Adhunik Metaliks Ltd

To

The Members of

Adhunik Metaliks Limited

1. We have audited the attached Balance Sheet of Adhunik Metaliks Limited(‘the Company’) as at 30th June 2012 and also the Statement of Profit and Lossand the cash flow statement for the fifteen months period ended on that date, annexedthereto. These financial statements are the responsibility of the Company’smanagement. Our responsibility is to express an opinion on these financial statementsbased on our audit.

2. We conducted our audit in accordance with the auditing standards generally acceptedin India. Those Standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement. Anaudit includes examining, on a test basis, evidence supporting the amounts and disclosuresin the financial statements. An audit also includes assessing the accounting principlesused and significant estimates made by the management, as well as evaluating the overallfinancial statements presentation. We believe that our audit provides a reasonable basisfor our opinion.

3. As required by the Companies (Auditor’s Report) Order, 2003 (as amended) issuedby the Central Government of India in terms of sub-section (4A) of Section 227 of theCompanies Act, 1956, we enclose in the Annexure a statement on the matters specified inparagraphs 4 and 5 of the said Order.

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

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

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

iii. The balance sheet, the statement of profit and loss and the cash flow statementdealt with by this report are in agreement with the books of account.

iv. In our opinion, the balance sheet, the statement of profit and loss and the cashflow statement dealt with by this report comply with the accounting standards referred toin sub-section (3C) of section 211 of the Companies Act, 1956.

v. On the basis of the written representations received from the directors, as on 30thJune 2012, and taken on record by the Board of Directors, we report that none of thedirectors is disqualified as on 30th June 2012 from being appointed as a director in termsof clause (g) of sub-section (1) of section 274 of the Company’s Act, 1956.

vi. Attention is drawn to claims receivable of Rs. 2450.00 lacs accounted for by theCompany towards supply of inferior quality of raw material by vendors. Pending acceptanceof the above claims by the respective vendors, we are unable to opine on thequantification and recoverability of these claims and thus its consequential impact, ifany, on the Company’s financial statements.

vii. Except for the possible effect of the observation in para (vi) above, in ouropinion 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 mannerso required and give a true and fair view in conformity with the accounting principlesgenerally accepted in India;

a) in the case of the Balance Sheet, of the state of affairs of the Company as at 30thJune 2012;

b) in the case of the Statement of profit and loss, of the loss for the period ended onthat date; an

c) in the case of the Cash Flow Statement, of the cash flows for the period ended onthat date.

Annexure to the Auditors' Report

(Referred to in our report of even date to the members of Adhunik Metaliks Limited asat and for the fifteen months period ended 30th June, 2012)

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

b) All fixed assets have not been physically verified by the management during theperiod but there is a regular programme of verification in a phased manner to cover allthe items of fixed assets over a period of three years which, in our opinion, isreasonable having regard to the size of the Company and the nature of its assets. Asinformed, no material discrepancies were noticed on such verification.

c) There was no substantial disposal of fixed assets during the period.

ii) a) The management has conducted physical verification of inventory at reasonableintervals during the period.

b) As the Company’s inventory of raw materials and finished goods mostly includesbulk materials which require technical expertise for establishing the quantity thereof,the Company has hired independent agencies for physical verification of such stocks.Relying on the above verification by independent expert agencies and according to theinformation and explanations furnished to us, the procedures of physical verification ofinventory followed by the management are reasonable and adequate in relation to the sizeof the Company and the nature of its business.

c) The Company is maintaining proper records of inventory and no material discrepancieswere noticed on physical verification of inventories.

iii) a) According to the information and explanations given to us, the Company has notgranted any loans, secured or unsecured to companies, firms or other parties covered inthe register maintained under section 301 of the Companies Act, 1956. Accordingly, theprovisions of clause 4(iii)(a) to (d) of the Order are not applicable to the Company andhence not commented upon.

b) According to the information and explanations given to us, the Company has not takenany loans, secured or unsecured, from companies, firms or other parties covered in theregister maintained under section 301 of the Companies Act, 1956. Accordingly, theprovisions of clauses 4(iii)(e) to (g) of the Order are not applicable to the Company andhence not commented upon.

iv) In our opinion and according to the information and explanations given to us, thereis an adequate internal control system commensurate with the size of the Company and thenature of its business, for the purchase of inventory and fixed assets and for the sale ofgoods. During the course of our audit, we have not observed any major weakness orcontinuing failure to correct any major weakness in the internal control system of thecompany in respect of these areas.

v) a) According to the information and explanations provided by the management, we areof the opinion that the particulars of contracts or arrangements referred to in section301 of the Companies Act, 1956 that need to be entered into the register maintained undersection 301 have been so entered.

b) In our opinion and according to the information and explanations given to us, thetransactions made in pursuance of such contracts or arrangements and exceeding the valueof Rupees five lakhs have been entered into during the financial year at prices which arereasonable having regard to the prevailing market prices at the relevant time.

vi) The Company has not accepted any deposit from the public within the purview ofSection 58A, 58AA or any other relevant provisions of the Companies Act, 1956 and therules framed there under.

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

viii) We have broadly reviewed the books of account maintained by the Company pursuantto the rules made by the Central Government for the maintenance of cost records undersection 209(1)(d) of the Companies Act, 1956 for the steel products manufactured by theCompany, and are of the opinion that prima facie, the prescribed accounts and records havebeen made and maintained.

ix) a) Undisputed statutory dues including provident fund, employees’ stateinsurance, income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty, cessand other material statutory dues have generally been deposited with delays with theappropriate authorities. As explained, there is no amount due for deposit with InvestorEducation & Protection Fund.

b) According to the information and explanations given to us, no undisputed amountspayable in respect of provident fund, employees’ state insurance, investor educationand protection fund, income-tax, sales-tax, wealth-tax, service tax, custom duty, exciseduty, cess and other material statutory dues were outstanding, as on the Balance Sheetdate for a period of more than six months from the date they became payable except infollowing cases which have since been paid:

c) According to the records of the Company, there are no dues outstanding of incometax, sales-tax, wealth-tax, service tax, customs duty, excise duty and cess on account ofany dispute except as mentioned below :

x) The Company has no accumulated losses at the end of the financial year and it hasnot incurred cash losses in the current and immediately preceding financial year.

xi) Based on our audit procedures and as per the information and explanations given bythe management, the Company has not defaulted in repayment of dues to banks except for adelay in repayment of dues to the banks to the extent of Rs. 33,154.65 lacs (the delay insuch repayment for less than 30 days is Rs. 22,157.25 lacs and for the period between 30to 90 days is Rs. 10,997.40 lacs in each individual case), of which Rs. 6,960.70 lacs wasin arrears as on the balance sheet date. Further, as informed, there were no outstandingdues to the debenture holders and financial institutions.

xii) According to the information and explanations given to us and based on thedocuments and records produced before us, the Company has not granted loans and advanceson the basis of security by way of pledge of shares, debentures and other securities.

xiii) In our opinion, the Company is not a chit fund or a nidhi / mutual benefit fund /society. Therefore, the provisions of clause 4(xiii) of the Order are not applicable.

xiv) In our opinion, the Company is not dealing or trading in shares, securities,debentures and other investments. Accordingly, the provisions of clause 4(xiv) of theOrder are not applicable.

xv) According to the information and explanations given to us, the Company has pledgeda part of its investments for loan taken by its wholly owned subsidiary company from bank,the terms and conditions whereof, in our opinion, are not prima-facie prejudicial to theinterest of the Company. According to the information and explanations given to us, theCompany has not given any guarantee for loans taken by others from financial institutions.

xvi) Based on the information and explanations given to us by the management, termloans were applied for the purpose for which these loans were obtained.

xvii) According to the information and explanations given to us and on an overallexamination of the balance sheet of the Company, we report that no funds raised onshort-term basis have been used for long-term investment.

xviii) The Company has not made any preferential allotment of shares during the periodto parties or Companies covered in the register maintained under section 301 of theCompanies Act, 1956.

xix) The Company did not have any outstanding debentures during the period.

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

xxi) Based upon the audit procedures performed for the purpose of reporting the trueand fair view of the financial statements and as per the information and explanationsgiven by the management, we report that no fraud on or by the Company has been noticed orreported during the period.