Kiri Industries Ltd

To

The Members,

KIRI INDUSTRIES LIMITED,

We have audited the attached Balance Sheet of KIRI INDUSTRIES LIMITED, as at31st March, 2011 and the annexed Profit & Loss Account for the year ended on thatdate, and also the cash flow statement for the year ended on that date. These FinancialStatements are the responsibility of the Company’s Management. Our responsibility isto express an opinion on these financial statements based on our Audit.

1 We conducted our audit in accordance with the auditing standards generally acceptedin India. These standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free from any material misstatement.An Audit includes examining on a test basis, evidence supporting the amounts anddisclosures in the financial statements. An audit also includes, assessing the accountingprinciples used and significant estimates made by management as well as evaluating theover all presentation of the financial statements. We believe that our audit provides areasonable basis for our opinion.

2 As required by the Companies (Auditors’ Report) Order, 2003 as amended byCompanies (Auditors’ Report) (Amendment) Order,2004 issued by the Central Governmentin terms of Section 227(4A) of the Companies Act, 1956, we annex hereto a Statement on thematters specified in paragraphs 4 and 5 of the said Order .

3 Further to our comments in the Annexure referred to above, we report that :

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

(ii) In our opinion, proper books of accounts as required by law have been kept by theCompany so far as it appears from our examination of the books of the Company.

(iii) The Balance Sheet and Profit and Loss Account and cash flow statement dealt withby this report are in agreement with the books of accounts of the Company.

(iv) In our opinion, the Balance Sheet and the Profit and Loss Account and cash flowstatement dealt with by this report comply with the accounting standards referred to insub section 3 (C) of Section 211 of the Companies Act , 1956.

(v) Based on the representations made by the Directors as on 31st March, 2011 and takenon record by the Board of Directors of the Company and the information and explanationsgiven to us, none of the Directors is, as at 31st March, 2011 prima facie disqualifiedfrom being appointed as a Director in terms of clause (g) of sub section (1) of Section274 of the Companies Act, 1956

(vi) In our opinion and to the best of our information and according to theexplanations given to us, the said financial statements read together with the other notesthereon give the information required by the Companies Act, 1956 in the manner so requiredand present a true and fair view in conformity with the accounting principles generallyaccepted in India.

(a) in the case of the Balance Sheet, of the state of affairs of the Company as at 31stMarch, 2011 and

(b) in the case of the Profit and Loss Account, of the Profit for the year ended onthat date.

(c) in the case of cash flow statement, of the cash flows for the year ended on thatdate.

ANNEXURE REFERRED TO IN PARAGRAPH 2 OF OUR AUDITORS’ REPORT OF EVEN DATE ON THEFINANCIAL STATEMENTS FOR THE YEAR ENDED ON 31st MARCH, 2011 OF KIRI INDUSTRIES LIMITED

On the basis of such checks as we considered appropriate and in terms of theinformation and explanations given to us, we state that: -

(i) a) The Company has generally maintained proper records showing particulars,including quantitative details and situation of fixed assets;

b) As explained to us, fixed assets, according to the practice of the Company, arephysically verified by the management at reasonable intervals, in a phased verificationprogramme, which in our opinion, is reasonable looking to the size of the Company and thenature of its assets. According to the information and explanations given to us, no majordiscrepancies were noticed on physical verification.

c) The Company has not disposed off any substantial part of its fixed assets so as toaffect its going concern status.

(ii) a) As explained to us, inventories have been physically verified during the yearby the management.

b) The procedures explained to us, which are followed by the management for physicalverification of inventories, are in our opinion, reasonable and adequate in relation tothe size of the Company and the nature of its business;

c) On the basis of our examination of the inventory records of the Company, we are ofthe opinion that, the Company is maintaining proper records of its inventory. Thediscrepancies which were noticed on physical verification of inventory as compared to bookrecords, have been properly dealt with in the books of accounts.

(iii) a) The Company has granted unsecured loan to a Company covered in the registermaintained under Section 301 of the Companies Act, 1956. We are of the opinion that theterms and conditions of loan are not prima facie prejudicial to the interest of theCompany. The maximum amount involved during the year and the year-end balance of the loangranted was Rs. 868.03 Lacs. The terms of repayment of principal and interest have notbeen stipulated and hence, the question of overdue amount does not arise.

b) The Company has taken unsecured loans from a Company covered in the registermaintained under Section 301 of the Companies Act, 1956. The maximum amount involvedduring the year was Rs.1841.59 Lacs and the year end balance was Rs. Nil.

c) In our opinion and according to the information and the explanation given to us theinterest and other terms and conditions are not prima-facie prejudicial to the interest ofthe Company and the terms of repayment have not been stipulated.

d) In our opinion and according to the information and the explanation given to us theCompany has been regular in repayment of interest. There is no stipulation with respect torepayment of principal amount.

(iv) In our opinion and according to the information and explanations given to us,there are generally adequate internal control procedures commensurate with the size of theCompany and the nature of its business, for the purchase of inventory and fixed assets andfor the sale of goods and services. No major weaknesses in internal control had come toour notice.

(v) a) On the basis of audit procedure performed by us, and according to theinformation, explanation and representation given to us, we are of the opinion that, thetransaction in which directors were interested, and which were required to be entered inthe register under section 301 of the Companies Act, 1956, have been so entered;

b) In our opinion and according to our information and explanation given to us, thetransactions made in pursuance of such contracts or arrangements entered in the registerunder section 301 of the Companies Act, 1956, in respect of any party during the year havebeen made at price which are reasonable having regard to the prevailing market prices atthe relevant time.

(vi) In our opinion and according to the information and explanations given to us, theCompany has not accepted deposits from the public, and therefore the questions ofcompliance of the provisions of Section 58A and 58AA of the Companies Act, 1956 and therules framed thereunder and the directives issued by the Reserve Bank of India does notarise. No order has been passed by Company Law Board, Reserve Bank of India or any Courtor any other Tribunal.

(vii) According to the information and explanation given to us and on the basis of suchchecks as we considered appropriate, the Company has an internal audit system commensuratewith its size and nature of its business. The Company has appointed a firm of CharteredAccountants for Internal Audit during the year under review.

(viii) We have broadly reviewed the books of accounts maintained by the Companypursuant to the notification of the Central Government for maintenance of the cost recordsu/s 209(1)(d) of the Companies Act, 1956 and on the basis of such review, we are of theopinion, that prima-facie, the prescribed accounts and records have been made andmaintained. We have not, however, carried out a detailed examination of the same.

(ix) a) According to its records, the Company is generally regular in depositingundisputed statutory dues including Provident Fund, Employees’ State Insurance,Income Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, Cess and anyother material statutory dues with the appropriate authorities.

b) According to the information and explanations given to us, there are no dues inrespect of Income Tax, Value Added Tax, Excise Duty, Customs Duty, Wealth Tax, ServiceTax, Cess and other statutory dues are outstanding as on 31st March, 2011 which are duefor a period of less than six months from the date they became due. There are no disputeswith any of the above authorities.

c) The disputed statutory dues that have not been deposited on account of disputedmatters pending before appropriate authorities are as under;

(x) The Company has neither the accumulated losses at the end of the financial year norit has incurred cash losses in such financial year under report and in the financial yearimmediately preceding such financial year also.

(xi) In our opinion and according to the information and the explanations given to us,the Company has generally not defaulted in repayment of dues to financial institutions orbanks.

(xii) The Company has not granted any loans and advances on the basis of security byway of pledge of shares, debentures and other securities.

(xiii) As informed to us, the provisions of any special statute applicable to chit fundare not applicable to the Company.

(xiv) The Company is not dealing or trading in shares, securities, debentures and otherinvestments, therefore, the question of maintaining records in respect of transactions andcontracts does not arise.

(xv) In our opinion and according to the information and explanations given to us, theterms and conditions on which the Company has given guarantees for the loans taken byothers from banks are not prejudicial to the interest of the Company.

(xvi) On the basis of the records examined by us and relying on the informationcompiled by the Company for corelating the funds raised to the end use of term loans, wereport that the Company has applied the term loans for the purposes for which they wereobtained.

(xvii) According to the information and explanations given to us and on an overallexamination of the Financial Statements of the Company and after placing reliance on thereasonable assumptions made by the Company for classification of long term and short termusages of funds, we are of the opinion that, prima-facie, as at the close of year, shortterm funds with negligible exceptions have not been utilised for long term purposes, andvice – versa.

(xviii) The Company has not made any preferential allotment of shares to parties andcompanies covered in the Register maintained under Section 301 of the Companies Act, 1956.

(xix) The Company has not issued any debentures during the year.

(xx) The Company has not raised any money by way of public issue during the year.

(xxi) According to the information and explanations given to us and to the best of ourknowledge and belief, no fraud on or by the Company, has been noticed or reported by theCompany during the year .