10322.36 Supreme Court

Orissa Minor Minerals Concession Rules, 2004 1696.09 Orissa High Court

Customs Act, 1962 42.76 CESTAT

26.90 Deputy Commissioner Customs

x) The Company has no accumulated losses and has not incurred any cash loss during the financial year covered by our Audit and in the immediate preceding financial year.

xi) In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to Financial Institutions or Banks or Debenture holders.

xii) On the basis of verification of accounts and records maintained by the Company and to the best of our knowledge and belief, the Company has not granted any loan and advance on the basis of security by way of pledge of shares, debentures and other securities.

xiii) The Company is not a chit fund / nidhi / mutual benefit fund / society. Therefore, the provision of clause 4(xiii) of the Companies (Auditors' Report) Order, 2003 is not applicable to the Company.

xiv) To the best of our knowledge and according to information given to us, the Company is not a dealer or trader in securities. The Company has invested in marketable securities and mutual funds. According to the information and explanations given to us, proper records have been maintained of the transactions and contracts, and timely entries have been made therein. The investments in marketable securities and mutual funds have been held by the Company in its own name.

xv) To the best of our knowledge and according to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from Banks/ Financial Institutions.

xvi) To the best of our knowledge and according to the information and explanations given to us, the term loans were applied for the purpose for which the loans were obtained, other than temporary deployment pending application.

xvii) In our opinion and according to the information and explanations given to us and on an overall examination of Balance Sheet, we report that funds raised on short term basis have not been used during the year for long term investments.

xviii) According to the information and explanations given to us, the Company has made preferential allotment of Preference Shares during the year to parties and companies covered in the Register maintained under section 301 of the Companies Act, 1956. In our opinion and according to information and explanations given to us, the price, at which Preference Shares have been issued, is not prejudicial to the interest of the Company.

xix) To the best of our knowledge and according to the information and explanations given to us, the Company has created securities/ charges as on the date of our report, in respect of Secured Debentures issued to the satisfaction of the Trustee of the Debentures.

xx) According to the information and explanations given to us, the Company has not raised any money by Public Issue during the year.

xxi) Based upon the audit procedure performed and information and explanations given by the Management, we report that no fraud on or by the Company has been noticed or reported during the year.

For MEHRA GOEL & CO.

Chartered Accountants (Registration NO.000517N)

Sd/ R.K. MEHRA

Partner

M. No.: 6102

Place: New Delhi Dated: 31 st July, 2012

Mar 31, 2011

We have audited the attached Balance Sheet of BHUSHAN STEEL LIMITED as on 31st March, 2011 and also the Profit & Loss Account and the Cash Flow Statement pf the Company for the year ended on that date annexed thereto. These financial statments are the responsibility of the Company's Management. Our responsibility is to express an opinion on these finacial statements based on our audit.

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

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

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

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

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

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

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

e) On the basis of the written representations received from the Directors as on 31 st March, 2011 and taken on record by the Board of Directors, we report that none of the Directors is disqualified as on 31 st March, 2011 from being appointed as a Director in terms of clause (g) of Sub-section (1) of Section 274 of the Companies Act, 1 956;

f) 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:

i) in the case of the Balance Sheet, of the state of affairs of the company as at 31st March, 2011;

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

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

ANNEXURE (Referred to in paragraph 1 of our report of even date)

i) In Respect of its Fixed Assets:

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

b) The Fixed Assets covering significant value were physically verified during the year by the Management at such intervals which in our opinion, provides for the physical verification of all the Fixed Assets at reasonable interval having regard to the size of the Company and nature of its business. According to the information and explanations given to us by the Management, no material discrepancies have been noticed on such verification.

c) No substantial part of fixed assets have been disposed off during the year. ii) In Respect of its Inventory:

a) As per information & explanations given to us, the inventory of finished goods, semi-finished goods and raw material at works were during the year physically verified by the management. In respect of Stores and Spare Parts and stock at yards in the custody of the third party and stocks in transit were verified with the confirmation or statement of account or correspondence of the third parties or subsequent receipt of goods.

b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories of the Company followed by the Management are reasonable and adequate in relation to the size of the Company and nature of its business.

c) In our opinion and according to the information and explanations given to us, the Company has maintained proper records of its inventories, no material discrepancies were noticed on such physical verification.

iii) In our opinion and according to information & explanations given to us, the company has not taken/granted any loans, secured or unsecured from /to companies, firms or other parties listed in the register maintained under Section 301 of the Companies Act, 1956.

iv) In our opinion and according to the information and explanations given to us, having regard to explanation that some of the items purchased are of special nature and suitable alternative sources are not readily available for obtaining comparable quotations there is an adequate internal control system commensurate with the size of the company and the nature of its business with regard to the purchase of inventory, fixed assets and for the sale of goods and services. During the course of our Audit we have not observed any continuing failure to correct major weaknesses in such internal control system.

v) In respect of contracts or arrangements entered in the register maintained in pursuance of Section 301 of Companies Act, 1956, to the best of our knowledge and belief and according to the information and explanations given to us.

a) The particular of contracts or arrangements referred to Section 301 that needed to be entered in the register maintained under the said Section have been so entered.

b) Where each of such transaction is in excess of Rs.5 Lacs in respect of any party, the transaction have been made at a price which are prima facie reasonable having regard to the prevailing market prices at the relevant time.

vi) To the best of our knowledge, the company has not accepted any deposits covered under section 58A and 58AA or any other provisions of the Companies Act, 1956.

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

viii) To the best of our knowledge, the Central Government has prescribed the maintenance of cost records under Section 209 (1) (d) of the Companies Act, 1956, which have been maintained by the company and these have been broadly reviewed by us and we are of the opinion that, prima facie, the prescribed accounts and records have been made and maintained. However, we have not, nor we are required, carried out any detailed examination of such accounts and records.

ix) According to the information and explanations given to us, in respect of statutory dues.

a) The Company has generally been regular in depositing undisputed dues including Provident Fund, Investors' Education and Protection Fund, Employees' State Insurance, Income Tax, Sales Tax/VAT, Wealth Tax, Custom Duty, Excise Duty, Cess, Service Tax and any other statutory dues applicable to it with the appropriate authorities.

b) There were no undisputed amounts payable in respect of Income Tax, Wealth Tax, Service Tax, Excise Duty, Cess, and other Material statutory dues in arrears as at 31st March, 2011 for a period of more than six months from the date they become payable.

c) The disputed statutory dues aggregating Rs.23228.45 Lacs that have not been deposited on account of disputed matters pending before appropriate authorities are as under:

Name of the Nature of the Dues Amount Statute [Rs. in Lacs)

The Central Differential Duty on material supplied 0.31 Excise Act, 1944 to earthquake victims Seizure 0.60

Job work challan 0.50

Modvat on Welding Electrodes 0.40

0.46

Demand of Excise duty, refunded by 0.52 the authorities, on returned of Imported Capital Goods

Modvat on Tank Fitted on Trailer for 2.16 Temporary storage used in emergency

Rejection of Cenvet credit on steel, cement, 14355.74 welding electrodes, sleepers, fuel oil etc. 113.11

Rejection of Cenvet Credit on HR Coils 353.06 used for manufacture of HR Sheets etc.

Duty Demanded without considering 257.10 credit and abatement of freight

Duty Demanded on account of Under 1259.80 valuation

Demand of Excise Duty on removal 391.76 of Zinc Dross and Ash

Rejection of Cenvat credit on 90.43 Capital Goods

0.72

Service Tax Service Tax on import of service 653.69

Service Tax on Export of Goods by 52.33 CHA & others

40.60

Sales Tax Penalty on Trade Tax (Net of 0.75 Rs.0.38 Lacs paid under protest)

Entry Tax Entry Tax (Net of Rs.1 290 Lacs 5654.41 paid under protest)

Name of the Period to which Forum where dispute Statue amount related is pending

The Central Excise Act, 1944 F.Y. 2001-02 Commissioner CESTAT

Jan. 2002 High Court, Allahabad

Oct.2000 to High Court, Allahabad Nov.2000

April - May 1998 High Court, Allahabad

Sept.2003 High Court, Allahabad

Jan. 1999 Commissioner CESTAT

Aug, 2005 to CESTAT (Kolkatta] July, 2009 & Commissioner(A]

Oct, 2003 to CESTAT Sep, 2005

Mar, 2005 to Appeal under Jan, 2010 preperation

July, 2001 to Commissioner(A] May, 2003

Oct, 1996 to CESTAT Sep, 2000

Dec, 2006 to CESTAT Feb, 2009

F.Y. 2001-2002 & CESTAT FY 2002-2003

F.Y. 2007-2008 Commissioner(A]

Service Tax Dec, 2005 to CESTAT Aug, 2008

Dec, 2004 to CESTAT Nov, 2007

May, 2005 to CCE(A] Mar, 2010

Sales Tax F.Y. 1993-1994 Tribunal Trade Tax Ghaziabad

Entry Tax Various year up to Supreme Court 31st March, 2011

x) The Company has no brought forward losses and has not incurred any cash losses during the financial year covered by our Audit and in the immediate preceding financial year.

xi) In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to Financial Institutions or Banks or Debenture holders.

xii) On the basis of verification of accounts and records maintained by the Company and to the best of our knowledge and belief, the Company has not granted any loan and advance on the basis of security by way of pledge of shares, debentures and other securities.

xiii) The Company is not a chit fund / nidhi / mutual benefit fund / society. Therefore,the provision of clause 4(xiii) of the Companies (Auditors' Report) Order, 2003 is not applicable to the Company.

xiv) To the best of our knowledge and according to information given to us, the Company is not a dealer or trader in securities. The Company has invested in marketable securities and mutual funds. According to the information and explanations given to us, proper records have been maintained of the transactions and contracts, and timely entries have been made therein. The investments in marketable securities and mutual funds have been held by the Company in its own name.

xv) To the best of our knowledge and according to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from Banks/ Financial Institutions.

xvi) To the best of our knowledge and according to the information and explanations given to us, the term loans were applied for the purpose for which the loans were obtained, other than temporary deployment pending application.

xvii) In our opinion and according to the information and explanations given to us and on an overall examination of Balance Sheet, we report that no funds raised on short term basis have not been used during the year for long term investments.

xviii)According to the information and explanations given to us, the Company has made preferential allotment of Preference Shares during the year to parties and companies covered in the Register maintained under section 301 of the Companies Act, 1956. In our opinion and according to information and explanations given to us, the price, at which Preference Shares have been issued, is not prejudicial to the interest of the Company.

xix) To the best of our knowledge and according to the information and explanations given to us, the Company has created securities/ charges as on the date of our report, in respect of Secured Debentures issued to the satisfaction of the Trustee of the Debentures.

xx) According to the information and explanations given to us, the Company has not raised any money by Public Issue during the year.

xxi) Based upon the audit procedure performed and information and explanations given by the Management, we report that no fraud on or by the Company has been noticed or reported during the year.

For MEHRA GOEL & CO.

Chartered Accountants (Registration No. 000517N]

Sd/-

R. K. MEHRA

Partner M.No. 6102

Place: New Delhi

Dated July 29, 2011

Mar 31, 2010

We have audited the attached Balance Sheet of BHUSHAN STEEL LIMITED as on 31st March, 2010 and also the Profit & Loss Account and the Cash Flow Statement of the Company for the year ended on that date annexed thereto. These financial statements are the responsibility of the Companys Management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

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

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

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

b) In our opinion, proper books of 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 Profit & Loss Account and the Cash Flow Statement dealt with by this report are in agreement with the books of account;

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

e) On the basis of the written representations received from the Directors as on 31st March, 2010 and taken on record by the Board of Directors, we report that none of the Directors is disqualified as on 31st March, 2010 from being appointed as a Director in terms of clause (g) of Sub-section (1) of Section 274 of the Companies Act, 1956;

f) 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:

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

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

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

Annexure (Referred to in paragraph 1 of our report of even date)

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

b) In our opinion the fixed assets covering significant value have been physically verified by the Management during the year at reasonable intervals and having regard to the size of the Company and the nature of its assets and on the basis of the information and explanations given by the Management, no material discrepancies have been noticed on such verification.

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

ii) a) As per information & explanations given to us, the inventory of the Company in its possession have been physically verified by the Management at reasonable intervals. Stocks in the possession and custody of the third parties and stocks in transit as on 31st March, 2010 have been verified by the Management with regard to confirmation or statement of account or correspondence of the third parties or subsequent receipt of goods.

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

c) The Company is maintaining proper records of inventories. As explained to us, no material discrepancies were noticed on such physical verification as compared to book records.

iii) In our opinion and according to information & explanations given to us, the Company has not taken/granted any loans, secured or unsecured from / to companies, firms or other parties listed in the register maintained under Section 301 of the Companies Act, 1956.

iv) In our opinion and according to the information and explanations given to us, there 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. During the course of our Audit, no major weakness has been noticed in the internal controls. We have not observed any continuing failure to correct major weaknesses in such internal control.

v) a) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements, that needs to be entered in the register maintained u/s 301 of the Companies Act, 1956 have been so entered.

b) In our opinion and according to the information and explanations given to us, each of these transactions entered in the register maintained under section 301 of the Companies Act, 1956 and aggregating during the year to Rs. 5,00,000/- or more in respect of each party, have been made at prices which are reasonable having regard to the prevailing market price at the relevant date.

vi) To the best of our knowledge, the Company has not accepted any deposits covered under section 58A and 58AA or any other provisions of the Companies Act, 1956.

vii) To the best of our knowledge and explanations given to us, the Company has an internal audit system commensurate with its size and the nature of its business.

viii) To the best of our knowledge, the Central Government has prescribed the maintenance of cost records under Section 209 (1) (d) of the Companies Act, 1956, which have been maintained by the Company and these have been broadly reviewed by us and we are of the opinion that, prima facie, the prescribed accounts and records have been made and maintained. However, we have not, nor we are required, carried out any detailed examination of such accounts and records.

ix) a) To the best of our knowledge and according to the information and explanations given to us the Company is regular in depositing undisputed statutory dues including Provident Fund, Investors Education and Protection Fund, Employees State Insurance, Income Tax, Sales Tax/VAT, Wealth Tax, Custom Duty, Excise Duty, Cess, Service Tax and any other statutory dues applicable to it with the appropriate authorities.

b) According to the information and explanations given to us there were no arrears of outstanding Income Tax, Wealth Tax, Sales Tax/VAT, Service Tax, Cess, Custom Duty, Excise Duty and any other statutory dues as at 31st March, 2010 for a period of more than six months from the date they became payable.

c) To the best of our knowledge and according to information and explanations given to us there are no dues of Income Tax / Sales Tax / VAT / Custom Duty / Wealth Tax / Excise Duty / Cess / Service Tax which have not been deposited on account of any dispute except in the following cases :-

Name of the Nature of the Dues Amount Period to which Forum where dispute

Statute (Rs. in Lacs) amount related is pending

The Central Differential Duty on material supplied 0.31 F.Y. 2001-02 Commissioner CESTAT

Excise Act, 1944 to earthquake victims

Seizure 0.60 Jan. 2002 High Court, Allahabad

Job work challan 0.50 Oct. 2000 to Nov. 2000 High Court, Allahabad

Modvat on Welding Electrodes 0.40 April - May 1998 High Court, Allahabad

0.46

Demand of Excise duty, refunded by the 0.52 Sept.2003 High Court, Allahabad

authorities, on returned of Imported Capital Goods

Modvat on Tank Fitted on Trailer for 2.16 Jan.1999 Commissioner CESTAT

Temporary storage used in emergency

Sales Tax Penalty on Trade Tax (Net of Rs. 0.38 Lacs 0.75 F.Y. 1993-94 Tribunal Trade Tax

paid under protest) Ghaziabad

x) The Company has no brought forward losses and has not incurred any cash losses during the financial year covered by our Audit and the immediate preceding financial year.

xi) In our opinion, the Company has not defaulted in repayment of dues to Financial Institutions or Banks or Debenture holders.

xii) On the basis of verification of accounts and records maintained by the Company and to the best of our knowledge & belief, the Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

xiii) The Company is not a chit fund or nidhi / mutual benefit fund / society. Therefore, the provision of clause 4(xiii) of the Companies (Auditors Report) Order, 2003 is not applicable to the Company.

xiv) To the best of our knowledge and according to information given to us, the Company is not a dealer or trader in securities. The Company has invested in marketable securities and mutual funds. According to the information and explanations given to us, proper records have been maintained of the transactions and contracts, and timely entries have been made therein. The investments in marketable securities and mutual funds have been held by the Company in its own name.

xv) To the best of our knowledge and according to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from Banks/ Financial Institutions.

xvi) To the best of our knowledge and according to the information and explanations given to us, the term loans were applied for the purpose for which the loans were obtained.

xvii) According to the Cash Flow Statement and other records examined by us and information & explanations given to us, on an overall basis, funds raised on short term basis have, prima facie, not been used during the year for long term investments.

xviii) According to the information & explanations given to us, the Company has made preferential allotment of Preference Shares during the year to parties and companies covered in the Register maintained under section 301 of the Companies Act, 1956. In our opinion and according to information and explanations given to us, the price, at which Preference Shares have been issued, is not prejudicial to the interest of the Company.

xix) To the best of our knowledge and according to the information & explanations given to us, the Company has created securities/ charges as on the date of our report, in respect of Secured Debentures issued to the satisfaction of the Trustee of the Debentures.

xx) According to the information & explanations given to us, the Company has not raised any money by Public Issue during the year.

xxi) Based upon the audit procedure performed and information and explanations given by the Management, we report that no fraud on or by the Company has been noticed or reported during the year.

For MEHRA GOEL & CO.

Chartered Accountants

(Registration No.-000517N)

Sd/-

R.K. MEHRA

Partner M. No.: 6102

Place : New Delhi

Dated : July 31, 2010

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