Vippy Spinpro Ltd

To,

The Members of Vippy Spinpro Ltd.,

1. We have audited the attached Balance Sheet of VIPPY SPINPRO LTD., DEWASas at 31st March, 2010, the related Profit & Loss Account of the Company for the yearended on that date annexed thereto, and Cash Flow Statement for the year ended on thatdate. These financial statements are the responsibility of the Company's management. Ourresponsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with auditing standards generally accepted inIndia. Those standards requires 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 and the Companies(Auditor's Report) (Amendment) order, 2004 issued by the Central Government of India interm of sub-section (4A) of Section 227 of the Companies Act, 1956 and on the basis ofsuch checks as we consider appropriate and according to the information and explanationgiven to us, we enclose in the Annexure, a statement on the matters specified in paragraph4 and 5 of the said order.

4. Further to our comments in the Annexure referred to 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 purpose of our audit;

ii. In our opinion, the company has kept proper books of accounts as required by law sofar as appears from our examinations of those books;

iii. The Balance Sheet, the Profit & Loss Account and Cash Flow Statement dealtwith by this report are in agreement with the books of account;

iv. In our opinion, the Balance Sheet and the Profit and Loss Account dealt with bythis report comply with the Accounting Standards referred to in sub-section (3C) ofSection 211 of the Companies Act, 1956;

v. On the basis of written representations received from the directors, as on 31stMarch, 2010 and taken on record by the Board of Directors, we report that none of thedirectors is disqualified as on 31st March, 2010 from being appointed as a director interms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956; and

vi. In our opinion and to the best of our information and according to the explanationsgiven to us, the said accounts give 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:

1. In the case of the Balance Sheet, of the State of Affairs of the Company as at 31stMarch, 2010.

2. In the case of the Profit & Loss Account of the Profit for the year ended onthat date and

3. In the case of Cash Flow Statement, of the cash flow for the year ended on thatdate.

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

We report that:

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

b. As explained to us, the assets have been physically verified by the management inaccordance with a phased programme of verification, which in our opinion, is reasonable,considering the size and the nature of its business. The frequency of verification isreasonable and no material discrepancies have been noticed on such physical verification.

c. The Company has not disposed off any substantial part of fixed assets during theyear.

ii. a. As explained to us, the Management has conducted physical verification ofinventory at reasonable intervals.

b. The procedures of physical verification of the inventories followed by themanagement are reasonable and adequate in relation to the size of the company and natureof its business.

c. In our opinion and according to the information and explanation given to us, thecompany is maintaining proper records of inventories and discrepancies noticed on physicalverification of inventories as compared to book records were not material.

iii. As informed to us, The Company has neither granted nor taken any loans, secured orunsecured, to or from companies, firms or other parties listed in the Register maintainedunder section 301 of the Companies Act, 1956 and as such clauses 4(iii)(a)to (g) of theorder are not applicable.

iv. There are adequate internal control systems commensurate with the size of thecompany and the nature of its business with regard to purchase of inventories, fixedassets and for the sale of goods. During the course of our audit, no major weakness hasbeen noticed in the internal controls.

v. a. According to the information and explanation given to us there are notransactions of contracts or arrangements that needs to be entered into the registermaintained under section 301 of the Companies Act, 1956.

b. Since the Company has not made the transactions of contract or arrangement exceedingthe value of Rs.5.00Lacs from such parties,the provisions of clause 4(v)(b) of the orderare not applicable.

vi. In our opinion and according to the information and explanations given to us, theCompany has not accepted any deposits from the public. Hence, the question of compliancewith the provisions of section 58A and 58AA or any other provisions of the Companies Act,1956 and the Companies (Acceptance of Deposits) Rules, 1975 does not arise.

vii. In our opinion, the Company has an internal audit system commensurate withthe size of the Company and the nature of its business.

viii. The Central Government has prescribed maintenance of the cost records undersection 209(1)(d) of the Companies Act, 1956 with respect to the company's product. Wehave reviewed the books of accounts maintained by the Company in this connection.We are ofthe opinion that, prima facie, the prescribed accounts and records have been made andmaintained. We have however,not made a detailed examination of the records with a view todetermine whether they are accurate or complete.

ix. a. According to the information and explanations given to us and the recordsexamined by us, the Company is regular in depositing with appropriate authoritiesundisputed statutory dues including provident fund, employees' state insurance,income-tax, sales-tax, customs duty, excise-duty, Service Tax, Cess and other statutorydues except for Entry Tax Rs. 14 Lakhs is outstanding for the Financial Year 2007-2008 ason 31st March, 2010 for a period of more than six months from the date it became payable.

b. According to the records of the Company, the dues outstanding of sales tax, incometax, cess and other statutory liability on account of any disputes are as follows:-

x. The company has no accumulated loss at the end of the financial year 31st March,2010 and it has not incurred cash loss in the current and immediately preceding financialyear.

xi. In our opinion and according to the information and explanations given to us theCompany has not defaulted in re-payment of its dues to banks and debenture holders.

xii. The Company has not granted any loans and advances on the basis of security by wayof pledge of shares, debentures and other securities and hence provision of clause 4(xii)of the order are not applicable.

xiii. In our opinion, the Company is not a chit fund or a nidhi/mutual benefit fund/society. Therefore, the provisions of clause4(xiii) of the order are not applicable.

xiv. The Company has maintained proper records of transactions and contracts in respectof dealing in shares, securities and other investment and timely entries have generallybeen made therein. All shares and other securities have been held by the Company in itsown name.

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

xvi. According to the information and explanations given to us, the term loans raisedduring the year have been applied for the purpose for which they were raised.

xvii. To the best of our knowledge and belief and according to the information andexplanations given to us, the fund raised on short term basis have not been used for longterm investment and the fund raised on long term basis have not been used for short terminvestment.

xviii. The Company has not made any preferential allotment of shares to the parties andcompanies listed in the register maintained under section 301 of the Companies Act, 1956during the year. Accordingly, the provisions of clause4(xviii) of the order are notapplicable to the Company.

xiv. No debentures have been issued by the Company and hence, the question of creatingsecurity or charges in respect thereof does not arise.

xx. The Company has not raised any money by way of public issues during the year.

xxi. On the basis of our examination and according to the information and explanationsgiven to us, no fraud, on or by the Company, has been noticed or reported during the year.