Bombay Rayon Fashions Ltd

We have audited the attached Balance Sheet of BOMBAY RAYON FASHIONS LIMITED asat March 31, 2010 and also the Profit and Loss Account & Cash Flow Statement for theyear ended on that date annexed thereto. These financial statements are the responsibilityof the Company's management. Our responsibility is to express an opinion on thesefinancial statements based on our audit.

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 disclosurein 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.

1. As required by the Companies (Auditor's Report) Order, 2003 (as amended) issued bythe Central Government of India in terms of sub-Section (4A) of Section 227 of theCompanies Act, 1956. We enclose the annexure statement on the matters specified inparagraphs 4 and 5 of the Order.

2. Further to our comments in the Annexure referred to in paragraph 1 above, we reportthat:

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

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

c) The Balance Sheet, Profit & Loss Account and Cash Flow Statement referred to inthis report are in agreement with the books of accounts.

d) In our opinion and to the best of our information and according to the explanationsgiven to us, the Balance Sheet, Profit & Loss Account & Cash Flow Statement areprepared in accordance with the Accounting Standards referred to in sub-section (3C) ofSection 211 of the Companies Act, 1961.

e) On the basis of written representations received from directors as on March 31, 2010and taken on record by the Board of Directors, we report that none of the Directors aredisqualified as on March 31, 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 explanationsgiven to us, the said financial statements together with notes thereon and attachedthereto give in the prescribed manner the information required by the Companies Act, 1956,required and give a true and fair view in conformity with the accounting principlesgenerally accepted in India:

i) In so far as it relates to the Balance Sheet of the state of affairs of the Companyas at March 31, 2010,

ii) In so far as it relates to the Profit & Loss Account of the PROFIT of thecompany for the year ended on that date, and

iii) In so far as it related to the Cash Flow Statement, of the Cash Flows for the yearended on that date.

Annexure to the Auditor’s Report of even date

(Referred to in paragraph 1 thereof)

1. In respect of Fixed Assets:

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

b) The fixed assets have been physically verified by the management at reasonableintervals during the year. We are informed that no material discrepancies were noticed bythe management on such verification.

c) Based on our scrutiny of the records of the company and the information &explanation received by us, we report that there were sale of fixed assets during the yearbut the fixed assets disposed off did not constitute a substantial part of the fixedassets of the company.

2. In respect of Inventories:

a) As explained to us physical verification of inventories has been conducted duringthe year by the management at reasonable intervals.

b) In our opinion, the procedures of physical verification of inventories followed bythe management are reasonable and adequate in relation to the size of the company andnature of its business.

c) In our opinion and according to the information and explanation given to us, theCompany is maintaining proper records of its inventories and no material discrepancieswere noticed on physical verification.

3. In respect of loans, secured or unsecured, granted or taken by the Company to/ fromcompanies, firms or other parties covered in the register maintained under Section 301 ofthe Companies Act, 1956:

a) The Company has granted loans to companies and the maximum amount outstanding at anytime during the year is M 445.53 crores and the year-end balance is M 440.31 crores.

b) In our opinion and according to the information and explanations given to us, therate of interest, where applicable and other terms and conditions, are not prima facieprejudicial to the interest of the Company.

c) In respect of the said loans, the same are repayable on demand and there is norepayments schedule.

d) In respect of said loans, the same are repayable on demand and therefore thequestion of overdue amounts does not arise. In respect of interest, where applicable thereare no overdue amounts.

e) During the year the Company has not taken any loans from parties covered in theregister maintained under Section 301 of the Companies Act, 1956.

f) In view of our comments above, clause (iii) (e) (f) and (g) of the said order is notapplicable to the Company.

4. In our opinion and according to the information and explanations given to us, thereis 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 and fixed assets. Further, on the basis of our examination of the books and recordsof the company, carried out in accordance with the auditing standards generally acceptedin India and according to the information and explanations given to us, we have neithercome across nor have we been informed of any continuing failure to correct weaknesses inthe aforesaid internal control system.

5. In respect of the contracts or arrangements referred to in Section 301 of theCompanies Act, 1956:

a) In our opinion and according to the information and explanations given to us theparticulars of contracts or arrangements referred to in Section 301 of the Act have beenentered in to the register required to be maintained under that section.

b) In our opinion and according to the information and explanations given to us,transactions made in pursuance of contracts or arrangements entered in the registermaintained under Section 301 of the Act and exceeding the value of Rupees Five Lakhs inrespect of any party during the year, have been made at prices, which are prima faciereasonable having regard to the prevailing market prices at the relevant time.

6. According to the information and explanations given to us, the Company has notaccepted any deposits from public.

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

8. As per the information and explanations provided to us, we are of the opinion thatin pursuant to prescribed rules by the central government, the company has maintained costrecords u/s. 209(1) (d) of the Companies Act, 1956 however we have not done a detailedexamination of the same.

9. In respect of Statutory Dues:

a) According to the records of the company produced before us, the Company is generallyregular in depositing with appropriate authorities undisputed statutory dues, includingProvident Fund, Employees State Insurance, Income Tax, Wealth Tax, Custom Duty, ExciseDuty, Service Tax, Cess and other statutory dues applicable to it, which were outstandingas at the last day of the financial year for a period of more than six months from thedate they became payable .

b) According to the records of the company, there are no disputed dues of Sales Tax,Customs Duty, Wealth Tax, Service Tax and Excise Duty / Cess except as under:

10. The company has no accumulated losses at the end of the financial year. The companyhas not incurred any cash loss during the financial year covered by our audit and in theimmediately preceding financial year.

11. As per the information and explanations given to us the company is generallyregular in making the repayments due to the banks & financial institution and as atMarch 31, 2010 there are no overdue amounts.

12. According to the information and explanations given to us the company has notgranted any loans and advances on the basis of security by way of pledge of shares,debentures or other securities.

13. In our opinion, and to the best of our information and according to theexplanations provided by the management, we are of the opinion that the company is neithera Chit Fund nor a nidhi/mutual benefit society. Hence, in our opinion, the requirements ofpara 4 (xiii) of the Order do not apply to the company.

14. As per records of the company and information and explanations given to us by themanagement, company is not dealing or trading in shares, securities, debentures and otherinvestments.

15. According to the information and explanations given to us the company has not givenany guarantee for loans taken by others from banks or financial institutions.

16. According to the records of the Company, the Company has applied the term loans forthe purposes of which it was taken during the year.

17. 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 by the company.

18. The Company has made preferential allotment of shares to a Company covered in theregister maintained under Section 301 of the Act. In our opinion, prices as which shareshave been issued are not prejudicial to the interest of the Company.

19. During the period covered by audit report the company has not issued anydebentures.

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

21. Based upon the audit procedures performed and information and explanations given bythe management, we report that no fraud on or by the Company has been noticed or reportedduring the course of our audit.