Himatsingka Auto Enterprises Ltd

TO

THE MEMBERS OF HIMATSINGKA AUTO ENTERPRISES LIMITED

1. We have audited the attached Balance Sheet of HIMATSINGKA AUTO ENTERPRISES LIMITED, as at 31 st March, 2004 and also the Profit & Loss Account of the Company for the year ended on that date annexed thereto and the Cash Flow Statement for the year ended on that date. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion

3. As required by the Companies (Auditors' Report) order, 2003 (the order) issued by the Central Government of India in terms of Sub-section (4A) of Section 227 of the Companies Act, 1956, we enclose in annexure a statement on the matters specified in paragraphs 4 and 5 of the said order.

4. Further to our comments in the Annexure referred to above, & subject to the effects of disclosures in, notes on accounts in item no. 10 (a) in respect of compliance of Prudential norms and 10 (b) in respect of Provision of Gratuity in Schedule 15 forming part of the financial statements, we report that:

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

b) In our opinion, proper Books of Account as required by law have been kept by the Company so far as appears from our examination of such books.

c) The Balance Sheet and Profit & Loss Account dealt with by this report are in agreement with the Books of Account.

d) In our opinion, the Balance Sheet and Profit & Loss Account dealt with by this report comply with the Accounting Standards referred to in Sub-section (3C) of Section 211 of the Company' Act, 1956, save and except non-provision of Gratuity (Accounting Standard-15) and non-provision of deferred tax Asset/Liability (Accounting Standard-22) refer to note no. 10(b) and 10(j) of Schedule-15 forming part of Statement of Accounts.

e) On the basis of written representations received from the Directors as on March 31, 2004, and taken on record by the Board of Directors, we report that none of the Directors is disqualified as on March 31,2004, 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 explanations given to us, the said Accounts read together with the Notes thereon, give the information required by Companies Act, 1956, in the manner so required and give a true and a fair view in conformity with the accounting principles generally accepted in India.

i) In the case of the Balance Sheet the state of affairs of the Company as at March 31, 2004, and

ii) In the case of the Profit & Loss Account, the PROFIT of the Company for the year ended on that date.

iii) In the case of Cash Flow Statement of the Cash Flow for the year ended on that date.

Annexure to the auditors^' report

[ REFERRED TO IN PARAGRAPH (3) OF OUR REPORT OF EVEN DATE ]

1. a) The Company is maintaining proper records showing full particulars including quantitative details and situation of fixed assets.

b) All the assets have been physically verified by the management during the year. There is a regular programme of verification which in our opinion is reasonable having regard to size of the company and the nature of its assets. No material discrepancies were noticed on such verification.

c) There was no disposal of fixed assets during the year, which would affect the going concern of the company.

2. The Company has no inventory so the clause 2a, b, c are not applicable.

3. a) The Company has taken unsecured loans from two parties covered in the register maintained U/s. 301 of the Co's. Act, 1956. The amount of such loans taken from the parties was Rs. 50 lacs. The maximum amount outstanding on aggregate basis during the year was Rs. 62.36 lacs.

b) In our opinion the rate of interest and other terms & conditions on which loans have been taken are not prima facie prejudicial to the interest of the Company.

c) The Company is regular in repaying the principal amount as stipulated and has been regular in the payment of interest.

d) There is no overdue amount of loans taken from companies listed in the register maintain U/s. 301 of the Companies Act, 1956.

4. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the company and the nature of its business with regard to purchases of equipments, fixed assets and with regard to the sale of fixed assets. During the course of our audit, no major weakness has been noticed in the internal controls.

5. a) Based on the audit procedures applied by us and according to the information and explanations provided by the management, we are of the opinion that the transactions that need to be entered into the register maintained under Section 301 have been so entered.

b) As inform to us and on the basis of our examination of books of account, there were no transactions exceeding value of Rs. Five lacs in respect of any party, and as such comment on Clause No. V (b) does not arise.

6. During the year, the company has not accepted deposits from public and as such compliance of provisions of Section 58A and 58AA of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules 1975 does not arise.

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

8. This being a Finance Company Provisions for Maintenance of cost records U/s. 209 (1) (d) of the Companies Act, 1956 are not applicable.

9 a) According to the records of the company, the company is generally regular in depositing with appropriate authorities undisputed statutory dues including Provident Fund, Income Tax, and other statutory dues applicable to it. The Employees State Insurance Act is not applicable to the company. There is no amount outstanding as at 31.03.2004 for more than six months from the date become payable except as mentioned in Notes on Accounts - Schedule 15 (k)

b) As explained to us there is no disputed demand of statutory dues against the Company

10. The Company has no accumulated losses and has not incurred any cash losses during the financial year covered by our audit and the immediately preceding financial year.

11. As per the information & explanations given by the management as is verified by us, we state that the Company has not defaulted repayment of dues to financial institution, bank

12. According to the information and explanations given to us, the Company has not granted loans or advances on the basis of security by way of pledge of shares, debentures, and other securities However Company has given unsecured loan free of Interest to a Company

13. The nature of the Company's business/activities during the year have been such that clause No. (1xiii) of the said order is not applicable to the Company.

14. The Company is not dealing ortradmg in shares securities or debentures thus there is no need for maintaining any records for the same.

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

16. There is no term loan taken by the Company, so question of application does not arise.

17. According to the records examined by us and the information and explanations given to us, funds raised on short term basis have not been used for Long Term investment and Vice-Versa

18. The Company has not made any preferential allotment of shares to parties or companies covered in the register maintained under Section 301 of the Companies Act, 1956

19. There were no debentures issued by the Company and hence question of creating security does not arise.

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

21. Based on information and explanations furnished by the management, which have been relied upon by us, there were no fraud on or by the company has been noticed or reported during the course of our audit

Auditors' Report

TO

THE BOARD OF DIRECTORS OF HIMATSINGKA AUTO ENTERPRISES LIMITED FOR THE YEAR ENDED 31-03-2004

As required by the "NBFC" Auditor's Report (Reserve Bank) Direction, 1998 issued by the Reserve Bank of India in terms of Section 451A of the Reserve Bank of India Act, 1934 (2 of 1934), and on the basis of such checks as we considered appropriate, we hereby state that:

The Company had applied for registration as provided in Section 451A of the Reserve Bank of India Act, (2 of 1934) and the Company has since received from Reserve Bank of India the Certificate of Registration No. 0500195 dated 27th February, 1998.

We further state that :-

i) The Board of Directors has passed a resolution dated 28-04-2003 for non-acceptance of any public deposit, hence the Company has not accepted any Public Deposits during the relevant year and.

ii) As per information and explanations given to us the Company has complied with the prudential norms relating to income recognition, Accounting Standards, Asset classification and provisioning for bad and doubtful debts as applicable to Non-Deposit taking companies. Provisions of the amounts as required under the prudential norms as stated in Note No. 10 (a) of Schedule-15 forming part of the statement of accounts.

iii) There was no leasing business during the relevant year.