Talbros Automotive Components Ltd

TALBROS AUTOMOTIVE COMPONENTS LIMITED

1. We have audited the attached Balance Sheet of Talbros Automotive ComponentsLimited as at March 31, 2011, the Profit and Loss Account and also the Cash FlowStatement 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 conducted our audit in accordance with Auditing Standards generally accepted inIndia. 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 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. Further to our comments in the Annexure referred in paragraph 3 above, we reportthat:

i) 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 by law have been kept by theCompany, so far as appears from our examination of those books and proper returns adequatefor the purposes of our audit have been received from branches not visited by us;

iii) The Branch Auditor’s Reports have been furnished to us and have beenappropriately dealt with while preparing our report.

iv) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with bythis report are in agreement with the books of account and with the audited returns fromthe branches;

v) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statementdealt with by this report comply with the Accounting Standards referred to in sub-section(3C) of Section 211 of the Companies Act, 1956;

vi) On the basis of written representations received from the directors as on March 31,2011, and taken on record by the Board of Directors, we report that none of the directorsis disqualified as on March 31, 2011 from being appointed as a director in terms of clause(g) of subsection (1) of Section 274 of the Companies Act, 1956.

vii) 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 Notes on Accounts give the information required by the Companies Act, 1956,in the manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India:

(a) In the case of the Balance Sheet, of the state of affairs of the Company as atMarch 31, 2011;

(b) In the case of the Profit and Loss Account, of the profit for the year ended onthat date; and

(c) 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 OUR REPORT OF EVEN DATE ON THE ACCOUNTS OFTALBROS AUTOMOTIVE COMPONENTS LIMITED FOR THE YEAR ENDED MARCH 31, 2011

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

(b) According to the information and explanations given to us, physical verification offixed assets is being conducted in a phased manner by the management under a programmedesigned to cover all the fixed assets over a period of three years, which, in ouropinion, is reasonable having regard to the size of the Company and the nature of theassets. Discrepancies noticed on such verification were not material and have beenproperly dealt with in the books of account.

(c) According to the information and explanations given to us, the Company has notdisposed off a substantial part of its fixed assets during the year.

ii) (a) As explained to us, the inventories of finished goods, stores, spare parts andraw materials have been physically verified by the management at reasonable intervalsduring the year, except for materials lying with third parties for which certificatesconfirming stocks held by them have been obtained.

(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) In our opinion and according to the information and explanations given to us, theCompany has maintained proper records of its inventories. The discrepancies noticed onphysical verification of inventories as compared to book records were not material and thesame have been properly dealt with in the books of account.

iii) (a) The Company has granted inter corporate deposit to two parties covered in theregister maintained under Section 301 of the Companies Act, 1956. The maximum amountinvolved during the year and the year-end balance of inter corporate deposit was Rs190Lacs and Rs100 lacs respectively.

(b) In our opinion and according to the information and explanations given to us, therate of interest and other terms and conditions for such inter corporate deposit are notprima facie prejudicial to the interest of the Company.

(c) According to the information and explanations given to us, the Inter CorporateDeposits are repayable on demand and during the year the Company has not made any demandfor repayment. The repayment of interest is regular except for overdue interestrecoverable from these companies as on March 31, 2011 amounting to Rs 13.17 Lacs. The samehas since been recovered.

(d) According to the information and explanations given to us, the Company has nottaken any loans from companies, firms or other parties covered in register maintainedunder Section 301 of the Companies Act, 1956. Therefore provisions of clause (iii) (f)& (g) of paragraph 4 of the Order are not applicable to the Company.

iv) In our opinion and according to the information and explanations given to us, thereexists an adequate internal control system commensurate with the size of the Company andthe nature of its business for the purchase of inventory, fixed assets and with regard tosale of goods and services.

During the course of our audit, we have not observed any continuing failure to correctmajor weaknesses in the internal control system.

v) (a) According to the information and explanations given to us, we are of the opinionthat the particulars of all contracts or arrangements that need to be entered into theregister maintained under Section 301 of the Companies Act, 1956 have been so entered.

(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 and exceeding the value of rupeesfive lacs in respect of any party during the year have been made at prices which arereasonable having regard to prevailing market prices at the relevant time, except foritems stated to be of a specialized nature where no comparison is possible.

vi) In our opinion and according to the information and explanations given to us, theCompany has complied with the provisions of Section 58A and 58AA and other relevantprovisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules,1975 with regard to deposits accepted from the public. No order has been passed by theCompany Law Board or National Company Law Tribunal or Reserve Bank of India or any Courtor any other Tribunal on the Company in respect of the aforesaid deposits.

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 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 and we are of the opinion that prima-faciethe prescribed accounts and records have been made and maintained. We have, however, notmade a detailed examination of the records with a view to determine whether they areaccurate or complete.

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, CustomsDuty, Excise Duty, and other material statutory dues applicable to it.

Further, since the Central Government has till date not prescribed the amount of cesspayable under Section 441A of the Companies Act, 1956, we are not in a position to commentupon the regularity or otherwise of the Company in depositing the same.

(b) According to the information and explanations given to us, no undisputed amountspayable in respect of Income Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty andExcise Duty were in arrears, as at March 31, 2011 for a period of more than six monthsfrom the date they became payable.

(c) According to the information and explanations given to us, the details of statutorydues of Income Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty and Excise Duty whichhave not been deposited on account of any dispute are given below:

x) In our opinion, the Company has no accumulated losses.

The Company has not incurred cash losses during the financial year covered by our auditand the immediately preceding financial year.

xi) In our opinion and according to the information and explanations given to us, theCompany has not defaulted in repayment of dues to the financial institution, banks ordebenture holders.

xii) 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.

xiii) In our opinion, the Company is not a chit fund or a nidhi/ mutual benefitfund/society. Therefore, the provisions of clause (xiii) of paragraph 4 of the Order arenot applicable to the Company.

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

Therefore, the provisions of clause (xiv) of paragraph 4 of the Order are notapplicable to the Company.

xv) The Company has given corporate guarantee for term borrowing by one of itsAssociate Company. According to the information and explanations given to us, we are ofthe opinion that terms and conditions thereof are not prima-facie prejudicial to theinterest of the Company.

xvi) To the best of our knowledge and belief and according to the information andexplanations given to us, the term loans availed by the Company were applied for thepurposes for which they 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) According to the information and explanations given to us, the Company has notmade any preferential allotment of shares to parties and companies covered in the registermaintained under Section 301 of the Companies Act, 1956.

xix) The Company has not issued any debentures. Therefore, the provisions of clause(xix) of paragraph 4 of the Order are not applicable to the Company xx) The Company hasnot raised any money by public issue during the year under review.

xxi) To the best of our knowledge and belief and according to information andexplanations given to us, no fraud on or by the Company has been noticed or reportedduring the course of our audit.