Himalaya Granites Ltd

TO THE MEMBERS OF

HIMALAYA GRANITES LIMITED

We have audited the attached Balance Sheet of M/s. HIMALAYA GRANITES LIMITED asat 31st March, 2010, the Profit and Loss Account and also the Gash Flow Statement for theyear ended on that date annexed hereto.

These financial statements are the responsibility of the Company's management. Ourresponsibility is to express an opinion on these financial statements based on our audit.We conducted our audit in accordance with auditing standards generally accepted in India.Those standards require that we plan and perform the audit to obtain reasonable assuranceabout whether the financial statements are free of material misstatement. An auditincludes examining, on a test basis, evidence supporting the amounts and disclosures inthe financial statements. An audit also includes assessing the accounting principles usedand significant estimates made by management, as well as evaluating the overall financialstatement presentation. We believe that our audit provides a reasonable basis for ouropinion.

(1) As required by the Companies (Auditors' Report) Order, 2003 issued by the CentralGovernment of India in terms of section 227(4A) of the Companies Act, 1956, we enclose inthe Annexure, a statement on the matters specified in paragraphs 4 and 5 of the saidOrder.

(2) Further to our comments in the Annexure referred to in paragraph (1) above:

(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 the Companies Act, 1956have been kept by the Company so far as appears from our examination of those books andproper returns, certified by the Branch Managers, adequate for the purpose of our audithave been received from some of the branches which have not been visited by us ;

(c) The Balance Sheet, Profit & Loss Account and Cash Flow Statement dealt with inthis report are in agreement with the books of account and returns made available to us;

(d) In our opinion, the Balance Sheet, Profit & Loss Account and Cash FlowStatement, together with notes thereon, comply with the Accounting Standards referred toin Sub-section (3C) of Section 211 of the Companies Act, 1956.

(e) On the basis of the written representations received from the directors and takenon record by Board of Directors, we report that none of the said directors is disqualifiedas on 31 March, 2010 from being appointed as directors in terms of clause (g) of subsection (1) of section 274 of the Companies Act, 1956.

(f) The Financial Statements have been prepared on the basis that the Company is agoing concern, which assumes continuity of normal business activities and the realizationof assets and the settlement of liabilities in the ordinary course of business. Theproduction facilities of the Company continue to remain close since 27-02-2008 and to thebest of our information and belief the Management has not yet drawn any future plan forrevival of the closed business. These events indicate a materiai uncertainty and castsignificant doubt on the Company's ability to continue as a going concern. However, theCompany has since paid the entire dues of its workers, repaid its borrowings from banksand / or financial institutions in full and also discharged a significant portion of itsother liabilities. In the opinion of the Management, the Company would be able to realizeits assets and discharge the remaining liabilities also in full in the normal course ofbusiness. Accordingly, the accounts have been prepared on the assumption that it is agoing concern and as such, no adjustments have been made to the financial statementsrelating to the recoverability and classification of recorded asset amounts, or to theamounts and classification of liabilities, except that a sum of Rs 28,935/- has beenwritten off on account of damage / deterioration of inventory.

Subject to above, in our opinion, the financial statements give the informationrequired by the Companies Act, 1956, in the manner so required and also give a true andfair view:

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

(ii) in the case of the Profit & Loss Account, of the Loss of the Company for theyear ended on that date.

(iii) in the case of the Cash Flow Statement of the cash flows for the year ended onthat date.

ANNEXURE TO AUDIT REPORT

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

(b) A substantial portion of the fixed assets have been physically verified by themanagement during the year and there is a regular programme of verification which, in ouropinion, is reasonable having regard to the size of the company and the nature of itsassets. No material discrepancies were noticed on such verification.

(c) As the company has disposed off part of its fixed assets and so the going concernstatus of the company is affected.

2. (a) As explained to us, the inventory has been physically verified during the yearby the management at reasonable intervals.

(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) In our opinion and according to the information and explanations given to us, thecompany has maintained proper records of its inventory and no material discrepancies werenoticed on physical verification.

3. (a) As informed to us, the Company has not granted any loans, secured and unsecured,to companies, firms or other parties covered in the register maintained under Section 301of the Companies Act, 1956 and as such clauses (iii)(a) to (iii)(d) are not applicable.

(b) As informed to us, the company has not taken any loans, secured or unsecured fromcompanies, firms or other parties covered in the registered maintained under section 301of the Act and as such clauses (iii)(e) to (iii)(g) are not applicable.

4. In our opinion and according to the information and explanations given to us, thereare adequate internal control systems 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 services. During the course of our audit, we have not observed any continuingfailure to correct major weaknesses in internal control system;

5. (a) According to the information and explanations given to us, we are of the opinionthat the particulars of contracts or arrangements referred to in section 301 of the Acthave been entered in the registered required to be maintained under that section; and

(b) In our opinion and according to the information and explanations given to us, notransactions have been made in pursuance of such contracts or arrangements.

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

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

8. In respect of the company, no cost records have been prescribed by the CentralGovernment under section 209 (1) (d) of the Companies Act, 1956.

9. According to the information and explanation given to us in respect of statutory andother dues:

(a) The company has been regular in depositing with appropriate authorities undisputedstatutory dues including provident fund, investor education protection fund, employees'state insurance, income tax, sales tax, wealth tax, service tax, custom duty, excise duty,cess and other matenal statutory dues applicable to it.

(b) According to information and explanations given to us, the following disputedamounts have not been deposited by the company: statement of Disputed Dues

(c) According to information and explanations given to us, apart from above, there areno other dues of income tax, sales tax, wealth tax, service tax, customs duty, excise dutyand cess which have not been deposited on account of any dispute.

10. The company does not have accumulated losses at the year-end and has incurred cashlosses during the financial year covered by our audit and the immediately precedingfinancial year.

11. In our opinion and according to the information and explanations given to us, theCompany has issued no debentures. According to the records of the Company examined by usand the information and explanations given to us, the Company has not defaulted inrepayment of dues to any financial institution or bank as at the Balance Sheet date.

12. The company has not granted loans and advances on the basis of security by way ofpledge of shares, 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 Companies (Auditor's Report)Order, 2003 are not applicable to the 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 theCompanies (Auditor's Report) Order, 2003 are not applicable to the company.

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

16. According to information and explanations given to us, no term loans were taken bythe Company during the year. Balance brought forward from earlier year was repaid in full.

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.

18. According to the information and explanations given to us, the company has not madeany preferential allotment of shares to parties and companies covered in the registermaintained under Section 301 of the Act during the year and hence the question ofdisclosure and verification of end use of such money does not arise.

19. According to the information and explanations given to us, the company has notissued any debentures.

20. The company has not raised money by public issue during the year and hence thequestion of disclosure and verification of end use of such money does not arise.

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.