Gujarat NRE Coke Ltd

To the members of Gujarat NRE Coke Ltd.

1. We have audited the attached Balance Sheet of Gujarat NRE Coke Limited as at March31, 2010 and the Profit and Loss Account and the Cash Flow Statement of the Company forthe year ended on that date annexed thereto. These financial statements are theresponsibility of the Company’s management. Our responsibility is to express anopinion 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 as amended by theCompanies (Auditor’s Report) (Amendment) Order, 2004, issued by the CentralGovernment of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956and on the basis of such checks of books and records of the company as we consideredappropriate and according to the information and explanations given to us , we enclose inthe Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Orderto the extent applicable.

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

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

(b) 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;

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

(d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statementdealt with by this report comply with the Accounting Standards referred to in sub-section(3C) of section 211 of the Companies Act, 1956 to the extent applicable;

(e) On the basis of written representations received from the directors as on 31^stMarch, 2010, and taken on record by the Board of Directors, we report that none of thedirectors is disqualified as at March 31, 2010 from being appointed as a director in termsof 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 accounts read together with the significant accounting policies inschedule 18 and notes appearing thereon, 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:

(i) in the case of the Balance Sheet, of the state of affairs of the Company as atMarch 31, 2010;

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

(iii) in the case of Cash Flow Statement, of the cash flows for the year ended on thatdate.

Annexure referred to in paragraph 3 of our report of even date to the members ofGujarat NRE Coke Ltd. for the year ended 31^st March 2010.

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

(b) We were informed that the Company has a phased programme of physical verificationof its fixed assets which, in our opinion, is reasonable having regard to the size of theCompany and the nature of its assets. In accordance with this programme, fixed assetsrequired to be verified were physically verified by management during the period underreview and no material discrepancies were noticed on such verification.

(c) Fixed assets disposed off during the year under review were not substantial andtherefore do not affect the going concern status of the company.

(ii) (a) During the year inventories have been physically verified by the management atreasonable intervals. In our opinion, the frequency of verification is reasonable.

(b) In our opinion and according to the information and explanations given to us, theprocedures of physical verification of inventories followed by the management arereasonable and adequate in relation to the size of the Company and the nature of itsbusiness.

(c) The Company is maintaining proper records of inventory. The discrepancies noticedduring the physical verification of inventories as compared to book records were notmaterial and have been properly dealt with in the books of account.

(iii) (a) During the year the company, has not granted loans, secured or unsecured, tocompanies, firm and others parties covered in the register maintained under section 301 ofthe Companies Act, 1956. Unsecured loan granted in the earlier year to its sub- subsidiarycompany (maximum amount due was Rs. 6.92 Crores during the year) has since been receivedin full.

(b) The rate of interest and other terms and conditions of such loans are not,prima-facie, prejudicial to the interest of the company.

(c) The sub-subsidiary company was regular in payment of interests, the principalamount of loan has been received in full during the year.

(d) There is no amount overdue in respect of loans granted by the company to partiescovered in the registered maintained under Section 301 of the Companies Act, 1956.

(e) In our opinion and according to the information and explanations given to us, thecompany has not taken any loan from the companies, firm or other parties covered in theRegister maintained under section 301 of the Companies Act, 1956, hence paragraph iii (f)and iii (g) of this order are not applicable.

(iv) In our opinion and according to the information and explanations given to us,there exists an adequate internal control system commensurate with the size of the companyand the nature of its business with regard to purchases of inventory and fixed assets andwith regard to the sale of goods and services. No major weakness in internal controlsystem was observed.

(v) (a) According to the information and explanations given to us, we are of theopinion that particulars of all contracts or arrangements referred to in section 301 ofthe Companies Act, 1956 have been entered in the register required to be maintained underthat section.

(b) In our opinion and according to the information and explanations given to us, thetransactions made in pursuance of contracts or arrangements entered in the registermaintained under section 301 of the Companies Act, 1956 and exceeding value of rupees fivelacs in respect of any party during the year have been made at prices which are reasonablehaving regard to prevailing market prices at the relevant time.

(vi) In our opinion and according to the information and explanations given to us, theCompany has not accepted any deposits from the public and consequently, the directivesissued by the Reserve Bank of India and the provisions of Section 58A, 58AA or any otherrelevant provisions of the Companies Act, 1956 and the rules framed there under are notapplicable to the Company.

(vii) In our opinion, the Company has an internal audit system commensurate with thesize and the nature of its business. (viii) The Central Government has not prescribed rulefor maintenance of cost records under Section 209(1) (d) of the Companies Act, 1956 forLow-ash Metallurgical coke business. The cost records are maintained for steel plants asper rules. We have broadly reviewed the accounts and records of the steel plant in thisconnection and are of the opinion that prima facie the prescribed accounts and recordshave been made and maintained. We have not, however, carried out a detailed examination ofsuch records.

(ix) (a) According to the information and explanations given to us and on the basis ofour examination of the books of account, in our opinion, the Company has been generallyregular in depositing undisputed statutory dues including Provident Fund, InvestorEducation and Protection Fund, Employees’ State Insurance, Income Tax, Sales Tax,Wealth Tax, Service Tax, Customs Duty, Excise Duty, Cess and any other material statutorydues with appropriate authorities during the year under review.

Since the Central Government has, till date, not prescribed the amount of cess payableunder Section 441A of the Companies Act, 1956, we are not in a position to comment uponthe regularity or otherwise of the company in depositing the cess.

(b) According to the information and explanations given to us, no undisputed amountpayable in respect of Income Tax, Sales Tax, wealth Tax, Service Tax, Custom duty andExcise duty were in arrear as at 31^st March, 2010, for a period of more thansix months from the date they became payable.

(c) According to the information and explanations given to us and the records of thecompany examined by us, there were no dues in respect of Income Tax, Sales Tax, WealthTax, Service Tax, Customs Duty, Excise Duty and Cess that have not been deposited with theappropriate authorities on account of any dispute other than those as mentionedhere-in-below:

(x) The Company does not have accumulated losses at the year ended 31^stMarch, 2010 and has not incurred cash losses during the year under review and in theimmediately preceding financial year.

(xi) In our opinion and according to the information and explanations given to us, theCompany has not defaulted in repayment of dues to its banks or to any financialinstitutions or debenture holders.

(xii) The Company has not granted loans and advances on the basis of security by way ofpledge of shares, debentures and other securities.

(xiii) In our opinion and according to the information and explanations given to us,the Company is not a chit fund / nidhi/ mutual benefit fund / society.

(xiv) According to the information and explanations given to us, the Company is notdealing or trading in shares, securities, debentures and other investments. Theinvestments have been held by the company in its own name except to the extent ofexemption granted under section 49 of the Companies Act, 1956.

(xv) In our opinion and according to the information and explanations given to us, theterms and conditions, on the basis of which the Company has given guarantees for loanstaken by the other companies from banks or financial institutions, are not as suchprejudicial to the interests of the Company.

(xvi) In our opinion and according to the information and explanations given to us andon the basis of our examination of the books of account, the term loans were applied forthe purpose for which such 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) According to the information and explanations given to us, the company has notmade any preferential allotment of shares to parties and companies covered in the Registermaintained under Section 301 of the Companies Act, 1956.

(xix) According to the information and explanations given to us, the company issuedsecured non-convertible debentures during the year (Refer note no. B-4 (a) of schedule 18)

(xx) The company has not raised any money by public issues during the year underreview.

(xxi) 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.