Lanco Industries Ltd

LANCO INDUSTRIES LIMITED

1. We have audited the attached Balance Sheet of LANCO INDUSTRIES LIMITED("the Company") as at 31st March, 2012 and also the Statement of Profit and Lossand the Cash Flow Statement for the year ended on that date and Summary of significantaccounting policies and other explanatory information annexed thereto. These financialstatements are the responsibility of the Company’s management. Our responsibility isto express an opinion on these financial statements based on our audit.

2. We have conducted our audit in accordance with 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 misstatement. Anaudit includes examining, on test basis, evidence supporting the amounts and disclosuresin the financial statements. An audit also includes assessing the accounting principlesused and significant estimates made by the 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 (CARO) (as amended)issued by the Central Government of India in terms of sub-section (4A) of Section 227 ofthe Companies Act, 1956 and on the basis of such examination of the books and records ofthe Company as we considered appropriate and the information and explanations given to usduring the course of the audit, we enclose in the Annexure a statement on the mattersspecified in the paragraphs 4 and 5 of the said 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 purpose of our audit;

b) in our opinion, proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books;

c) the Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statementdealt with by this report are in agreement with the books of account;

d) in our opinion, the Balance Sheet, the Statement of Profit and Loss and the CashFlow Statement dealt with by this report comply with the Accounting Standards referred insub-section (3C) of Section 211 of the Companies Act, 1956;

e) on the basis of written representations received from the Directors of the companyas on 31st March, 2012 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 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 explanationsgiven to us, the said accounts read together with the Significant Accounting Policies andOther Notes (Note No. 1 to 43) give the information required by the Companies Act, 1956,in the manner so required and give a true and fair view in conformity with the accountingprinciples 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 loss of the Company for theyear ended on that date; and

iii) in the case of the Cash Flow Statement, of the cash flows of the Company for theyear ended on that date.

Re: Lanco Industries Limited

(Referred to in paragraph 3 of our report of even date)

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

b) As explained to us, the fixed assets have been physically verified by the managementduring the year as per a detailed program drawn for the said purpose, which in our opinionis reasonable having regard to the size of the Company and nature of its assets. Nomaterial discrepancies were noticed on such physical verification.

c) The fixed assets disposed off during the year do not constitute a substantial partof the fixed assets, and therefore, there is no affect on the going concern status of theCompany.

ii) a) As explained to us, the management has conducted physical verification ofinventories during the year, except the materials in transit and the materials lying withthird parties. In our opinion, the frequency of the said verification is reasonable.

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

c) In our opinion and according to the information and explanations given to us, theCompany has maintained proper records of its inventories and no material discrepancieswere noticed on physical verification.

iii) According to the information and explanations given to us, the company has neithergranted nor taken any loans, secured or unsecured to /from companies, firms or otherparties covered in the register maintained under section 301 of the Companies Act, 1956.Accordingly, clauses (iii)(a) to (iii)(g) of paragraph 4 of CARO are not applicable.

iv) 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 andnature of its business, for the purchase of inventory, fixed assets and for the sale ofgoods and services. During the course of our audit, no major weakness has been noticed inthe internal control system in respect of the said areas.

v) a) In our opinion and according to the information and explanations given to us, theparticulars of contracts or arrangements referred to in Section 301 of the Companies Act,1956 have been entered in the register required to be maintained under that Section.

b) In our opinion and according to the information and explanations given to us, therewere no transactions made in pursuance of contracts or arrangements referred to in v(a)above and exceeding the value of Rupees five Lakhs with any such party.

vi) The company has not accepted any deposits from public covered under Sections 58A,58AA or any other relevant provisions of the Companies Act, 1956 and Rules framed thereunder.

vii) In our opinion, the Company’s internal audit system is commensurate with itssize and nature of its business.

viii) We have broadly reviewed the books of account maintained by the Company relatingto its products, where, pursuant to the Rules made by the Central Government of India, themaintenance of cost records has been prescribed under Section 209(1)(d) of the CompaniesAct, 1956 and are of the opinion that prima facie, the prescribed accounts and recordshave been made and maintained. We have not, however, made a detailed examination of therecords with a view to determining whether they are accurate or complete.

ix) a) According to the information and explanations given to us and the records of theCompany examined by us, the Company is generally regular in depositing the undisputedstatutory dues including provident fund, investor education and protection fund, employeesstate insurance, income-tax, sales-tax, wealth-tax, service-tax, customs duty, exciseduty, cess and other material statutory dues as applicable with the appropriateauthorities and there were no undisputed dues outstanding as at 31st March, 2012 for aperiod exceeding six months from the date they became payable.

b) According to the information and explanations given to us, the disputed dues ofsales tax, income-tax, customs duty, wealth-tax, excise duty, service-tax and cess, ifany, that have not been deposited on account of disputed matters pending beforeappropriate authorities as at 31st March, 2012 are as follows:

* Stay of collection granted for the demands.

x) The Company has no accumulated losses as at the end of the financial year and it hasnot incurred cash losses in the current and immediately preceding financial year.

xi) In our opinion and according to the information and explanations given to us, theCompany has not defaulted in repayment of dues to financial institutions and banks. TheCompany did not have outstanding dues to debenture holders.

xii) 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.

xiii) In our opinion, the Company is not a chit fund or a nidhi/mutual benefitfund/society. Therefore, the provisions of clause (xiii) of paragraph 4 of CARO are notapplicable.

xiv) In our opinion and according to the information and explanations given to us, theCompany is not a dealer or trader in shares, securities, debentures and other investments.Therefore, the provisions of clause (xiv) of paragraph 4 of CARO are not applicable.

xv) According to the information and explanations given to us, the Company has notgiven guarantees for loans taken by others from Banks or Financial Institutions.

xvi) In our opinion and according to the information and explanations given to us, onoverall basis, the term loans have been applied for the purposes for which they wereobtained.

xvii) Based on the information and explanations given to us and on an overallexamination of the cash flow statement and the Balance Sheet of the Company, in ouropinion, the funds raised by the Company on short term basis have prima facie not beenused for long term investment.

xviii) The Company has not made any preferential allotment of shares during the year.

xix) During the year, the Company has not made any issue of debentures. Accordingly,clause (xix) of paragraph 4 of CARO is not applicable.

xx) The Company has not raised any money through a public issue during the year.Accordingly, the provisions of clause (xx) of paragraph 4 of CARO are not applicable.

xxi) To the best of our knowledge and according to the information and explanationsgiven to us, no fraud by the Company and no fraud on the Company has been noticed orreported during the year.