Metroglobal Ltd

TO THE MEMBERS

1.0 We have audited the attached Balance Sheet of METROGLOBAL LIMITED (Formerlyknown as GLOBAL BOARDS LIMITED) as at 31^st March, 2011 and also the Profitand Loss Account for the year ended on that date annexed thereto and the Cash Flowstatement for the year ended on that date. These financial statements are theresponsibility of the Company’s management. Our responsibility is to express anopinion on these financial statements based on our audit.

2.0 We have conducted our audit in accordance with auditing standards generallyaccepted in India. These Standards require that we plan and perform the audit to obtainreasonable assurance about whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supporting theamounts and disclosures in the financial statements. An audit also includes, assessing theaccounting principles used and significant estimates made by management, as well asevaluating the overall financial statement presentation. We believe that our auditprovides a reasonable basis for our opinion.

3.0 As required by the Companies (Auditors’ Report) Order, 2003 issued by theCentral Government of India in terms of Section 227(4A) of the Companies Act, 1956, weannex hereto a Statement on the matters specified in paragraphs 4 and 5 of the said Order.

4.0 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 purpose of our audit;

ii) 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 ;

iii) The Balance Sheet, Profit & Loss Account and Cash Flow Statement dealt with bythis report are in agreement with the books of account.

iv) In our opinion, the Balance Sheet, Profit & Loss Account and Cash FlowStatement dealt with by this report comply with the accounting standards referred to insub-section(3C) of section 211 of the Companies Act, 1956;

v) On the basis of written representations received from the directors, as on 31^stMarch, 2011, and taken on record by the Board of Directors, we report that none of thedirectors is disqualified as on 31^st March, 2011 from being appointed as adirector in terms of clause(g) of sub-section(1) of section 274 of the Companies Act,1956;

vi) (a) The Scheme of Amalgamation in the nature of Amalgamation of MetrochemIndustries Limited (Transferor Company) with Global Boards Limited (Transferee Company)has been approved by Gujarat High Court, at Ahmedabad for transferor Company and HighCourt of Bombay for transferee Company. Appointed date for Scheme is 1st April,2009 &Effective date for scheme is 13th July, 2011. Further The Income tax department has filedOJ Misc Civil Application No: 59 of 2011 against the Order passed by Gujarat High Court inCompany Petition No 177 of 2010. The above said OJ Misc Civil Application has beendismissed by Gujarat High Court. We have issued this report after considering the Mergeraccounting and are on consolidated basis.

(b) In the current year, the Company has entered into an Asset sale agreement withPudumjee Pulp & Paper Limited for sell of its assets situated at Mahad plant &loss arising from the same is reported as exceptional item in profit and loss account.

(c) We have not carried any physical verification of cash balances, inventories andfixed assets of the Company as on 31^st March’ 2011.

(d) The Company has ten disputed cases involving a total amount of Rs. 1,96,23,494/-.The Company has made a payment of Rs. 1,92,98,493/- under protest on 14^thDecember 2010. Of the total ten cases, four cases (involving an amount of Rs. 7,44,689/-)have yet to come for hearing, the balance 6 cases (involving an amount of Rs.1,88,78,805/-) have been decided in favour of the Company by the respective appellateauthorities. However the excise department has filed appeals and the cases are pending inrespective forums. Hence interest if any, payable till 14^th December 2010, isunascertainable in case of negative verdict.

vii) In our opinion and to the best of our information and according to theexplanations given to us, subject to para (vi) above with corresponding effect on the lossfor the year mentioned therein, the said financial statements together with notes thereonand attached thereto and the Statement on Significant Accounting policies give in theprescribed manner the information required by the Act and also give a true and fair viewin conformity with the accounting principles generally accepted in India;

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

b) in the case of the Profit & Loss Account, of the loss for the year ended on thatdate; and

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

Annexure referred to in paragraph 3 of the Auditor’s Report of even date on theaccounts for the year ended 31^st March, 2011 of Metroglobal 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 phasedverification-programme, which, in our opinion, is reasonable, looking to the size of theCompany and the nature of its business.

(c) In the current year, the Company has entered into an Asset sale agreement withPudumjee Pulp & Paper Limited for sell of its assets situated at Mahad plant &loss arising from the same is reported as exceptional item in profit and loss account

(ii) (a) During the year, the inventories have been physically verified by themanagement, except for stock lying with outside parties, which have, however, beenconfirmed by them.

(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 record of inventories, we are of the opinionthat, the Company is maintaining proper records of inventories. Discrepancies noticed onphysical verification of inventories as compared to book records were not material andhave been properly dealt with in the books of account.

(iii) (a) (I) According to the information and explanations given to us, the Companyhas not granted loans to firms or other parties covered in the register maintained undersection 301 of the Companies Act, 1956.

(II) According to the information and explanation given to us, the Company had takenloans from the parties covered in the register maintained under section 301 of theCompanies Act, 1956. The maximum amount involved during the year was Rs. 46.57 Crores andthe year end balance of loan taken from such parties was Rs. 23.00 crores.

(b) In our opinion, the rate of interest and other terms and conditions on which loanshave been taken from the companies and other parties listed in the register maintainedunder section 301 of the Companies Act, 1956 are not, prima facie, prejudicial to theinterest of the Company.

(c) The Company is regular in repaying the principal amounts as stipulated and has beenregular in the payment of interest.

(d) There is no overdue amount in respect of loans taken from or granted to companiesand other parties listed in the register maintained under section 301 of the CompaniesAct, 1956.

(iv) According to the information and explanations given to us, there are adequateinternal control procedures commensurate with the size of the Company and the nature ofits business, for the purchase of inventory and fixed assets and for the sale of goods.During the course of our audit, no major weakness has been noticed in the internalcontrols.

(v) (a) On the basis of the audit procedures performed by us, and according to theinformation, explanations and representations given to us, we are of the opinion that, thetransactions in which directors were interested, and which were required to be entered inthe register maintained under Section 301 of the Companies Act, 1956, have been soentered.

(b) In our opinion and according to the information and explanations given to us, thetransactions made in pursuance of contracts or arrangements entered in the registermaintained under Section 301 of the Companies Act, 1956 exceeding the value of rupees fivelacs in respect of any party during the year have been made at price which are reasonablehaving regard to prevailing market prices at that time.

(vi) In our opinion and according to the information and explanations given to us, theCompany has complied with the provisions of Section 58A of the Companies Act, 1956 and itsRules, and also the directives of Reserve Bank of India. The Company has not defaulted inrepayments of deposits and therefore compliance of Section 58AA or obtaining any orderfrom the National Company Law Tribunal does not arise.

(vii) On the basis of the internal audit reports broadly reviewed by us, we are of theopinion that, coverage of internal audit functions carried out by the internal auditdepartment constituted by the management is commensurate with the size of the Company andthe nature of its business.

(viii) We have broadly reviewed the books of account maintained by the Company pursuantto the rules made by the Central Government for the maintenance of cost records underSection 209(1)(d) of the Companies Act, 1956 in respect of the Company’s products towhich the said rules are made applicable, and are of the opinion that, prima-facie, theprescribed accounts and records have been made and maintained. We have, however, not madea detailed examination of the records with a view to determining whether they are accurate.

(ix) (a) According to the records of the company and according to explanations given tous, the statutory dues payable by the Company comprise of provident fund, investorseducation and protection fund, employees state insurance, income tax, sales tax, wealthtax, custom duty, excise duty, cess, octroi, entry tax, purchase tax, municipal tax,service tax and other applicable statutory dues. According to the records of the Company,the Company is normally regular in depositing undisputed statutory dues with theappropriate authorities. There are no undisputed statutory dues as referred to above as at31^st March, 2011 outstanding for a period of more than six months from the datethey became payable.

(b) On the basis of our examination of the documents and records and representationsmade by the Management, the statutory disputed dues which have not been deposited with theappropriate authorities are as under :

Note : The Company has paid the entire differential duty amount for Rs. 94, 68,900 on10.05.2011 and has made necessary submissions before the aforesaid forum that the Companymay not be liable to pay interest. In view of these submission interests liability is notascertainable.

(x) The Company has accumulated losses both, in the financial year under report and inthe immediately preceding financial year and it has not incurred cash losses, both, in thefinancial year under report and in the immediately preceding financial year

(xi) On the basis of the records examined by us and the information and explanationsgiven to us, the company has not defaulted in repayment of dues to financial institutions,banks or debenture holders.

(xii) In our opinion and according to the information and explanations given to us,,the Company has not granted any loans or advances on the basis of security by way ofpledge of shares, debentures or any other securities;

(xiii) In our opinion, the Company is not a chit fund or a nidhi/mutual benefitfund/society and therefore, the provisions of clause 4 (xiii) of the Companies(Auditor’s Report) Order, 2003 are not applicable to the Company.

(xiv) In respect of investments dealt or traded by the Company, proper records aremaintained in respect of transactions and contracts and timely entries have been madetherein. All the investments are held by the Company in its own name ;

(xv) According to the information and explanations given to us, and the representationsmade by the management, the Company has not given any guarantee for loans taken by othersfrom any bank or financial institution;

(xvi) In our opinion, the company has not raised any term loan during the year underreview.

(xvii) According to the Cash Flow Statement and other records examined by us and theinformation and explanations given to us, on an overall basis, funds raised on short termsbasis have not, prima facie, been used during the year for long terms investment and viceversa.

(xviii) The Company during the year under review has not made any preferentialallotment of shares to parties and companies covered in the register maintained undersection 301 of the Companies Act.1956.

(xix) In respect of debentures issued by the Company and outstanding during the year,The Company has not created any security or charge in respect of debentures issued

(xx) The Company has not raised any money by way of public issue during the year andtherefore paragraph 4(xx) of the Order is not applicable.

(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 duringthe course of our audit during the year .