Orient Paper & Industries Ltd

To

The Members of

ORIENT PAPER & INDUSTRIES LIMITED

1. We have audited the attached Balance Sheet of ORIENT PAPER & INDUSTRIESLIMITED (the Company) as at 31st March, 2012 and also the Statement of Profit &Loss and Cash Flow Statement for the year ended on that date, annexed thereto. Thesefinancial statements are the responsibility of the Company’s management. Ourresponsibility is to express an opinion on these financial 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 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 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 (as amended) issuedby the Central Government of India in terms of sub-section (4A) of Section 227 of theCompanies Act, 1956, we enclose in the Annexure a statement on the matters specified inparagraphs 4 and 5 of the said Order.

4. As stated in to Note No.40, no provision has been made for Water Tax demandamounting to Rs.21879.32 lacs (including interest and penalty) since the Company’sapplication for waiver thereof is under consideration by the Government of Madhya Pradesh.Had the above liability been considered, profit for the year would have been Rs. 6447.01lacs (after considering tax impact) as against the reported profit of Rs. 21227.58 lacsand reserves & surplus as at the balance sheet date would have been Rs.95027.79 lacsas against the reported figure of Rs.109808.36 lacs.

In respect of above, the previous year’s audit report was similarly modified.

5. Further to our comments in the Annexure referred to above :

i) We have obtained all the information and explanations, which to the best of ourknowledge and belief were necessary for the 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, the Statement of Profit & Loss and Cash Flow statementdealt with by this report are in agreement with the books of account;

iv) In our opinion, the Balance Sheet, the Statement of Profit & Loss and Cash FlowStatement comply with the Accounting Standards referred to in sub-section (3C) of Section211 of the Companies Act, 1956;

v) On the basis of written representations received from the directors as on 31stMarch, 2012 and taken on record by the Board of Directors, we report that none of thedirectors is disqualified as on March 31, 2012 from being appointed as Director in termsof Clause (g) of subsection (1) of section 274 of the Companies Act, 1956;

vi) In our opinion and to the best of our information and according to the explanationsgiven to us, the said statements of account, except for the possible impact of ourcomments on the matter stated in para (4) above, give the information required by theCompanies Act, 1956 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 Balance Sheet, of the state of affairs of the Company as at 31stMarch, 2012;

ii) in the case of the Statement of Profit & Loss, of the profit of the Company forthe year ended on that date; and

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

annexure to the auditors' report (referred to in our report of even date to the membersof orient paper & industries limited as at and for the year ended 31st march, 2012)

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

b) All fixed assets have not been physically verified by the management during the yearbut there is a regular programme of verification (except for assets of the written downvalue of Rs.1416.86 lacs at Brajrajnagar unit, due to suspension of production activities)which, in our opinion, is reasonable having regard to the size of the Company and thenature of its assets. As informed, no material discrepancies were noticed on suchverification. However, discrepancies, if any, at Brajrajnagar unit are unascertainabledue to non verification of fixed assets for the reasons mentioned above.

c) There was no disposal of a substantial part of fixed assets during the year.

ii) a) The management has conducted physical verification of inventory at reasonableintervals during the year except for the value of Rs.32.90 lacs at Brajrajnagar unit,due to suspension of production activities.

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

c) The Company is maintaining proper records of inventory and no material discrepancieswere noticed on such physical verification. However, discrepancies, if any, atBrajrajnagar unit are unascertainable due to non verification of inventories for thereasons mentioned in (a) above.

iii) a) According to the information and explanations given to us, the Company hasnot granted any loans, secured or unsecured, to companies, firms or other parties coveredin the register maintained under section 301 of the Companies Act, 1956. Accordingly, theprovisions of clause 4 (iii) (a) to (d) of the Order are not applicable to the Company andhence not commented upon.

b) According to the information and explanations given to us, the Company has not takenany loans, secured or unsecured, from companies, firms or other parties covered in theregister maintained under section 301 of the Companies Act, 1956. Accordingly, theprovisions of clause 4 (iii) (e) to (g) of the Order are not applicable to the Company andhence not commented upon.

iv) In our opinion and according to the information and explanations given to us, andhaving regard to the explanation that some of the items purchased are of a proprietorynature and alternate sources do not exist for obtaining quotations thereof, it appearsthat there is an adequate internal control system 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. During the course of our audit, we have not observedany major weakness or continuing failure to correct any major weakness in the internalcontrol system of the Company in respect of these areas.

v) a) According to the information and explanations provided by the management, we areof the opinion that the particulars of contracts or arrangements referred to in section301 of the Companies Act, 1956 that need to be entered into the register maintained underthe above section, have been so entered.

b) In our opinion and according to the information and explanations given to us, thetransactions made in pursuance of such contracts or arrangements exceeding the value ofRupees five lakhs entered into during the financial year, are at prices which arereasonable having regard to the prevailing market prices at the relevant time.

vi) The Company has not accepted any deposit from the public.

vii) In our opinion, the Company has an internal audit system commensurate with thesize and nature of its business.

viii) We have broadly reviewed the books of accounts 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 paper, cement, electricalconsumer durables and chemicals and are of the opinion that prima facie, the prescribedaccounts and records have been made and maintained.

ix) a) The Company is regular in depositing with appropriate authorities undisputedstatutory dues including provident fund, investor education and protection fund,employees’ state insurance, income-tax, sales-tax, wealth-tax, service tax, customduty, excise duty and other material statutory dues applicable to it though there havebeen slight delays in certain cases and also certain payments are not yet made asindicated in (b) below.

b) According to the information and explanations given to us, undisputed amountspayable in respect of provident fund, investor education and protection fund,employees’ state insurance, income-tax, sales-tax, wealth-tax, service tax, customduty, excise duty, cess and other material statutory dues outstanding at the year end fora period of more than six months from the date they became payable, are as follows :

(c) According to the records of the Company, the dues outstanding in respect of salestax, income tax, custom duty, wealth tax, service tax, excise duty & cess on accountof any dispute, are as follows :

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

xi) Based on our audit procedures and as per the information and explanations given bythe management, we are of the opinion that the Company has not defaulted in repayment ofdues to financial institutions, banks or debenture holders.

xii) According to the information and explanations given to us and based on thedocuments and records produced to us, the Company has not granted loans and advances onthe 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 benefit fund /society and therefore, the provisions of clause 4(xiii) of the Order are not applicable.

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

Accordingly, the provisions of clause 4(xiv) of the Order are not applicable.

xv) According to the information and explanations provided to us, the Company has notgiven guarantee for loans taken by others from banks or financial institutions.

xvi) Based on the information and explanations given to us by the management, termloans were applied for the purpose for which these were obtained.

xvii) According to the information and explanations given to us and on an overallexamination of the balance sheet of the Company, we report that no funds raised onshort-term basis have been used for long-term investment.

xviii) The Company has made preferential allotment of shares to a company covered inthe register maintained under section 301 of the Companies Act, 1956. In our opinion, theprice at which shares have been issued is not prejudicial to the interest of the Company.

xix) According to the information and explanations given to us, the Company had createdsecurity in respect of debentures issued in earlier years and outstanding during the year.

xx) The Company has not raised any money through a public issue during the year.

xxi) Based upon the audit procedures performed for the purpose of reporting the trueand fair view of the financial statements and as per the information and explanationsgiven by the management, we report that no fraud on or by the Company has been noticed orreported during the year.