Balaji Galvanising Industries Ltd

The Members of

BALAJI GALVANISING INDUSTRIES LIMITED

SECUNDERABAD.

1. We have audited the attached balance sheet of BALAJI GALVANISING INDUSTRIESLIMITED as at 31st March, 2010, the profit & loss account and also the cash flowstatement of the Company for the year ended on that date annexed thereto. These financialstatements are the responsibility of the company's management. Our responsibility is toexpress an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with auditing standards generally accepted inIndia. 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 management as well as evaluating the overallfinancial statement presentation. We believe that our audit provides a reasonable basisfor our opinion.

3. As required by the Companies (Auditor's Report) Order, 2003 issued by the CentralGovernment of India in terms of sub-section (4A) of section 227 of the Companies Act,1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and5 of the said order.

4. Further to our comments in the Annexure referred to in paragraph 3 above, we reportthat:

i. We have obtained all the information and explanations which to the best of ourknowledge and belief were necessary for the purpose 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, profit & loss account and the cash flow statement dealtwith by this report are in agreement with the books of account;

iv. In our opinion, the balance sheet, profit & loss account and the cash flowstatement dealt with by this report comply with the accounting standards referred to insub-section (3C) of section 211 of the Companies Act, 1956;

v. On the basis of written representations received from the directors, as on 31stMarch, 2009, and taken on record by the Board of Directors, we report that none of thedirectors of the company is disqualified as on 31st March, 2010 from being appointed as adirector in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act,1956;

vi. Advances, creditors and other liabilities include certain old balances whichrequire review, recalculation and adjustments. In the absence of the same, consequentialadjustments are not carried out in the books of accounts. The relevant impact on theaccounts is not ascertainable.

vii. In our opinion and to the best of our information and according to theexplanations given to us, the said accounts give the information required by the CompaniesAct, 1956 in the manner so required and give a true and fair view in conformity with theaccounting principles generally accepted in India, subject to note no.4(vi)

a) in the case of the balance sheet, of the state of affairs of the Company as at 31stMarch, 2010;

b) in the case of the profit & loss account, of the loss for the year ended on thatdate; and

c) in the case of the cash flow statement, of the cash flows for the year ended on thatdate.

ANNEXURE TO AUDITOR'S REPORT

(Referred to in paragraph 3 of our Report of Even date)

1a. The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.

b. As explained to us, the fixed assets have been physically verified by the managementduring the year and no material discrepancies were noticed on such physical verification.

c. During the year the company has not disposed off any substantial/major part of fixedassets.

2a. As explained to us, the inventory has been physically verified by the management atregular intervals during the year. In our opinion, the frequency of verification isreasonable.

b. In our opinion and according to the information and explanations given to us, theprocedures of physical verification of inventory followed by the management are reasonableand adequate in relation to the size of the company and the nature of its business.

c. The, company has maintained proper records of inventory and discrepancies betweenthe physical inventory and the book records, which have been properly dealt with in thebooks of account, were not material.

3. The company has neither granted nor taken any loans, secured or unsecured to/fromCompanies, firms or other parties covered in the register maintained under Section 301 ofthe Companies Act, 1956.

a. The company has not granted loans, but has taken loan from a company covered in theregister maintained under section 301 of the Companies Act, 1956. The maximum amountinvolved during the year was Rs 34.25 lacs and the year and balance of loan taken fromsuch party was (Rs 0.07) lacs.

b. In our opinion and according to the information and explanations given to us, therate of interest, wherever applicable and other terms and conditions on which such loanshas been taken are not prima facie prejudicial to the interest of the company.

c. In respect of loans taken by the company, the Interest payments are regular and theprincipal amount is repayable on demand.

d. There is no overdue amount in respect of loan taken by the company as this loan isrepayable on demand.

4. In our opinion and according to the information and explanations given to us, thereare adequate internal control procedures commensurate with the size of the company and thenature of its business for the purchase of inventory, fixed assets and also for the saleof goods. During the course of our audit, we have not observed any major weaknesses ininternal controls.

5a. In our opinion and according to the information and explanations given to us, theparticulars of contracts and arrangements that need to be entered into the registermaintained under Section 301 of the Companies Act, 1956 have been so entered

b. According to the information and explanations given to us, the transactions made inpursuance of such, contracts have been made at prices which are reasonable having regardto the prevailing' market prices at the relevant time.

6. The company has not accepted any deposits from the public.

7. In our opinion, the Company's present internal audit system is commensurate with itssize and nature of its business.

8. According to the information given to us, the company being a small scale industrialundertaking, it is exempt from maintaining cost records under Section 209(1)(d) of theCompanies Act, 1956 for its manufacturing activities.

9 in respect of statutory dues:

a. According to the records of the company, and as per the information and explanationsgiven to us, the company has generally been regular in depositing with appropriateauthorities undisputed statutory dues including Provident Fund, Investor Education andProtection fund, Employees' State Insurance, Income Tax, Sales Tax, Wealth Tax, CustomsDuty, Excise Duty, Cess and other statutory dues as are applicable t the company, with theappropriate authorities during the year.

b. According to the Information and explanations given to us, no undisputed amountspayable in respect of income tax, wealth tax, sales tax, customs duty and cess were inarrears as at 31.03.10 for a period of more than six months from date they became payable.

c. According to the information and explanations given to us, there are no dues ofsales tax, income tax, customs duty, wealth tax, service tax, excise duty and cess whichhaven not been deposited on account of any dispute.

10. In our opinion, the accumulated losses as at 31st March, 2010 are less than fiftypercent of its net worth. The company has not incurred cash any cash loss during thefinancial year covered by our audit but has incurred cash losses in the immediatelypreceding financial year.

11. According to the records of the company examined by us and explanations given tous, the company has not defaulted in repayment of dues to financial institutions, banks ordebenture holders during the year.

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

13. The provisions of any special statute applicable to a chit fund/nidhi/mutualbenefit fund/society are not applicable to the company.

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

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

16. The company has not raised any term loan during the year.

17. On the basis of an overall examination of the balance sheet of the company, in ouropinion and according to the information and explanations given to us, there are no fundsraised on short term basis which have been used for long term investment, and vice versa.

18. During the year, the company has not made any preferential allotment of shares toparties and companies covered in the register maintained under Section 301 of theCompanies Act, 1956.

19. The company has not issued any debentures so far.

20. The company has not raised any money by way of public issue during the year.

21 During the course of our examination of the books of account carried out inaccordance with the generally accepted auditing practices in India, we have not comeacross any instance of fraud on or by the company nor have we been informed by themanagement of any such instance being noticed or reported during the year.