Vishal Exports Overseas Ltd

To

The Members of

VISHAL EXPORTS OVERSEAS LIMITED

We have audited the attached Balance Sheet of VISHAL EXPORTS OVERSEAS LIMITED asat 30th September, 2009 and the related Profit and Loss Account and Cash Flow Statementfor the year ended on that date, which we have signed under reference to this report(together referred to as "financial statement"). These financial statements arethe responsibility of the Company's Management. Our responsibility is to express anopinion on these financial statements based on our audit.

1.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 the Management, as well as evaluating the overallfinancial statement presentation. We believe that our audit provides a reasonable basisfor our opinion.

2. As required by the Companies (Auditor's Report) Order, 2003 ('CARO') and Companies(Auditors Report) (Amendment) Order 2004 issued by the Central Government of India interms of sub-section (4A) of Section 227 of 'The Companies Act, 1956 of India and on thebasis of such checks of the books and records as we considered appropriate and accordingto the information and explanations given to us during the course of audit, we set out inthe Annexure, a statement on the matters specified in paragraphs 4 and 5 of the said Orderto the extent applicable.

3. Further to our comments in the Annexure referred in paragraph (2) above, we reportthat:

a) We have obtained the information and explanations as provided by the management,which to the best of our knowledge and belief, were partly adequate for the purpose of ouraudit;

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 those Books of the Company;

c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with bythis Report are in agreement with the Books of Account of the Company;

d) In our opinion, the Balance Sheet and Profit and Loss Account and Cash FlowStatement dealt with by this report, except in some cases, generally comply with theAccounting Standards, referred to in sub-section (3C) of section 211 of the Companies Act,1956, to the extent applicable.

e) On the basis of representations made by the Directors of the Company and taken onrecord by the Board of Directors of the Company, we report that none of the Directors isdisqualified as on 30th September, 2009 from being appointed as a Director of the Companyin terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956.

f) In our opinion, and to the best of our information and according to the explanationsgiven to us, subject to:

(i) Note No. 2 of Schedule 18 Notes on Accounts towards going concern.

(ii) Note No. 3 of Schedule 18 Notes on Accounts towards non provision of interest onborrowing.

(iii) Note No. 4 of Schedule 18 Notes on Accounts towards non-reflection of fixedAssets sold by the bank and non provision of depredation on fixed assets.

(iv) Note No. 6 of Schedule 18 Notes on Accounts the said accounts, read together withsignificant Accounting Policies and Notes thereon give the information required by theCompanies Act, 1956 in the manner so required. Subject to above,

i) in the case of Balance Sheet, of the state of the affairs of the Company as at 30thSeptember, 2009,

ii) in the case of the Profit and Loss Account, of the Loss for the year ended on thatdate and;

iii) in the case of the Cash Flow Statement, of the cash flow for the year ended onthat date.

ANNEXURE TO THE AUDITORS' REPORT

(Referred to in Paragraph (2) of our Report of even date)

(i) (a) The Company has maintained records showing particulars of fixed assets.

(b) As informed by the company to us, some of the fixed assets which are in possessionof the Company have been physically verified by the Management at reasonable intervalsduring the Period. In our opinion, the frequency of physical verification of said fixedassets is reasonable having regard to the size of the operations of the company. Asinformed to us, no material discrepancies were noticed on such verification.

(c) During the year under audit, we are informed by the management that the fixedassets charged to the banks have been sold under Securitization Act 2002. We are alsoinformed by the management that the said banks have not provided details as regard thesale of such fixed assets. (Refer note No. 4 of Schedule 18 Notes on Accounts).

(d) Other than as referred above, the company has sold fixed assets of Rs.NIL (P.Y.Rs.4579.84 lacs).and depreciation provided till the date of sale of Rs. NIL Lac (P.Y.Rs.737.19 lacs) during the year under review.

(ii) As there are no inventories, this clause is not applicable.

(iii) (a) In our opinion and according to the information and explanation given to us,the company had granted unsecured interest free loans to a company covered under section301 of the Companies Act, 1956. The maximum amount of loans granted during the year wasRs. 290.37 Lacs (P.Y year Rs. 185.25 lacs) and the year end balance of loans granted tosuch parties was Rs.290.37 (P.Y.Rs. 185.25 lacs).

(b) As informed by the Company, loan granted to a Company is on interest free basishence we are of opinion that this clause is not applicable.

(c) As informed by the Company, loan granted to a Company is not having any fixedrepayment terms and hence we are of the opinion that this clause is not applicable..

(d) In our opinion and according to the information and explanation given to us, thereare no companies, firms etc listed under Register maintained u/s 301 of the Companies Act,1956 where the overdue amount is more than one lac rupees.

(e) The Company has taken unsecured loan from a parties and companies covered in theregister maintained under section 301 of the Companies Act,1956.The maximum amountinvolved during the year was Rs.4506.55 lacs (P.Y.Rs.4213.21 Lacs) and at the year endbalance of loans taken from such parties and companies was Rs.4506.55 lacs (P.Y. Rs.4213.21 lacs).

(f) In our opinion and according to the information and explanations given to us, therate of interest and other terms and conditions on which loans have been taken fromCompany covered in the register maintained under section 301 of the Companies Act,1956 arenot, prima facie, prejudicial to the interest of the Company.

(g) As informed by the Company, loan granted by parties and companies are on interestfree basis hence we are of opinion that this clause is not applicable.

(h) As informed by the Company, loan granted by companies/parties are not having anyfixed repayment terms and hence we are of the opinion that this clause is not applicable.

(iv) In our opinion and according to information and explanations given to us, duringthe course of our audit there are adequate internal control procedures commensurate withthe size of the Company and the nature of its business, and for the sale of goods. Duringthe course of our audit, we have not observed any continuing failure to correct majorweakness in such internal controls.

(v) (a) To the best of our knowledge and belief and according to the information andexplanations given to us, we are of the opinion that the contracts or arrangementsgenerally entered into the register required to be maintained under section 301 of theCompanies Act,1956 have been so entered.

(b) In our opinion and according to the information and explanations given to us,transactions made in pursuance of contracts or arrangement entered in the registermaintained under section 301 of the Companies Act,1956 are reasonable except in case ofsome transactions which are technical in nature for which prevailing market prices at therelevant time were not available. We have relied on information and explanations madeavailable to us.

(vi) In our opinion and according to the information and explanations given to us, theCompany has not accepted deposits from the public during the period covered by our auditreport. To the best of our knowledge and according to the information and explanationsgiven to us, no order has been passed by the Company Law Board or National Company LawTribunal or Reserve Bank of India or any Court or any other Tribunal.

(vii) The company has no internal audit system during the year under review.

(viii) The Central Government has prescribed maintenance of cost records under section209(l)(d) of the Companies Act, 1956 in respect of generation of electricity for WindPower and in our opinion, the Company has been made and maintained proper cost records inconnection therewith.

(ix) (a) According to information and explanations given to us, the company is notregular in depositing with Appropriate Authorities undisputed statutory dues includingIncome Tax, Wealth Tax Provident fund. Employees State Insurance, Sales tax, Excise-duty,Custom Duty and other material statutory dues applicable to it.

(b) According to the information and explanations given to us, there were no undisputedamounts payable in respect of dues as referred to (ix) (a) above, which were outstandingas on 30th September, 2009 for a period of more than six months from the date they becamepayable except the following : Fringe Benefit Tax Rs.2.05 Lac.

(c) According to information and explanations given to us, details of dues of IncomeTax, Sales Tax, and custom Duty which have not been deposited on account of any dispute isgiven below:

(x) The company has accumulated losses at the end of the financial Period and hasincurred cash losses in the financial Period under report.

(xi) In our opinion and according to the information and explanations given to us, thecompany has defaulted during the Period, in repayment of dues in respect of Term Loan tofinancial institution and/or bank(s) and has been designated as Non Performing Assets .During the period under review the Company's working capital borrowings have beendesignated as non performing assets.

(xii) In our opinion the company has not granted any loans and advances on the basis ofsecurity by way of pledge of shares, debentures and other securities.

(xiii) The company is not a chitfund, nidhi / mutual benefit fund/society and thereforethe provisions of clause 4(xiii) of the Companies (Auditors Report) 0rder,2003 are notapplicable to the company.

(xiv) According to the information and explanations given to us, the company does notdeal or trade in shares, securities or debentures. Proper records have been maintained ofthe transactions and contracts in respect of the investments made by the Company.The investments are held by the Company in its own name.

(xv) The Company has given certain guarantees on behalf of its group & associatecompanies as mentioned in Notes on Accounts no. 17 of schedule 18 Notes on Accounts, tothe financial statements. In our opinion based on the information and explanations givento us, the terms and conditions of the guarantees are not prejudicial to the interest ofthe company.

(xvi) In our opinion and according to the information and explanations given to us, noTerm Loans is raised during the Period.

(xvii) In our opinion and according to the information and explanations given to us,and according to Cash flow statement, on an overall examinations of the Balance Sheet ofthe Company we report that funds raised on short term basis have been utilized for longterm investment and vice-versa.

(xviii) The Company has not made any preferential allotment of shares to parties andcompanies covered in the register maintained under section 301 of the Companies Act, 1956during the Period.

(xix) The Company has not issued any secured debentures during the period covered bythe report. Accordingly, the provisions of clause 4 (xix) of the Companies (AuditorsReport) 0rder,2003 are not applicable to the company.

(xx) During the period covered by our audit report, the Company has not raised anymoney by public issue.

(xxi) To the best of our knowledge and belief and according to the information andexplanations given to us, no fraud on or by the company has been noticed or reportedduring the course of our audit for the year ended 30th September 2009.

AUDITOR'S CERTIFICATE ON CASH FLOW STATEMENT

We have examined the attached CASH FLOW statement of VISHAL EXPORTS OVERSEAS LIMITEDfor the year ended 30th September, 2009. The statement has been prepared by the Company inaccordance with requirements of Clause 32 of the Listing agreement with Stock Exchange andis based on is in agreement with the corresponding Profit & Loss Account and BalanceSheet of the Company covered by our report dated 29th January 2010 to the Members of theCompany.