Hisar Spinning Mills Ltd

To

The Members,

Hisar Spinning Mills Limited

1. We have audited the attached balance sheet of Hisar Spinning Mills Limited(the "company") as at 31st March 2012, the related statement of profit and lossand cash flow statement for the year ended on that date annexed thereto, which we havesigned under reference to this report. These financial statements are the responsibilityof the company's management. Our responsibility is to express an opinion on thesefinancial statements based on our audit.

2. We conducted our audit in accordance with the auditing standards generally acceptedin India. Those Standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material mis-statement. 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 (together the "Order"),issued by the Central Government of India in terms of sub-section (4A) of section 227 ofthe Companies Act, 1956 (the "Act") and on the basis of such checks of the booksand records of the company as we considered appropriate and according to the informationand explanations given to us, we enclose in the .Annexure, a statement on the mattersspecified in paragraphs 4 and 5 of the Order.

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, statement of profit and toss and cash flow statement dealt withby this report are in agreement with the books of account;

(d) In our opinion, the balance sheet, statement of profit and loss and cash flowstatement dealt with by this report comply with the accounting standards referred to insub-section (3C) of section 211 of the Act;

(e) On the basis of written representations reserved, from the directors as on 31stMarch 2012 and taken on record by the board of directors, none of the directors isdisqualified as on 31st March 2012; from being appointed as a director in terms ofclause(g) of sub-section (1) of section 274 of the Act;

(f) In our opinion and to the best of our information and according to the explanationsgiven to us, the said financial statements together with the notes thereon and attachedthereto give the information required by the Act in the manner so required and give a trueand fair view in conformity with the accounting principles generally accepted in India:

(i) in the case of the balance sheet, of the state of affairs of the company as at 31stMarch 2012;

(ii) in the case of the statement of profit and loss, of the profit for the year endedon that date; and

(ii) in the case of the,cash flow, statement,,.of the.cash flows for the year ended onthat date

ANNEXURE TO THE AUDITOR'S REPORT

(referred to in paragraph 3 of the Auditor's Report of even date to the members ofHisar Spinning Mills Limited on the financial statements for the year ended 31st March2012)

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

(b) The company has a program for the physical verification of fixed assets at periodicintervals. In our opinion, the period of verification is reasonable having regard to thesize of the company and the nature of its fixed assets. No significant discrepancies werenoticed on such verification.

(c) Fixed assets disposed off during the year were not substantial, and therefore, donot affect the going concern assumption.

2. (a) The inventory has been physically verified during the year by the management, inour opinion, the frequency of verification is reasonable.

(b) The procedures of physical verification of inventories followed by the managementare reasonable and adequate in relation to the size of the company and the nature of itsbusiness.

(c) On the basis of our examination of the records of inventory, we are of the opinionthat the company is maintaining proper records of inventory. The discrepancies noticed onverification between the physical stocks and the book records were not material.

3. (a) The company has not granted any loans, secured or unsecured to companies, firmsor other parties covered in the register maintained under section 301 of the Act.Accordingly, paragraphs 4(iii)(a) to 4(iii)(d) of the Order are not applicable to thecompany.

(b) The company has taken unsecured loans from three parties covered in the registermaintained under section 301 of the Act. The maximum amount involved during the year fromthese parties was rupees 6511500/- and the year end balance of loans taken from suchparties was rupees 6511500/-.

(c) In our opinion, the rate of interest and other terms and conditions on whichunsecured loans have been taken from parties covered in the register maintained undersection 301 of the Act are not, prima facie, prejudicial to the interest of the company.

(d) The loans accepted by the company from parties covered in the register maintainedunder section 301 of the Act are interest free loans. In the case of loans accepted fromthe parties covered in the register maintained under section 301 of the Act, no principalamount was due for payment to the said parties during the financial year underconsideration. Accordingly, paragraph 4(iii)(g) of the Order is not applicable to thecompany in respect of regularity of payment of the principal amount and interest.

4. In our opinion and according to the information and explanations given to us, thereis an 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. During the course of our audit, we have not observed any continuing failure tocorrect major weaknesses in internal control system.

5. According to the information given to us, there are no contracts or arrangementsduring the year that need to be entered into a register in pursuance of section 301 of theAct. therefore; the provisions of clause 4 (v) of the Order are not applicable to thecompany.

6. The company has not accepted any deposits from the public within the,meaning ofsections 58A, 58AA or any other relevant provisions of the Act and the rules framedthereunder.

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

8 We have broadly reviewed the company pursuant to the Companies

(Cost Accounting Records) Rules, 2011, prescribed by the Central Government underSection 209 (1) (d) of the Act and are of the opinion that prima facie the prescribed costrecords have been maintained we have,however' not made a detailed examination of the costrecords with a view to

9. (a) The company ,is.generally regular in depositing the undisputed statutory dues'including"employees' state insurance, income tax, sales tax, wealth tax, service tax,customs duty, excise duty, cess and other material statutory dues as applicable with theappropriate authorities though, there has been slight delay in a few cases. No undisputedamounts payable in respect thereof were outstanding at the year end for a period of morethan six months from the date they became 105617/- issued by "the company in favouror Punjab National Bank for payment of custom duty during July 2011 was presented forpayment by the bank

(b) According to the information and explanations given to us and the records of thecompany examined by us, there are no dues of income tax/sales tax/wealth tax/servicetax/custom duty/excise duty/cess which have not been deposited with the appropriateauthorities on account of any-dispute.

10. In our opinion, the accumulated tosses of the company are not more than fifty percent of its net worth as on 31st March 2012. The company also has not incurred any cashlosses during the financial year covered by our audit and the immediately precedingfinancial year. In arriving at the accumulated Iosses net worth and cash losses as above,we have considered the qualifications, if any which are quantifiable in the audit reportsof the years to which these pertain.

11. In our opinion and according to the information and explanations given to us, thecompany has not defaulted in,repayment of dues to a financial institution or bank.According to records of the company, the company did not have any outstanding debenturesduring the year.

12. The company has not granted any loans and advances on the basis of security by wayof pledge of shares, debentures and other securities.

13. In our opinion and according to the information and explanations given to us, thecompany is not a chit fund/ nidhi/ mutual benefit fund/ society.

14. The company is not dealing in or trading in shares, securities, debentures andother investments. Therefore, the provisions of paragraph 4(xiv) of the Order are notapplicable to the company.

15. According to the information and explanations given to us, the company has notgiven any guarantee for bans taken by others from banks or financial institutions.

16. In our opinion and according to the information and explanations given to us, theterm loans taken during the year have been applied for the purpose for which they wereobtained.

17. On the basis of an overall examination of the balance sheet of the company, in ouropinion, there are no funds raised on a short-term basis which have been used forlong-term investment

18. The company has not made any preferential allotment of shares to parlies andcompanies covered in the register maintained under section 301 of the Act.

19. The company has not issued any debentures.

20. The company has not raised any money by public issues 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.