U.P.Asbestos Ltd

LUCKNOW

1. We have audited the attached Balance Sheet of U. P. Asbestos Limited as on31s1 March, 2012 and also the Profit & Loss Account and 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 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 (Auditors' Report) Order, 2003, issued by the CentralGovernment of India, in terms of section 227 (4A) of the Companies Act, 1956, we enclosein the Annexure a statement on the matters specified in paragraph 4 & 5 of the saidorder to the extent applicable to the company.

4. Further to our comments in the Annexure referred to in paragraph 3 above:

(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 accounts as required by law have been kept by thecompany so far as appears from our examination of the books;

(c) the Balance Sheet, Profit & Loss Account and Cash Flow Statement dealt with bythis report are in agreement with the books of accounts;

(d) in our opinion the Balance Sheet, Profit & Loss Account and Cash Flow Statementdealt with by this report comply with the Accounting Standards (AS) referred to insub-section (3C) of section 211 of the Companies Act, 1956. except that disclosures oughtto have been made as perAS-17in respect of Segment Reporting has not been made since themanagement is of the opinion that there are no reportable business segments (Refer note 31to the financial statements).

(e) on the basis of written representations received from the Directors and taken onrecord by the Board of Directors, we report that none of the Directors are disqualified,as on the balance sheet date, from being appointed as a Director in terms of clause (g) ofsub-section (1) of section 274 of the Companies Act, 1956;

(f) Without qualifying our opinion we draw attention to Note 44 to the financialstatements stating therein that the liability for entry tax of Rs. 179.71 lacs isdependent on the outcome of the decision of the Hon'ble Supreme Court in the Special LeavePetition of another party. The management has as a matter of prudence charged to theStatement of Profit and Loss the actual amount of Rs. 93.98 lacs paid during the year.Since the ultimate outcome of the matter cannot presently be determined pending decisionof the Hon'ble Supreme Court, hence no provision of the balance liability of Rs. 85.73lacs is deemed necessary by the management.

(g) in our opinion and to the best of our information and according to the explanationsgiven to us, the said accounts subject to recoverability of Rs. 340.98 lacs (including Rs.276.44 lacs under the Maharashtra Value Added Tax Act, 2002) and non-provision ofliability, if any, as referred to in note 38 in respect of which we are unable to form anopinion for reasons stated in the said note; note 43 regarding non-provision of Rs. 278.70lacs on account of cenvat credit on service tax claimed and utilized in respect of whichwe are unable to form an opinion; note 42a in respect of non-receipt of balanceconfirmation from customers due to which we are unable to comment on short-provision, ifany of bad/ doubtful debts, discounts, commission and breakage compensation in the booksof account and note 42b regarding reconciliation and balance confirmation with parties andtheir impact, if any, on the profit for the year and reserves of the company and readtogether with 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 Balance Sheet of the state of affairs of the Company as on 31stMarch, 2012;

(ii) in the case of the Statement of Profit & Loss Account of the Profit of thecompany for the year ended on that date; and

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

(Referred to in para 3 of our report of even date)

1. (a) The company has maintained proper records showing full particulars includingquantitative details and situation of its fixed assets.

(b) As informed to us, physical verification of substantial portion of the fixed assetshas been carried out by the management during the year which, in our opinion, isreasonable. We have been informed that no material discrepancies were noticed during thecourse of such verification.

(c) During the year, the company has not disposed off a substantial part of its fixedassets.

2. (a) As informed to us, physical verification of inventory was conducted by themanagement at year-end except for materials stated to be lying with third parties. In ouropinion, the frequency of verification of materials verified by the company 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 were foundreasonable and adequate in relation to the size of the company and nature of its business.

(c) In our opinion and according to the information and explanations given to us and onthe basis of our examination of the records of inventory, the company is maintainingproper records of inventory. We were explained that discrepancies noticed on physicalverification of inventory as compared to book records were not material.

3. (a) As informed to us, the Company has not granted any loans, secured or unsecuredto companies, firms or other parties covered in the register maintained under section 301of the Companies Act, 1956 and therefore clauses 4(iii)(a), iii(b), iii(c) and iii(d) ofthe Companies (Auditors' Report) Order, 2003 is not applicable.

(b) As informed to us, the company has taken unsecured loans (including deposit underthe fixed deposit scheme of the company) aggregating to Rs. 142.89 lacs as on 31.03.2012from 10 parties covered in the register maintained under section 301 of the Companies Act,1956.

(c) According to information and explanations furnished to us, in our opinion, the rateof interest and other terms and conditions of the above loans taken by the company are notprima facie prejudicial to the interests of the company.

(d) According to the information and explanations given to us, the company is regularin payment of principal amount as stipulated and interest on the above loans taken fromparties covered in the register maintained under section 301 of the Companies Act, 1956.

4. In our opinion and according to the information and explanations given to us duringthe course of audit, there are adequate internal control systems commensurate with thesize of the company and the nature of its business with regard to purchase of inventoriesand fixed assets and for sale of goods

5. (a) In our opinion and according to the information and explanations given to us,the particulars of contracts or arrangements referred to in section 301 of the CompaniesAct, 1956 have been entered in the register required to be maintained under that section,(b) In our opinion and according to the information and explanations given to us, thetransactions made in pursuance of contracts or arrangements required to be entered in theregister maintained under section 301 of the Companies Act, 1956 exceeding the value offive lac rupees in respect of any party during the year have been made at prices which arereasonable having regard to prevailing market price at the relevant time.

6. In our opinion and according to the information and explanations given to us, thecompany has complied with the directives issued by the Reserve Bank of India and theprovisions of section 58A, 58AA or any other provisions of the Companies Act, 1956 andrules framed thereunder, in respect of public deposits accepted by the company.

7. The company has an internal audit system which, in our opinion, is commensurate withthe size of the company and the nature of its business

8. We have been informed that the company has maintained cost records pursuant to theCompanies (Cost Accounting Records) Rules, 2011 prescribed by the Central Government undersection 209(1 )(d) of the Companies Act, 1956. We have, however, not made an examinationof the cost records with a view to determine whether they are accurate or complete.

9. (a) On the basis of information and explanations given to us and according to therecords of the company, the undisputed statutory dues are generally being regularlydeposited by the company with the appropriate authorities. According to the informationand explanations furnished to us, we report that there are no undisputed amounts payablein respect of statutory dues except Rs 7.72 lacs under the Maharashtra Value Added TaxAct, 2002 for the financial year 2006-07 and Rs. 2.17 lacs under the Central Sales TaxAct, 1956 for the financial year 2004-05 for a period of more than six months from thedate they become payable,

(b) The information furnished to us by the management regarding the amount involved andthe forum where dispute is pending in respect of Income tax/ Sales tax/ Wealth tax/Service tax/ Custom duty/ Excise duty/ Cess which has not been deposited on account of anydispute are given here-in-below:-

21. As informed to us, no fraud, on or by the company has been noticed or reportedduring the year.