Auditor Report of Krishna Ferro Products Ltd.

Mar 31, 2012

1. We have audited the attached Balance Sheet of M/S KRISHNA FERRO PRODUCTS LIMITED, MANDIAKUDAR, CHUNGIMATI-770034, as at 31st March 2012, the Profit & Loss Account and Cash Flow Statement of the Company for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted the audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis of our opinion.

Q. As required by the Companies (Auditors Report) Order, 200Q issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Companies Act, 19S6, we enclose in the Annexure a statement on the matters specified in the paragraphs 4 and Sof the said Order.

4. Further to our comments in the Annexure referred to in paragraph (Q) above, we report that:

(a) We have obtained all the information and explanations, which to the best of our knowledge and belief, were necessary for the purpose of our audit;

(b) In our opinion, proper Books of Account as required by Law have been kept by the Company, so far as appears from our examination of those books;

(c) The Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report are in agreement with the books of Account;

(d) In our opinion, the Balance Sheet , Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the accounting standards referred to in section 211 ( QC ) of the Companies Act, 19S6 to the extent applicable.

(e) On the basis of the written representation, received from the directors taken on record by the board of directors as on Q1st March'12. We report that none of the Directors is disqualified as on Q1st March'12 from being appointed as a Director in terms of Section-274 (1) (g) of the Companies Act 19S6.

(f) In our opinion and to the best of our information and according to the explanations given to us, the said accounts, give the information required by the Companies Act, 19S6 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

i. in the case of the Balance Sheet, of the state of affairs of the Company as at Q1st March, 2012

ii in the case of the Profit and Loss Account, of the profits for the year ended on that date.

iii in the case of Cash Flow Statement, of the cash flows for the year ended on that date.

ANNEXURE TO THE AUDITOR'S REPORT

Referred to in Paragraph (3) of our report of even date on the accounts for the year ended 31st March, 2012 of Krishna Ferro Products Limited.

i. a) The Company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets.

b) Fixed Assets of the company were physically verified by the management during the year at reasonable intervals and no material discrepancies were noticed on verification.

c) There is no disposal of a substantial part of fixed assets during the year; therefore, the effect, if any, as going concern does not arise.

ii. a) The stock of finished goods, stores, spare parts and raw materials have been physically verified by the management at reasonable intervals.

b) In our opinion and according to the information and explanation given to us, the procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

c) No discrepancies were noticed on verification of physical stock as compared to book records.

iii. a) The Company has not granted unsecured loans to Companies/Firms or Other parties covered in the register maintained under section 301 of the Companies Act, 19S6. Therefore, the provisions of clause 4(iii) (a) to (d) of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company.

b) The company has taken unsecured loans from Companies/Firms or Other parties covered in the register maintained under section 301 of the Companies Act, 19S6.

No. of Opening balance of Maximum amount involved Year end Parties Loan ( Rs. In Lacs) in the transaction balance of loan

5 653.34 670.63 30.62

c) The rate of interest and other terms and conditions on which unsecured Loans have been obtained from Companies and other parties are not, prima-facie, prejudicial to the interest of the Company.

d) Payment of the Principal amount and interest wherever is applicable, are regular.

iv. In our opinion and according to the information and explanations given to us there is an adequate internal control procedure commensurate with the size of the Company and the nature of its business, for the purchase of raw materials including components, stores, plant and machinery, equipments and other similar assets and with regard to sale of goods & services. To the best of our knowledge, we noticed no major weaknesses in internal control during the course of our audit.

v. a) In our opinion and according to the information given to us, the transactions that need to be entered into the register in pursuance of section 301 of the Companies Act, 19S6, have been entered.

b) In our opinion and according to the information and explanation given to us, the transactions made in pursuance of such contracts or arrangements exceeding value of Rupees Five Lakhs have been entered into during the financial year at price which are reasonable having regard to the prevailing market price at the relevant time.

vi. In our opinion and according to information and explanations given to us, the Company has not accepted any deposits from public as per the provisions of section S8A, S8AA or any other relevant provisions of the Act and the Companies (Acceptance of Deposits) Rules, 197S, where applicable, with regard to deposits accepted from the public.

vii. In our opinion the company has an internal audit system commensurate with its size and nature of its business.

viii. We have broadly reviewed the cost records maintained by the Company pursuant to the Companies (Cost Accounting Records) Rules, 2011 prescribed by the Central Government under Section 209(1 )(d) of the Companies Act, 19S6 and are of the opinion that prima facie the prescribed cost records have been maintained. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

ix. a) According to the records of the Company, the Company has been generally regular in depositing undisputed statutory dues including Provident Fund, Employees' State Insurance, Income-tax, Sales-tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, Cess and any other statutory dues with the appropriate authorities. According to the information & explanation given to us, no undisputed statutory dues were in arrear as at 31st March, 2012, for a period of more than six months from the date they became payable.

b) The disputed statutory dues aggregating Rs 1S.0S Lacs that have not been deposited on account of disputed matters pending before appropriate authorities are as under:

Name of Nature of Amount Forum where the Status Dues Year (in Rs.) pending

ESI Act ESI Mar 01"to Mar03 1,54,728/- Regional Director ESI Corporation BBSR

Entry Tax Act Entry Tax 2002-03 1,94,874/- Asst. Commissioner of

2001-02 1,2S,484/- Sales Tax Sundergarh

Range, Rourkela 2003-04 3,04,676/- Addl/ Commissioner S.T

Cuttack

Sales Tax & CST 200S-06 5,17,36S/- Joint Commissioner of

VAT Law Sales Tax Sundergarh

Range, Rourkela

Sales Tax & VAT 200S-07 2,07,6S4/- Deputy Commissioner of

VAT Law Sales Tax Sundergarh

Range, Rourkela

x. The Company has no accumulated losses and has not incurred cash losses in the financial year covered by our audit and immediately preceding financial year.

xi. On the basis of the verification of records and information and explanations given to us, the Company has not defaulted in repayment of dues to financial institutions, banks and debenture holders.

xii. The Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

xiii. The Company does not carry on the business of a chit fund.

xiv. The Company does not deal or trade in shares, securities, debentures and other investments.

xv. According to information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions.

xvi. According to the records of the company, term loans have been applied for the purpose for which they were obtained.

xvii. According to the information and explanations given to us, the cash flow statement examined by us and on an overall examination of the balance sheet of the company, we report that funds raised on short-term basis have not been used for long term investment.

xviii. During the year, the Company has not made any preferential allotment of shares to parties and companies covered in the Register maintained under section Q01 of the Act.

xix. The Company has issued 0% unsecured Non Convertible Debenture to M/S Krishna Re-Rollers Pvt. Ltd. during the year. The said debentures are unsecured and no charge or security is required to be created in respect of debenture issued.

xx During the year, the Company has not raised any money by public issues.

xxi Based on the audit procedure performed and the representation obtained from the management, we report that no case of fraud on or by the Company has been noticed or reported during the year under audit.

For K. D. LATH & COMPANY

Chartered Accountants sd/-

Place: Rourkela SUDHIR LATH, Partner

Dated: 22nd June, 2012 Membership No. 59396

FRN. 306011E

---

Mar 31, 2011

1. We have audited the attached Balance Sheet of M/S KRISHNA FERRO PRODUCTS LIMITED, MANDIAKUDAR, CHUNGIMATI-770034, as at 31st March 2011, the Profit & Loss Account and Cash Flow Statement of the Company for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted the audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis of our opinion.

3. As required by the Companies (Auditors Report) Order, 2003 issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in the paragraphs 4 and 5of the said Order.

4. Further to our comments in the Annexure referred to in paragraph (3) above, we report that:

(a) We have obtained all the information and explanations, which to the best of our knowledge and belief, were necessary for the purpose of our audit;

(b) In our opinion, proper Books of Account as required by Law have been kept by the Company so far as appears from our examination of those books;

(c) The Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report are in agreement with the books of Account;

(d) In our opinion, the Balance Sheet , Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the accounting standards referred to in section 211 ( 3C ) of the Companies Act, 1956 to the extent applicable.

(e) On the basis of the written representation, received from the directors taken on record by the board of directors as on 31st March' We report that none of the Directors is disqualified as on 31st March'11from being appointed as a Director in terms of Section-274 (1) (g) of the Companies Act 1956.

(f) In our opinion and to the best of our information and according to the explanations given to us, the said 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 accounting principles generally accepted in India:

i. in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2011

ii in the case of the Profit and Loss Account, of the profits for the year ended on that date.

iii in the case of Cash Flow Statement, of the cash flows for the year ended on that date.

ANNEXURE TO THE AUDITOR'S REPORT

Referred to in Paragraph (3) of our report of even date on the accounts for the year ended 31st March, 2011 of Krishna Ferro Products Limited.

i. a) The Company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets.

b) Fixed Assets of the company were physically verified by the management during the year at reasonable intervals and no material discrepancies were noticed on verification.

c) There is no disposal of a substantial part of fixed assets during the year; therefore, the effect, if any, as going concern does not arise.

ii a) The stock of finished goods, stores, spare parts and raw materials have been physically verified by the management at reasonable intervals.

b) In our opinion and according to the information and explanation given to us, the procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

c) No discrepancies were noticed on verification of physical stock as compared to book records.

iii a) The Company has not granted unsecured loans to Companies/Firms or Other parties covered in the register maintained under section 301 of the Companies Act, 1956. Therefore, the provisions of clause 4(iii) (a) to (d) of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company.

e) The company has taken unsecured loans from Companies/Firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956.

No. of Opening balance of Maximum amount involved Year end Parties Loan ( Rs. In Lacs) in the transaction balance of loan

4 653.34 653.34 653.04

f) The rate of interest and other terms and conditions on which unsecured Loans have been obtained from Companies and other parties are not, prima-facie, prejudicial to the interest of the Company.

g) Payment of the Principal amount and interest wherever is applicable, are regular.

iv In our opinion and according to the information and explanations given to us there is an adequate internal control procedure commensurate with the size of the Company and the nature of its business, for the purchase of raw materials including components, stores, plant and machinery, equipments and other similar assets and with regard to sale of goods & services. To the best of our knowledge, we noticed no major weaknesses in internal control during the course of our audit.

v a) In our opinion and according to the information given to us, the transactions that need to be entered into the register in pursuance of section 301 of the Companies Act, 1956, have been entered.

b) In our opinion and according to the information and explanation given to us, the transactions made in pursuance of such contracts or arrangements exceeding value of Rupees Five Lakhs have been entered into during the financial year at price which are reasonable having regard to the prevailing market price at the relevant time.

vi In our opinion and according to information and explanations given to us, the Company has not accepted any deposits from public as per the provisions of section 58A, 58AA or any other relevant provisions of the Act and the Companies (Acceptance of Deposits) Rules, 1975, where applicable, with regard to deposits accepted from the public.

vii In our opinion the company has an internal audit system commensurate with its size and nature of its business.

viii As far as we are aware, the Central Government has not prescribed the maintenance of cost records under section 209 (1) (d) of the Companies Act, 1956.

ix a) According to the records of the Company, the Company has been generally regular in depositing undisputed statutory dues including Provident Fund, Employees' State Insurance, Income- tax, Sales-tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, Cess and any other statutory dues with the appropriate authorities. According to the information & explanation given to us, no undisputed statutory dues were in arrear as at 31st March, 2011, for a period of more than six months from the date they became payable.

b) The disputed dues of different years in respect of Sales Tax, which have remained unpaid on 31st March, 2011 aggregate to Rs. 15.05 lakhs, for which appeals are pending as under:

Nature of Dues Year Amount (in Rs.) Forum where pending

ESI Mar'01to 1,54,728/- Regional Director Mar'03 ESI Corporation BBSR

Entry Tax 2002-03 1,94,874/- Asst. Commissioner of Sales

2001-02 1,25,484/- TaxSundergarh Range,

2003-04 3,04,676/- RourkelaAddl/ Commissioner S.T Cuttack

CST 2005-06 5,17,365/- Joint Commissioner of Sales Tax Sundergarh Range, Rourkela

VAT 2005-07 2,07,654/- Deputy Commissioner of Sales Tax Sundergarh Range, Rourkela

x The Company has no accumulated losses and has not incurred cash losses in the financial year covered by our audit and immediately preceding financial year.

xi On the basis of the verification of records and information and explanations given to us, the Company has not defaulted in repayment of dues to financial institutions or banks. There are no debentures outstanding in the books of account at any time during the year.

xii The Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

xiii The Company does not carry on the business of a chit fund.

xiv The Company does not deal or trade in shares, securities, debentures and other investments.

xv According to information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions.

xvi According to the records of the company, term loans have been applied for the purpose for which they were obtained.

xvii According to the information and explanations given to us, the cash flow statement examined by us and on an overall examination of the balance sheet of the company, we report that funds raised on short-term basis have not been used for long term investment.

xviii During the year, the Company has not made any preferential allotment of shares to parties and companies covered in the Register maintained under section 301 of the Act.

xix There are no debentures outstanding in the books at any time during the year.

xx During the year, the Company has not raised any money by public issues.

xxi Based on the audit procedure performed and the representation obtained from the management, we report that no case of fraud on or by the Company has been noticed or reported during the year under audit.

For K.D. LATH & COMPANY

Chartered Accountants

sd/-

Place: Rourkela SUDHIR LATH, Partner

Dated: 17th August, 2011 Membership No. 59396

FRN. 306011E

---

Mar 31, 2010

1. We have audited the attached Balance Sheet of M/S KRISHNA FERRO PRODUCTS LIMITED, MANDIAKUDAR, CHUNGIMATI-770034, as at 31st March 2010, the Profit & Loss Account and Cash Flow Statement of the Company for the year ended on that date annexed thereto. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted the audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis of our opinion.

3. As required by the Companies (Auditors Report) Order, 2003 issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in the paragraphs 4 and 5 of the said Order.

4. Further to our comments in the Annexure referred to in paragraph (3) above, we report that:

(a) We have obtained all the information and explanations, which to the best of our knowledge and belief, were necessary for the purpose of our audit;

(b) In our opinion, proper Books of Account as required by Law have been kept by the Company so far as appears from our examination of those books;

(c) The Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report are in agreement with the books of Account;

(d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the accounting standards referred to in section 211 ( 3C ) of the Companies Act, 1956 to the extent applicable.

(e) On the basis of the written representation, received from the directors taken on record by the board of directors as on 31st March10, We report that none of the Directors is disqualified as on 31st March10 from being appointed as a Director in terms of Section- 274 (1) (g) of the Companies Act 1956.

(f) In our opinion and to the best of our information and according to the explanations given to us, the said 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 accounting principles generally accepted in India:

i. in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2010;

ii. in the case of the Profit and Loss Account, of the profits for the year ended on that date.

iii. in the case of Cash Flow Statement, of the cash flows for the year ended on that date.

ANNEXURE TO THE AUDITORS REPORT

Referred to in Paragraph (3) of our report of even date on the accounts for the year ended 31st March, 2010 of Krishna Ferro Products Limited.

i.a) The Company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets.

b) Fixed Assets of the company were physically verified by the management during the year at reasonable intervals and no material discrepancies were noticed on verification.

c) There is no disposal of a substantial part of fixed assets during the year; therefore, the effect, if any, as going concern does not arise.

ii a) The stock of finished goods, stores, spare parts and raw materials have been physically

verified by the management at reasonable intervals.

b) In our opinion and according to the information and explanation given to us, the procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

c) No discrepancies were noticed on verification of physical stock as compared to book records.

iii a) The Company has not granted unsecured loans to Companies/Firms or Other parties

covered in the register maintained under section 301 of the Companies Act, 1956. Therefore, the provisions of clause 4(iii) (a) to (d) of the Companies (Auditors Report) Order, 2003 are not applicable to the Company.

e) The company has taken unsecured loans from Companies/Firms or Other parties covered in the register maintained under section 301 of the Companies Act, 1956.

No.of Opening balance of Maximum amount involved Year end Parties Loan( Rs. In Lacs) in the transaction balance of loan ( Rs. In Lacs) ( Rs. In Lacs)

4 577.49 653.34 653.34

f) The rate of interest and other terms and conditions on which unsecured Loans have been obtained from Companies and other parties are not, prima-facie, prejudicial to the interest of the Company.

g) Payment of the Principal amount and interest wherever is applicable, are regular.

iv In our opinion and according to the information and explanations given to us there is an adequate internal control procedure commensurate with the size of the Company and the nature of its business, for the purchase of raw materials including components, stores, plant and machinery equipments and other similar assets and with regard to sale of goods & services. To the best of our knowledge, we noticed no major weaknesses in internal control during the course of our audit.

v a) In our opinion and according to the information given to us, the transactions that need to

be entered into the register in pursuance of section 301 of the Companies Act, 1956, have been entered.

b) In our opinion and according to the information and explanation given to us, the transactions made in pursuance of such contracts or arrangements exceeding value of

Rupees Five Lakhs have been entered into during the financial year at price which are reasonable having regard to the prevailing market price at the relevant time.

vi In our opinion and according to information and explanations given to us, the Company has not

accepted any deposits from public as per the provisions of section 58A, 58AA or any other relevant provisions of the Act and the Companies (Acceptance of Deposits) Rules, 1975, where applicable, with regard to deposits accepted from the public.

vii In our opinion the company has an internal audit system commensurate with its size and nature of its business.

viii As far as we are aware, the Central Government has not prescribed the maintenance of cost records under section 209 (1) (d) of the Companies Act, 1956.

ix a) According to the records of the Company, the Company has been generally regular in

depositing undisputed statutory dues including Provident Fund, Employees State Insurance, Income-tax, Sales-tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, Cess and any other statutory dues with the appropriate authorities. According to the information & explanation given to us, no undisputed statutory dues were in arrear as at 31 st March, 2010, for a period of more than six months from the date they became payable.

b) The disputed dues of different years in respect of Sales Tax, which have remained unpaid on 31st March, 2009 aggregate to Rs. 15.05 lakhs, for which appeals are pending as under:

Nature of Dues Year Amount (in Rs.) Forum where pending

ESI Mar01 to 1,54,728/- Regional Director ESI Mar03 Corporation BBSR

Entry Tax 2002-03 1,94,874/- Asst. Commissioner of Sales

2001-02 1,25,484/- TaxSundergarh Range, Rourkela

2003-04 3,04,676/- Addl/ Commissioner S.T Cuttack

CST 2005-06 5,17,365/- Joint Commissioner of Sales Tax Sundergarh Range, Rourkela

VAT 2005-07 2,07,654/- Deputy Commissioner of Sales Tax Sundergarh Range, Rourkela

x The Company has no accumulated losses and has not incurred cash losses in the financial

year covered by our audit and immediately preceding financial year.

xi On the basis of the verification of records and information and explanations given to us, the

Company has not defaulted in repayment of dues to financial institutions or banks. There are no debentures outstanding in the books of account at any time during the year.

xii The Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

xiii The Company does not carry on the business of a chit fund.

xiv The Company does not deal or trade in shares, securities, debentures and other investments.

w According to information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions.

xvi According to the records of the company, term loans have been applied for the purpose for which they were obtained.

xvii According to the information and explanations given to us, the cash flow statement examined by us and on an overall examination of the balance sheet of the company, we report that funds raised on short-term basis have not been used for long term investment.

xviii During the year, the Company has not made any preferential allotment of shares to parties and companies covered in the Register maintained under section 301 of the Act.

xix There are no debentures outstanding in the books at any time during the year.

xx During the year, the Company has not raised any money by public issues.

xxi Based on the audit procedure performed and the representation obtained from the management, we report that no case of fraud on or by the Company has been noticed or reported during the year under audit.

Place: Rourkela for, K.D LATH & CO.

Date : 28th June, 2010 (Chartered Accountants)

sd/-

SUDHIR LATH, Partner

Membership No. 59396

---

Mar 31, 2009

1. We have audited the attached Balance Sheet of M/s KRISHNA FERRO PRODUCTS LIMITED, MANDIAKUDAR, CHUNGIMATI-770 034, as at 31 st March 2009, the Profit & Loss Account and Cash Flow Statement of the company for the year ended on that date annexed thereto. These financial statements are the responsibility of the companys management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted the audit in accordance with the auditing standards generally accepted in India. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosure in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis of our opinion.

3. As required by the Companies (Auditors Report) Order, 2003 as amended by the Companies (Auditors Report) (amendment) Order, 2004, issued by the Department of Company Affairs in terms of section 227(4A) of the Companies Act, 1956, and on the basis of such checks as we considered appropriate and according to the information and explanations given to us, we further report on the matters specified in the paragraphs 4 and 5 of the said order to the extent applicable!

4. Further to our comments in the Annexure referred to in paragraphs (3) above, we report that:

(a) We have obtained all information and explanations, which to the best of our knowledge and belief, were necessary for the purpose of our audit;

(b) In our opinion, proper Books of Account as required by the law have been kept by the company, so far as appears from our examination of those books ;

(c) The Balance Sheet, The Profit & Loss Account and the Cash Flow Statements dealt with by this report are in agreement with the books of Account;

(d) In our opinion, the Balance Sheet and the profit and Loss Account dealt with this by this report comply with the accounting standards referred to in section 211 (3C) of the Companies Act, 1956 to the extent applicable ;

(e) On the basis of written representation, received from the directors taken on record by the Board of Directors as on 31st March 09,We report that none of the Directors are disqualified as on 31 st March09 from being appointed as a Director in terms of section 274 (1 )(g) of the Companies Act, 1956.

(f) In our opinion and to the best of our information and according to the explanations given to us, the said 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 accounting principles generally accepted in India :

i. In case of the Balance Sheet, of the state of affairs of the company as at 31st March09. ii. In case of the Profit & Loss Account, of the profits for the year ended on that date. iii. In case of the Cash Flow statement, of the cash flows for the year ended on that date.

ANNEXURE TO THE AUDITORS REPORT

Referred to in paragraph (3) of our report of even date on the accounts for the year ended 31 st March, 2009 of Krishna Ferro Products Ltd

i.) (a) The company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets.

(b) Fixed Assets of the company were physically verified by the management during the year at reasonable intervals and no material discrepancies were noticed on verification.

(c) There is no disposal of a substantial part of fixed assets during the year; therefore, the effect, if any, as going concern does not arise.

ii) (a) The stock of the finished goods, stores, spare parts and raw materials have been physically verified by the management at reasonable intervals.

(b) In our opinion and according to the information and explanation given to us, the procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the company and the nature of its business.

(c) No discrepancies were noticed on verification of physical stock as compared to book records.

iii) (a) The company has not been granted unsecured loans to the companies / firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Therefore, the provisions of clause 4(iii) (a) to (d)of the Companies Auditors Report Order, 2003 are not applicable to the company.

(b) The companies has taken unsecured loans from companies/ firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956.

No. of Parties Opening Maximum amount Year and balance balance of involved in the of loan Loan (Rs. In lacs) transaction (Rs. In lacs) (Rs. In lacs)

4 327.04 577.49 577.49

(c) The rate of interest and other terms and conditions on which unsecured Loans have been obtained from the companies and other parties are not, prima-facie, prejudicial to the interest of the company.

(d) Payment of the Principal amount and interest wherever is applicable, are regular.

iv. In our opinion and according to the information and explanations given to us there are adequate internal control procedure commensurate with the size of the company and the nature of its business, for the purchases of raw materials including components, stores, plant and machinery, equipments and other similar assets and with regards to sale of goods. To the best our knowledge, we noticed no major weakness in internal control during the course of our audit.

v. (a) In our opinion and according to the information given to us, the transactions that need to be entered into the register in pursuance of section 301 of the Companies Act, 1956, have been entered

(b) In our opinion and according to the information given to us, the particulars of the contracts or agreements entered into the register in pursuance of Section 301 of the Companies Act on exceeding the value of rupees Five Lakhs in respect of any party during the year, have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time .

vi. In our opinion and according to the information and explanation given to us, the company has not accepted any deposits from the public as per the provisions of section 58A, 58AA or any other relevant provisions of the Act and the Companies (Acceptance of Deposits) Rules, 1975, where applicable, with regard to deposits accepted from the public.

vii. The company has an internal audit system, which is in our opinion is generally commensurate with its size and nature of its business.

viii. As far as we are aware, the Central Government has not prescribed the maintenance of cost records under section 209(1) (d) of the Companies Act, 1956.

ix. (a) According to the records of the company, the company has been generally regular in depositing undisputed statutory dues including Provident fund, employees State Insurance, Income Tax, Sales Tax, wealth Tax, Service Tax, Custom Duty, Excise Duty, Cess and any other statutory dues with the appropriate authorities. According to the information and explanation given to us, no undisputed statutory dues were in arrear as at 31st March, 2009, which is payable for a period of more than six months from the date they become payable.

(b) The disputed dues of different years in respect of Sales Tax, which have remained unpaid on 31st March, 2009 aggregate to Rs. 7.80 Lakhs, for which appeals are pending as under

Nature of dues Year Amount (in Rs.) Forum where pending

ESI Mar 01 to Mar03 1,54,728 /- Regional,Director of ESI Corporation, BBSR

Entry Tax 2001-02 1,25,484/- Asst. Commissioner of Sales

2002-03 1,94,874/- Tax, Sundargarh Range, Rourkela

2003-04 3,04,676 /- Addl./Commissioner of S.T, Cuttack

x. The company has no accumulated losses and has not incurred cash losses in the financial year covered by our audit and immediately preceding financial year.

xi. On the basis of the verification of records and information and explanations given to us, the company has not defaulted in repayment of dues to the financial institution or banks. There are no debentures outstanding in the Books of Account at any time during the year.

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

xiii. The company does not carry on the business of a chit fund.

xiv. The company does not deal or trade in shares, securities, debentures and other investments. loans taken by others from banks or financial institutions.

xvi. According to the records of the company, term loans have been applied for the purpose for which they are obtained.

xvii. According to information and explanations given to us, the cash flow statement examined by us and on an overall examination of the balance sheet of the company, we report that funds raised on short term basis have not been used for long term investment.

xviii. During The year, the company has not made any preferential allotment of shares to parties and companies covered in the Register maintained under section 301 of the Act.

xix. There are no debentures outstanding in the books at any time during the year.

xx. During the year, the company has not raised any money by public issue during the year.

xxi. Based on the audit procedures performed and the representation obtained from the management we report that no case of fraud on or by the company has been noticed or reported during the year under audit.

Place: Rourkela for, K.D LATH & CO.

Date : 29th June, 2009 (Chartered Accountants)

sd/-

SUDHIR LATH, Partner

Membership No. 59396