Sandur Laminates Ltd

TO THE MEMBERS OF SANDUR LAMINATES LIMITED

1) We have audited the attached balance sheet of SANDUR LAMINATES LIMITED as at 31 March, 2005, and also the profit and loss account and the cash flow statement for the year ended on that date, annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility 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 accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, un a test basis, evidence supporting the amounts and disclosure in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3) As required by the Companies (Auditor's Report) Order, 2003 issued by the Central Government of India in terms of sub-section (4A) of Section 227 of Hie Companies Act, 1956, we annex hereto a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4) Further to our comments in the Annexure referred to in paragraph 3 above; we report that:

a) we have obtained all the information and explanations which to the best of our knowledge 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 the Company so far as appears from our examination of those books;

c) the balance sheet, profit and loss account and the cash flow statement dealt with by this report are in agreement with the books of account;

d) subject to our comments in paragraph 4(f) and 5 below, in our opinion, the balance sheet, profit and loss account and the cash flow statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act 1956;

e) on the basts of written representations received from the directors, as on 31st March, 2005 and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March, 2005 from being appointed as a director in terms of clause g) of sub-section (1) of section 274 of the Companies Act, 1956;

f) (i) as stated in Note 1 of Schedule 12, the accounts have been prepared on a going concern basis. The Company has incurred a net toss of Rs. 5,819.11 lakhs during the year ended 31st March, 2005 and as of that date, the Company's current taffies exceeded its current assets by Rs. 1,861.25 lakhs and its accumulated losses net of shareholders' funds is Rs. 25,354.27 lakhs. The Company has a/so been declared sick by the Board for Industrial and Financial Reconstruction (BIFR); the Board vide its order dated 12.06.2003 confirmed that the company is not likely to make Its net worth exceed its accumulated /asses within a reasonable time and has ordered that it should be wound up under section 20(1) of the Sick Industrial Companies (Special Provisions) Act, 1985. In view of the above, we are of the opinion mat the going concern basis is not an appropriate basis for the presentation of Vie accounts of the Company. Consequently, adjustments may be required to the recoverability and classification of recorded assets amounts, and to amounts and classification of liabilities, the impact of which is not ascertained,

(ii) as stated in Note 9 of Schedule 12, no provision has been made for interest claim of Rs. 1,524.14 lakhs. Including Rs. 294.64 lakhs for the current year, on advances from certain companies as a result of which the current liabilities and toss for the year are understated to that extent respectively,

(iii) as stated in note 17 of schedule 12, the Company has not provided for impairment loss as required under Accounting Standard-28 on "Impairment of Assets."

We further report that, without considering item mentioned at 4(f)(1) above the effect of which on the financial statements could not be determined, had the observation made by us in 4 and above been considered, the toss for the year would have been Rs. 6,113.75 lakhs (as against the reported figure of Rs. 5,81911 lakhs), debit balance in the profit and toss account would have been R$- 29,497,14 lakhis (as against the reported figure of Rs. 27,973.00 lakhs), and liabilities would have been Rs. 3,706.16 lakhs (as against the reported figure of Rs. 2,182.02 lakhs). 6) In our opinion and to the best of our information and according to the explanations given to us, the accounts give the information required by the Companies Act, 1956, in the manner so required, and in view of the significance of the matters referred to in paragraph 4(fX0 relating to going concern and 4(f)(ii) and 4(f)(iii) above, we are unable to express an opinion whether the accounts give a true and lair view:

i in the case of die balance sheet, of the state of affairs of the Company as at 31 March, 2005

ii in the case of the profit and loss account, of the loss for the year ended on that date; and

iii in the case of the cash flow statement, of the cash flows for the year ended on that date

ANNEXURE REFERRED TO IN PARAGRAPH 3 OF THE AUDITORS' REPORT TO THE MEMBERS OF SANDUR LAMINATES LIMITED ON THE ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2005.

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

(b) The management has not physically verified the fixed assets during the year. In our opinion, the physical verification of fixed assets is not conducted at reasonable intervals.

(c) During the year, the Company has not disposed off a major part of the fixed assets and therefore paragraph 4(j)(c) of the Companies (Auditor's Report) Order, 2003 (hereinafter referred to as 'the Order') is not applicable

ii) (a) According to the information and explanations given to us, the inventory has not been physically varied during the year. In our opinion the physical verification of inventory is not conducted at reasonable intervals.

(b) In view of (a) above, the reporting under paragraph 4(f)(b) does not arise.

(c) On the basis of our examination of the records of inventory, in our opinion, the Company has maintained proper records of inventory.

iii) In our opinion and according to the information and explanations given to us, the Company has not granted/ taken any loans, secured or unsecured to/from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956 and therefore, paragraphs 4(iii) of the Order is not applicable.

iv) In our opinion and according to the information and explanations given to us, there are no purchases of inventory and fixed assets and sale of goods and services during year and accordingly the reporting on internal control in respect of the clause (iv) is not applicable. During the course of our audit, we have not observed any continuing failure to correct major weaknesses. If any, in internal controls system.

v) In our opinion and according to the Information and explanations given to us, there are no Contracts or arrangements that need to be entered in the register maintained under Section 301 of the Companies Act, 1956 and therefore, paragraph My)of the Order is not applicable.

vi) In our opinion and according to the Information and explanations given to us, the Company has not accepted any deposits from the public during the year and therefore, paragraph 4(vi) of the Order is not applicable,

vii) No internal audit was carried out during the year.

viii) According to the information and explanations given to us, maintenance of cost records has not been prescribed by the Central Government under Section 209 (1) (d) of the Companies Act, 1956 for the Company's product and therefore, paragraph 4(viii) of the Order is not applicable,

ix) (a) In our opinion, and according to the information and explanations given to us, there had been delays in depositing undisputed statutory dues including Provident Fund, Investor Education & Protection Fund, Employees' State Insurance, Income Tax, Sales lax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, Cess and other material statutory dues, if any, applicable to it with appropriate authorities. The arrears as at 31 March 2005ofsuch items out standings for a period of more than six months from the date they became payable is given below:

(b) According to the records of the Company and information and explanations given to us, there are disputed dues of Excise Duty and Entry Tax which have not been deposited are set out below:

x) The Company has accumulated losses exceeding fifty percent of its networth as at year end and has incurred cash losses during the financial year and in the immediately preceding financial year.

xi) In our opinion and according to the information and explanations given to us, the Company has defaulted in repayment of dues to financial institutions and banks. The total amount defaulted as at 31 March 2005 is Rs. 27,028.49 lakhs. The defaults continue for the past few years and the exact due dates are not readily available.

xii) The Company has not granted loans or advances on the basis of security by way of pledge of shares, debentures, and other securities and therefore, paragraph 4(xii) of the Order is not applicable.

xiii) The provisions of special statute applicable to chit fund and nidhi / mutual benefit fund / society are not applicable to the Company and therefore, paragraph 4(xiii) of the Order is not applicable.

xiv) The Company is not dealing in or trading in shares, securities, debentures and other investments and therefore, paragraph 4(xiv) of the Order is not applicable

xv) In our opinion and according to the information and explanation given to us, the Company has not given guarantees during the year for loans taken by others from banks or financial institutions and therefore, paragraph 4(xv) is not applicable.

xvi) The Company has not availed term loans during the year and therefore, paragraph 4(xvi) of the Order is not applicable.

xvii) According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, funds raised on short term basis have prima facie, not been used during the year for long term investment.

xviii) The Company has not made any preferential allotment of shares during the year and therefore, paragraph 4(xviii) of the Order is not applicable.

xix) The Company has not issued any debentures during the year and therefore, paragraph 4(xix) of the Order is not applicable.

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

xxi) To the best our knowledge and belief and according to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the year.