Steel Strips Ltd

To

The Shareholders,

Steel Strips Limited

We have audited the attached Balance Sheet of M/s. STEEL STRIPS LIMITED as at31.03.2010 and also the Profit and Loss Account and the Cash Flow Statement for the periodended on that date annexed thereto. These financial statements are the responsibility ofthe company's management. Our responsibility is to express an opinion on these financialstatements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted inIndia. These 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 management, as well as evaluating the overallfinancial statement presentation. We believe that our audit provides a reasonable basisfor our opinion.

(1) As required by the Companies (Auditors' Report) Order, 2003 issued by the CentralGovernment in terms of Section 227 (4-A) of the Companies Act, 1956 we enclose in theAnnexure a statement on the matters as specified in paragraph 4 and 5 of the said order.

(2) Further to our comments in the Annexure referred to in paragraph 1 above, we statethat: -

(1) We have obtained all the information and explanations which to the best of ourknowledge and belief were necessary for the purposes of our audit.

(ii) In our opinion, proper books of account as required under the law, have been keptby the Company so far as appears from our examination of such books.

(iii) The Balance Sheet, Profit and Loss Account and the Cash Flow Statement referredto in this report are in agreement with the books of accounts.

(iv) In our opinion, the Balance Sheet, Profit and Loss Account and the Cash FlowStatement dealt with by this report, comply with the mandatory Accounting Standardsreferred to in Section 211 (3C) of the Companies Act, 1956.

(v) On the basis of written representation received from directors, as on 31.03.2010and taken on record by the Board of Directors, we report that none of the directors isdisqualified as on 31.03.2010 from being appointed as a director in terms of Clause (g) ofsubsection (1) of Section 274 of Companies Act, 1956.

(vi) 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 as per schedule 9 of Notes on Accounts, and subject to note no. 8 of schedule 9of Notes on Accounts, give the information required by the Companies Act, 1956 in themanner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India:-

(a) In the case of balance sheet, of the state of affairs of the company as at31.03.2010 and

(b) In the case of Profit and Loss Account, of the Loss for the period ended on thatdate.

(c) In the case of cash flow statement, of the cash flows for the year ended on thatdate.

ANNEXURE TO AUDITORS' REPORT

Referred to in paragraph 1 of our report of even date:

1. (a) The company has maintained proper records of Fixed Assets, showing fullparticulars including quantitative details and situation thereof.

(b) The assets were physically verified by the management at reasonable intervals. Nomaterial discrepancies were noticed on such verification.

2. The Company is not holding any inventory. Therefore, the reporting requirementsunder this clause are not applicable.

3. The company has not granted any loans, secured or unsecured to companies, firms orother parties covered in the register maintained under section 301 of the Act. However thecompany has taken loans from such companies, firms or other parties, covered in the saidregister, terms where of are not prejudicial to the interest of the company.

4. There is an adequate internal control procedure commensurate with the size of thecompany and the nature of its business.

5. The transactions that need to be entered into a register in pursuance of section 301of the Act have been so entered in the register. Each of these transactions has been madeat prices which are reasonable having regard to the prevailing market prices at therelevant time.

6. The company had not accepted deposits from the public under sections 58-A of thecompanies Act, 1956 during the year under consideration.

7. The company has an adequate internal audit system commensurate with the size andnature of its business.

8. The company is not required to maintain cost records u/s 209 (1) (d) of thecompanies Act, 1956. As such, no cost records have been maintained.

9. According to the records of the company, the Provident Fund and Employees StateInsurance dues Income Tax, Sales Tax, Wealth Tax, Custom Duties, Excise Duty and Cess havebeen regularly deposited during the year with the appropriate authorities and there are noarrears as on 31st March, 2010.

10. The company has been registered for a period of more than five years, havingexisting share capital of Rs. 828.31 lakhs. Its accumulated losses at the end of thefinancial year amount to Rs. 3060.12 lakhs and are more than 50% of its net worth. It hasincurred cash loss in the financial year under review. However, there was no cash lossimmediately preceding financial year.

11. The company has not defaulted in repayment of dues to Financial Institutions orBanks or debenture holders during the year under consideration.

12. The company has not granted loans and advances on the basis of security by way ofpledge of shares, debentures and other securities.

13. The company is not a chit fund company. The company is not running any Nidhi/Mutual Benefit Fund/ Society.

14. The Company is not dealing or trading in Shares, Securities, Debentures or otherinvestments.

15. The company is not a Financing Company. The company has not given any guarantee forloans taken by others from bank or financial institutions.

16. There are no term loans raised during the year, as such question of theirutilization does not arise.

17. The company has not raised any short Term Funds during the year.

18. The company has not made any preferential allotment of shares to parties andcompanies covered in the Register maintained under section 301 of the Act during the year

19. The company has not issued any Debentures during the year.

20. The company has not raised any money by Public Issue during the year.

21. No fraud on or by the company has been noticed or reported during the year

22. We have not come across any personal expenses, which have been charged to revenueaccount, other than those payable in accordance with generally accepted businesspractices.

23. The Company is a Sick Industrial Company within the meaning of clause (o) ofSub-Section (1) of Section 3 of the Sick Industrial Companies (Special Provisions) Act,1985 as amended.