Jindal Saw Ltd

To

THE MEMBERS OF JINDAL SAW LIMITED

We have audited the attached Balance Sheet of JINDAL SAW LIMITED as at 31st March,2010, the Profit and Loss Account and the Cash Flow Statement for the period ended on thatdate annexed thereto. These financial statements are the responsibility of the Company'smanagement. Our responsibility s to express an opinion on these financial statements basedon our audit.

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.

A) As required by the Companies (Auditor's Report) Order, 2003 as amended by theCompanies (Auditor's Report) (Amendment) Order, 2004, issued by the Central Government ofIndia in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we enclosein the Annexure hereto, a statement on the matters specified n paragraphs 4 and 5 of thesaid Order, so far as applicable to the Company.

B) Further to our comments in Annexure referred to in paragraph (A) 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 of the Company.

(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 2ll of the Companies Act, l956.

(e) Based on written representations received from the directors and taken on record bythe Board of Directors, we report that none of the directors of the company s disqualifiedas on 3lst March, 20l0 from being appointed as director of the company as referred to nclause (g) of sub section (l) 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 notes thereon give the informationrequired by the Act in the manner so required and give a true and fair view in conformitywith 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 3lstMarch, 20l0 and

ii) In the case of the Profit and Loss Account, of the Profit for the period ended onthat date, and

iii) In the case of the Cash Flow Statement, of the cash flows for the period ended onthat date.

(REFERRED TO IN PARAGRAPH (A) IN OUR REPORT OF EVEN DATE FOR THE PERIOD ENDED 31stMarch,2010)

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

b) A major portion of the fixed assets, has been physically verified by the Managementin accordance with a phased programme of verification adopted by the Company. In ouropinion, the frequency of verification s reasonable having regard to the size of theCompany and the nature of its assets. To the best of our knowledge, no materialdiscrepancies have been noticed on such verification.

c) The Company has not disposed off substantial part of fixed assets during the yearand the going concern status of the Company is not affected.

2. a) As explained to us, the management during the period has physically verifiedinventories at reasonable intervals and in respect of stores and spares, there is aperpetual inventory system and a substantial part of such stocks has been verified duringthe period. However, stocks n the possession and custody of third parties and stock ntransit as at 3Ist March, 20I0 have been verified by the Management with reference toconfirmation or statement of account or correspondence of third parties or subsequentreceipt of goods. 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) On the basis of our examination of the inventory records, in our opinion, theCompany is maintaining proper records of inventories. The discrepancies noticed duringphysical verification of inventories as compared to book records were not material and thesame have been properly dealt with in the books of account.

3. a) (i) The Company has given interest bearing demand loan to two subsidiarycompanies covered in the register maintained under section 30I of the Companies Act, I956.The maximum amount involved and period end balance during the period n respect of saidsubsidiaries is Rs. 44987.80 lacs and Rs. 42663.39 lacs respectively. The Company has notgiven any other loan to any Company or party covered under section 30I of the CompaniesAct, I956.

(ii) In our opinion and according to information and explanations given to us, theinterest bearing demand loans with relevant terms and conditions on which loan has beengiven are, prima facie, not prejudicial to the interest of the Company.

(iii) In respect of the aforesaid loans, the amount are repayable on demand, and hence,the question of irregularity on payment does not arise.

(iv) The aforesaid loans is repayable on demand and therefore, the question of overdueamounts does not arise.

b) As informed to us, the Company has not taken any loans, secured or unsecured fromCompanies, firms or other parties listed in the register maintained under section 30I ofthe Companies Act, I956. Thus Paragraph 4 (iii) (f) & (g) of the order, is notapplicable.

4. In our opinion and according to information and explanations given to us, havingregard to the explanation that some of the items purchased are of special nature andsuitable alternative sources do not exist for obtaining comparable quotations, there areadequate internal control system commensurate with the size of the Company and the natureof its business with regard to purchases of inventories, fixed assets and with regard tothe sale of goods and services. During the course of our audit, we have not observed anymajor weaknesses in internal control system of the Company.

5. a) To the best of our knowledge and belief and according to the information andexplanations given to us, we are of the opinion that the particulars of contracts orarrangements that need to be entered into the register maintained under section 30I of theCompanies Act, 1956 have been so entered.

b) In our opinion and according to the information and explanations given to us, thetransactions with parties with whom transactions exceeding the value of Rupees five lacshave been entered into during the financial period are at prices, which are reasonable,having regard to the prevailing market prices at the relevant time.

6. In our opinion and according to the information and explanations given to us, theCompany has complied with the provisions of Sections 58A and 58AA of the Companies Act,I956 and the Companies (Acceptance of Deposits) Rules, 1975 with regard to the depositsaccepted from the public.

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

8. We have broadly reviewed the accounts and records maintained by the Company inrespect of manufacture of steel and steel products to which the said rules are madeapplicable pursuant to the order made by the Central Government for maintenance of costrecords prescribed under Section 209(l)(d) of the Companies Act, l956 and are of theopinion that prima facie, the prescribed records have been made and maintained. We havenot, however, made a detailed examination of such records with a view to determine whetherthese are accurate and complete.

9. a) According to the information and explanations given to us, the Company isgenerally regular in depositing with the appropriate authorities undisputed statutory duesincluding Provident Fund, Employees State Insurance, Sales Tax, Income Tax, Custom duty,Investor Education & Protection fund, Excise Duty, Cess, Service Tax and Royalty.There are no arrears as at 3lst March, 20l0 for a period of more than six months from thedate they become payable.

b) According to the information and explanation given to us, the dues in respect ofsales tax, excise, Service tax, entry tax, income tax and custom duty that have not beendeposited with the appropriate authorities on account of dispute and the forum where thedisputes are pending are given below:

10. The Company has no accumulated losses at the end of the financial period. TheCompany has not incurred any cash losses during the financial period covered by our auditand in the immediately preceding financial year.

11. According to the information and explanation given to us, the Company has notdefaulted in repayment of dues to the banks and debenture holders.

12. According to the information and explanations given to us, the Company has notgranted any loans and advances on the basis of security by way of pledge of shares,debentures and other securities. Therefore, the provision of clause 4(xii) of theCompanies (Auditor's Report) Order, 2003 are not applicable to the Company.

13. In our opinion, the Company is not a chit fund or a nidhi mutual benefitfund/society. Therefore, the provisions of clause 4(xiii) of the Companies (Auditor'sReport) Order, 2003 are not applicable to the Company.

14. In our opinion, the Company is not dealing in or trading n shares, securities,debentures and other investments.

Accordingly, the provisions of clause 4(xiv) of the Companies (Auditor's Report) Order,2003 are not applicable to the Company.

15. In our opinion, and according to the information and explanations given to us, theterms and conditions on which the Company has given guarantee for loans taken by othersfrom banks, or financial institutions are not prima facie, prejudicial to the interest ofthe company.

16. In our opinion, and according to information and explanation given to us, the termloans have been applied for the purpose for which they were raised, other than temporarydeployment pending application.

l7. According to the information and explanations given to us and on an overallexamination of the Balance Sheet of the company, in our opinion, there are no funds raisedon short-term basis, which 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 30l of the Companies Act,l956.

19. According to the information and explanations given to us, the Company has createdsecurity for the debentures issued. The debentures were, however, paid during the period.

20. The Company has not raised any money through a public issue during the period.

21. During the course of our examination of the books and records of the Company, andaccording to the information and explanations given to us by the management, we reportthat no fraud on or by the Company has been noticed or reported during the course of ouraudit.