Prakash Industries Ltd

To,

The Members of

PRAKASH INDUSTRIES LIMITED

1. We have audited the attached Balance Sheet of Prakash Industries Ltd. as at31st March, 2011 and the Profit & Loss Account and the Cash Flow Statement of theCompany for the year ended on that date, annexed thereto. These financial statements arethe responsibility of the Company’s management. Our responsibility is to express anopinion on these financial statements based on our audit.

2. We have conducted audit in accordance with Auditing standards generally accepted inIndia. Those Standards require that we plan and perform the audit to obtain reasonableassurance whether the financial statements are free of material misstatement. An auditincludes examining, on a test basis, evidence supporting the amounts and disclosures inthe financial statements. An audit also includes assessing the accounting principles usedand 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 (Auditors’ Report) Order, 2003, issued by theGovernment of India in terms of section 227(4A) of the Companies Act, 1956 and on thebasis of such checks of the books and records of the Company as we considered appropriateand according to the information and explanations given to us, we annex here to astatement on the matters specified in paragraphs 4 & 5 of the said order.

4. As stated in Note No.6, in terms of a Court order, the deferred tax liability forthe year has been adjusted against Securities Premium account. Had the deferred taxliabilities for the year been accounted for pursuant to AccountingStandard-22‘Accounting for Taxes on Income‘, profit after tax for the year wouldhave been lower by Rs. 302.30 lacs

5. As stated in Note No.1(l), the provision of tax made by the Company is subject toassessment by the tax authorities and set off of MAT credit entitlement is subject toavailability of taxable income of the Company in future, as per the provisions of theIncome Tax Act, 1961.

6. 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 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, the Profit & Loss Account and Cash Flow Statement dealt withby this report are in agreement with the books of account

d) Subject to our comments in para 4 above, in our opinion, the Balance Sheet,Profit & Loss Account and Cash Flow Statement dealt with by this report, comply withthe mandatory Accounting Standards, referred to in sub-section (3C) of Section 211 of theCompanies Act, 1956, to the extent applicable.

e) On the basis of written representations received from the Directors as on 31stMarch, 2011 and taken on record by the Board of Directors, we report that none of theDirectors is disqualified as on 31st March, 2011 from being appointed as a Director interms of Clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956.

Subject to our comments in para 4 above and their consequential impact on the profitfor the year, in our opinion and to the best of our information and according to theexplanations given to us, the said accounts read together with the significant accountingpolicies and the notes thereon give the information required by the Companies Act, 1956 inthe 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, 2011

(ii) in the case of the Profit & Loss Account, of the profit for the year ended onthat date and

(iii) in the case of the Cash Flow Statement, of the Cash Flows for the year ended onthat date.

ANNEXURE REFERRED TO IN PARAGRAPH 3 OF THE AUDITORS‘ REPORT OF EVEN DATE TO THEMEMBERS OF PRAKASH INDUSTRIES LIMITED ON THE ACCOUNTS FOR THE YEAR ENDED 31ST MARCH, 2011.

1. (a) The Company has maintained proper records showing all particularsincludingquantitative details and situation of fixed assets on the basis of available information.

(b) As explained to us, the fixed assets have been physically verified by themanagement in accordance with a phased programme, which in our opinion is reasonablehaving regard to the size of the company and the nature of its assets. During the year, nomaterial discrepancies were noticed by the management on such verification.

(c) Fixed assets disposed off during the year, in our opinion, do not constitute asubstantial part of the fixed assets of the Company and going concern status of theCompany is not affected.

2. (a) The inventory, except stock in transit or lying with the third parties has beenphysically verified by the management during the year. For stocks lying with the thirdparties at the year end, written confirmations have been obtained. In our opinion, thefrequency of verification is reasonable.

(b) In our opinion and according to the information and explanations given to us, theprocedures of physical verification of inventory followed by the management are reasonableand adequate in relation to the size of the Company and the nature of its business.

(c) In our opinion and according to the information and explanations given to us, theCompany is maintaining proper records of inventory. The discrepancies noticed on physicalverification of inventory as compared to the book records were not material and have beenproperly dealt with in the books of account.

3. The Company has neither granted nor taken any loan, secured or unsecured, to / fromcompanies, firms or other parties covered in the register maintained under section 301 ofthe Companies Act, 1956.

4. In our opinion and according to the information and explanations given to us, thereis adequate internal control system commensurate with the size of the Company and thenature of its business for the purchases of inventory and fixed assets and for the sale ofgoods. During the course of our audit, we have not come across any continuing failure tocorrect major weaknesses in the internal control system.

5. Based upon the audit procedures applied by us and according to the information andexplanations given to us, there are no transactions which are required to be entered inthe register maintained under Section 301 of the Companies Act,1956.

6. In our opinion and according to the information and explanations given to us, theCompany has not accepted any deposits from the public during the year within the meaningof the provisions of Section 58A and 58AA of the Companies Act, 1956 and the Companies(Acceptance of Deposits) Rules, 1975.

7. In our opinion, the Company has an internal audit system commensurate with the sizeand nature of its business.

8. The Central Government has prescribed maintenance of cost records under Section209(1)(d) of the Companies Act,1956 in respect of certain manufacturing activities of theCompany. We have been informed that such accounts and records have been maintained by theCompany.

9. (a) As per records of the Company and according to the information and explainationsgiven to us and further read together with Note No.1(l)(i) regarding payment of MAT, inour opinion, the Company is generally regular in depositing the undisputed statutory duesincluding Provident Fund, Investor Education and Protection Fund, Employees‘ StateInsurance, Income Tax, Sales Tax, Entry Tax, Wealth Tax, Service Tax, Custom Duty, ExciseDuty, Cess or any other material statutory dues applicable to it with the appropriateauthorities. There are no undisputed statutory dues at the year end outstanding for aperiod of more than six months.

(b) According to the information and explanations given by the management and reliedupon by us, there are following statutory dues which have not been deposited by theCompany on account of some dispute and same are pending before appropriate authorities:-

10. The Company has no accumulated losses as at 31st March, 2011. The Company has notincurred cash losses during the financial year covered by our audit and in the immediatelypreceding financial year.

11. Based on our audit procedures and according to the information and explanationsgiven to us, we are of the opinion that the Company has not defaulted in repayment of duesto any financial institution or bank during the year.

12. According to the information and explanations given to us, the Company has notgranted loans and advances on the basis of security by way of pledge of shares, debenturesand other securities.

13. In our opinion and according to the information and explanations given to us, theprovisions of any special statute applicable to chit fund / nidhi / mutual benefit fund/societies are not applicable to the Company.

14. In our opinion and according to the information and explanations given to us,proper records have been maintained of the transactions and contracts and timely entrieshave been made in respect of Company’s dealings in its investments. The investmentsheld by the Company as at 31st March, 2011 are in its own name.

15. According to the information and explanations given to us, the Company has notgiven any guarantee for loans taken by others from banks or financial institutions duringthe year.

16. In our opinion and according to the information and explanations given to us, on anoverall basis, the term loans taken by the Company during the year have been applied forthe purpose for which they were obtained, other than temporary deployment pendingapplication.

17. According to the information and explanations given to us and on an overallexamination of Balance Sheet of the Company, we are of the opinion that the Company hasnot raised any funds on short-term basis, which have been used for long-term investments.

18. The Company has not made any preferential allotment of shares during the year tothe parties and companies covered in the Register maintained under Section 301 of theCompany Act,1956.

19. The Company has not issued any debentures during the year under review.

20. The Company has not raised any money by way of public issue during the year underreview.

21. During the course of our examination of the books and records of the Companycarried out in accordance with the generally accepted auditing practices in India andaccording to the information and explanations given to us, we have neither come across anyinstance of material fraud on or by the Company, noticed or reported during the year, norhave we been informed of such case by the management.