Chase Bright Steel Ltd

To,

The Members,

CHASE BRIGHT STEEL LTD.

We have audited the attached Balance Sheet of CHASE BRIGHT STEEL LTD. as atMarch 31,2011 the Profit and Loss account and also the Cash Flow statement for the yearended on that date annexed thereto. These financial statements are the responsibility ofthe company's management. Our responsibility is to express an opinion on these financialstatements based on our audit.

We conducted our audit in accordance with the 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.

As required by the Companies (Auditors' Report) Order, 2003 (CARO 2003) (as amended)issued by the Central Government of India in terms of section 227(4A) of the CompaniesAct, 1956, we enclose in the Annexure, a statement on the matters specified in Paragraphs4 and 5 of the said Order.

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 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 and Loss Account and Cash Flow statement dealt with bythis report are in agreement with the books of account of the Company;

(iv) In our opinion, the Balance Sheet, the Profit and Loss Account and the Cash Flowstatement dealt with by this report comply with the Accounting Standards referred to inthe section 211 (3C) of the Companies' Act, 1956 to the extent applicable:

(v) On the basis of written representations received from the directors, as on March31, 2011 and taken on record by the Board of Directors, we report that none of theDirectors is disqualified as on March 31, 2011 from being appointed as a director in termsof clause (g) of sub-section (1) of section 274 of the Companies' Act, 1956.

(vi) In our opinion and to the best of our information and according to theexplanations given to us, the said financial statements together with the"Significant Accounting Policies" and "Notes to Accounts" and othernotes appearing else where in the accounts and subject to Note No. 5 of Schedule 20relating to non provision for doubtful debts of Rs. 10,09,374/-, give the informationrequired by the Companies' Act, 1956, in the manner so required and present a true andfair 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 atMarch 31,2011;

(b) in the case of the Profit and Loss Account, of the Profit for the year ended onthat date; and

(c) in the case of the Cash Flow statement, of the cash flows for the year ended onthat date.

ANNEXURE TO THE AUDITORS' REPORT

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

On the basis of the records produced to us for our verification / perusal, such checksas we considered appropriate and in terms of information and explanations given to us onour enquiries, we state that

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

(b) As explained to us, all the assets have been physically verified by the managementat reasonable intervals during the year No material discrepancies were noticed on suchverification.

(c) The Company has not disposed off a substantial part of Fixed Assets during theyear.

(2) (a) As explained to us, the inventories have been physically verified by themanagement at regular intervals during the year and at the close of the year.

(b) In our opinion and according to the information and explanations given to us theprocedures of physical verification of inventories followed by the management as explainedto us are, in our opinion, reasonable and adequate in relation to the size of the Companyand the nature of its business.

(c) The Company is maintaining proper records of inventory. The discrepancies noticedon verification between the physical stocks and the book records were not material andhave been properly dealt within the books of account.

(3) (a) The Company has not granted any loans, secured or unsecured, to companies,firms or other parties listed in the register maintained under Section 301 of theCompanies Act, 1956. Accordingly, Clauses (b), (c) and (d) of paragraph 4(iii) of theOrder are not applicable.

(b) The company has taken loans from seven parties covered in the register maintainedunder section 301 of the Companies Act, 1956. The maximum balance involved during the yearwas Rs. 362.49 lakhs and the year end balance of loans taken from such parties was Rs.296.46 lakhs.

(c) In our opinion, the rate of interest and other terms and conditions on which loanshave been taken from companies and other parties listed in the register maintained undersection 301 of the Companies Act, 1956 are not, prima tads, prejudicial to theinterest of the company.

(d) The Company is regular in repaying the principal amounts as stipulated and has beenregular in the payment of interest, wherever applicable.

(4) In our opinion and according to the information and explanations given to us, thereare in general adequate internal control procedures commensurate with the size of theCompany and the nature of its business with regard to purchase of inventory and fixedassets and also with regard to the sale of goods and services. During the course of ouraudit, we have not observed any continuing failure to correct major weaknesses in internalcontrol system.

(5) (a) On the basis of the audit procedures performed by us and according to theinformation and explanations provided by the management, the contracts or arrangementsthat need to be entered into the register maintained under section 301 of the CompaniesAct, 1956 have been so entered.

(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 Companies Act, 1956 and exceeding the value of rupeesfive lakhs in respect of any party have been made at prices / rates which are reasonablehaving regard to the prevailing market price / rates at the relevant time.

(6) The Company has not accepted any deposits from the public and consequently thedirectives issued by the Reserve Bank of India, the provisions of sections 58A and 58AA orany other relevant provisions of the Act and the Rules framed thereunder are notapplicable.

(7) In our opinion, the company has an internal audit system commensurate with the sizeand nature of its business.

(8) According to information and explanations given to us, the Central Government hasnot prescribed the maintenance of cost records under clause (d) of sub-section (1) ofSection 209 of the Companies Act, 1956 in respect of the manufacturing activities carriedon by the Company and therefore, clause 4(viii) of the Order is not applicable.

(9) (a) According to records of the Company, and on the basis of our examination of thebooks of accounts and other records, the company is generally regular in depositing withappropriate authorities undisputed statutory dues including provident fund, Employee'sState Insurance, Income-tax, Service tax, Sales tax/VAT, Customs Duty, Excise Duty andother material statutory dues applicable to it but there have been some delays in fewinstances. However, according to information and explanation given to us, there is noliability towards Investor Education & Protection Fund, Wealth- tax for the year underaudit.

(b) According to the information and explanations given to us, no undisputed amountspayable in respect of income tax, wealth tax, service tax, sales tax, customs duty, exciseduty and cess were in arrears, as at March 31,2011 for a period of more than six monthsfrom the date they became payable except Income-tax dues of Rs.14.88 lakhs and NMMC Cessof Rs. 25.56 lakhs.

(c) According to the information and explanation given to us, there are no dues ofincome tax, sales tax, wealth tax, excise duty, service tax or custom duty which have notbeen deposited on account of any dispute.

(10) As on March 31, 2010, the accumulated losses of the Company are more than 50% ofits net worth. The Company has not incurred cash losses during the year ended on that dateand in the immediately preceding financial year.

(11) In our opinion and according to the information and explanations given to us, thecompany has not defaulted in repayment of dues to financial institutions or banks.Further, the Company has not issued any debentures and hence clause 4 (xi) of the Order,to that extent, is not applicable.

(12) In our opinion and according to the information and explanations given to us, theCompany has not granted loans and advances on the basis of security by way of pledge ofshares, debentures and other securities.

(13) 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 tothe company.

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

(15) According to the information and explanations given to us, the company has notgiven guarantees for loans taken by others from banks or financial institutions.

(16) The Company has raised new loans during the year. The loans so raised have beenutilized for the purpose for which they were raised.

(17) According to the information and explanations given to us and on an overallexamination of the balance sheet of the Company, we are of the opinion that the Companyhas utilised short term funds towards financing of losses incurred in the past.

(18) The Company has not made preferential allotment of shares to parties and companiescovered in the register maintained under section 301 of the Companies Act, 1956.

(19) The Company has not issued any debentures. Accordingly, clause 4(xix) of the Orderis not applicable.

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

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