Auditor Report of Stelco Strips Ltd.

Mar 31, 2012

1) We have audited the Balance Sheet of M/s Stelco Strips Limited as at 31st March, 2012 and Profit and Loss Account and also the Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

2) We have conducted our 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 for our opinion.

3) As required by the Companies (Auditors' Report) Order, 2003 issued by the Department of Company Affairs Government of India in terms of Section 227 (4A) of the Companies Act,1956,and on the basis of that checks as we considered appropriate and according to information and explanations given to us, we annexure hereto a statement on the matters specified in 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 accounts, as required by law, have been kept by the Company, so far as appears from our examinations of the books;

(c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement as referred to in this report are in agreement with the books of account produced before us;

(d) In our opinion, the Balance Sheet, Profit and Loss Account & Cash Flow Statement of the Company dealt with by this report comply with the Accounting Standards referred to in sub section (3C) of Section 211 of the Companies Act,1956.

(e) On the basis of written representations received from the directors and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31.03.2012 from being appointed as a director in 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 explanations given to us ,the said accounts read together with Notes to 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, 2012;

(ii) In the case of Profit & Loss Account, of the Loss 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.

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

1.(a) The Company has maintained proper records showing full particulars including quantitative details and situation of Fixed Assets.

(b) The Company has a phased programme of physical verification of its fixed assets which in our opinion is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification.

(c) In our opinion and according to the information and explanation given to us, no substantial part of fixed assets has been disposed off by the Company during the year, and therefore it does not effect the going concern assumption.

2.(a) The inventories have been physically verified during the year by the management. In our opinion, the frequency of verification is reasonable.

(b) The procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) On the basis of our examination of the records of inventory, in our opinion, the Company is maintaining proper records of inventory. The discrepancies noticed on physical verification of stocks as compared to the book records were not material.

3. The Company has not granted or taken any loans, secured or unsecured to and from Companies, firms or other parties as 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, there are adequate internal procedures commensurate with the size of the company and the nature of its business for the purchase of the inventory, fixed assets and for sale goods. Further on the basis of our examination of the books & records of the Company & according to information & explanations given to us, we have neither come across nor have been informed of any continuing failure to correct major weakness in the aforesaid internal control procedures.

5. We are informed that there are no transactions made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act,1956 & aggregating during the year to Rs. 500000/- or more in respect of any party.

6. According the records of the company & the information & explanations given to us, the Company has not accepted deposits within the meaning of the provisions of Section 58-A and 58AA of the Companies Act,1956 and the rules made hereunder.

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

8. The Central Govt. has prescribed for the maintenance of cost records under Section 209 (1) (d) of the Companies Act, 1956 for the products manufactured by the company to which The Companies (Cost Accounting Record), Rules 2011 are applicable. The Company maintains the same, we have however not made a detailed examination of records with a view to determine whether they are accurate or complete.

9.(a)According to the records of the Company and the information and explanations given to us, in our opinion , the Company is generally regular in depositing with appropriate authorities undisputed statutory dues including sales Tax , wealth Tax, custom Duty, excise duty , cess and other statutory dues applicable to it except the following payment of dues /demands outstanding for a period of more than 6(six) months from the date they became payable :

Name of Statute /Authority Nature of dues Amount (Rs)

The Employees Provident Fund Provident Fund 13,99,133/- & Misc. Provisions Act ,1952 dues/contributions

Employees State Insurance Employees state 1,54,362/- Act,1948 Insurance dues/contributions

Punjab Labour Welfare Act ,1948 Welfare fund 4,155/- contributions

(b) According to the records of the Company and the information and explanations given to us, the details of disputed statutory dues that have not been deposited on account of matters pending before the appellate authorities in respect of income tax ,excise tax, service tax are as follows:

Nature of dues/name of Disputed Amount Forum where dispute the statute (in Rs.) is pending

Income Tax Act ,1961 2,81,10,200/- Income Tax Commissioner (Appeals) ,Ludhiana

Central Excise Act , 1944 2,65,867/- Deputy Commissioner (Excise), Ludhiana

Central Excise Act , 1944 35,75,264/- Central Excise & Service Tax Appellant Tribunal, Delhi

Central Excise Act , 1944 2,03,175/- Commissioner (Appeals) Central Excise, Chandigar

10. The Company has accumulated losses as at 31st March, 2012 amounting to Rs.4540.19 Lacs i.e., more than its net worth and has incurred cash losses amounting to Rs.259.72 Lacs during the financial year ended on that date and also incurred cash losses in the previous year.

11. According to the records of the Company and the information and explanations given by the management, the Company has defaulted in repayment of dues to a financial institution, banks (State Bank of Patiala, The Saraswat Cooperative Bank Ltd and IDBI Bank ) as at the Balance Sheet date.

12. According to information & explanations given to us, the Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

13. The provisions of any special statute applicable to chit fund/nidhi/mutual benefit fund/societies are not applicable to the Company.

14. According to the records & the information & explanations given to us, the Company is not a dealer or trader in shares, securities, debentures, and other investments.

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

16. According to the records of the Company & the information & explanations given to us, no term loans/Working Capital Term Loans were raised during the year.

17. According to information and explanations given to us and as per the books and records of the Company, as on the date of balance sheet, the funds raised by the Company on short term basis have not been applied for long term investments.

18. According to the records & the information & explanations given to us, the Company has not made any preferential allotment of shares to parties and Companies covered in the register maintained under section 301 of the Companies Act, 1956.

19. According to records of the Company & the information & explanations given to us, no debentures have been issued by the Company.

20. The company has not raised any money by public issues during the year.

21. During the course of our examination of the books and records of the company carried out in accordance with the generally accepted auditing practices in India and according to the information and explanations given to us., we have neither come across any instance of fraud on or by the company noticed or reported during the year, nor have we been informed of such case by the management.

For M.P. Goyal & Co.

Chartered Accountants

Place: Ludhiana (Rajnish Goyal,F.C.A)

Date : 05.09.2012 Partner

(M.NO.93622)

---

Mar 31, 2010

1) We have audited the Balance Sheet of M/s Stelco Strips Limited as at 31st March, 2010 and Profit and Loss Account and also the Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of Companys management. Our responsibility is to express an opinion on these financial statements based on our audit.

2) We have conducted our 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 for our opinion.

3) As required by the Companies (Auditors Report) Order, 2003 issued by the Department of Company Affairs Government of India in terms of Section 227 (4A) of the Companies Act,1956 and on the basis of that checks as we considered appropriate and according to information and explanations given to us, we annexure hereto a statement on the matters specified in 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 accounts, as required by law, have been kept by the Company, so far as appears from our examinations of the books;

(c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement as referred to in this report are in agreement with the books of account produced before us;

(d) In our opinion, the Balance Sheet, Profit and Loss Account & Cash Flow Statement of the Company dealt with by this report comply with the Accounting Standards referred to in sub section (3C) of Section 211 of the Companies Act, 1956.

(e) On the basis of written representations received from the directors and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31.03.2010 from being appointed as a director in 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 explanations given to us, the said accounts read together with the Accounting Policies & Notes on Accounts (as per Schedule-T), 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 Profit & Loss Account, of the Profit 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)

1.(a) The Company has maintained proper records showing full particulars including quantitative details and situation of Fixed Assets.

(b) The Company has a phased programme of physical verification of its fixed assets which in our opinion is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification.

(c) In our opinion and according to the information and explanation given to us, no substantial part of fixed assets has been disposed off by the Company during the year, and therefore it does not effect the going concern assumption.

2..(a) The inventories have been physically verified during the year by the management. In our opinion, the frequency of verification is reasonable.

(b) The procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) On the basis of our examination of the records of inventory, in our opinion, the Company is maintaining proper records of inventory. The discrepancies noticed on physical verification of stocks as compared to the book records were not material.

3. The Company has not granted or taken any loans, secured or unsecured to and from Companies, firms or other parties as 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, there are adequate internal procedures commensurate with the size of the company and the nature of its business for the purchase of the inventory, fixed assets and for sale goods. Further on the basis

of our examination of the books & records of the Company & according to information & explanations given to us, we have neither come across nor have been informed of any continuing failure to correct major weakness in the aforesaid internal control procedures.

5. We are informed that there are no transactions made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act,1956 & aggregating during the year to Rs. 500000/- or more in respect of any party.

6. According the records of the company & the information & explanations given to us, the Company has not accepted deposits within the meaning of the provisions of Section 58-A and 58AA of the Companies Act,1956 and the rules made hereunder.

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

8. We are informed that the Central Govt. has not prescribed for the maintenance of cost records under Section 209(1) (d) of the Companies Act,1956 for the products manufactured by the Company

9.(a) According to the records of the Company and the information and explanations given to us, in our opinion , the Company is generally regular in depositing with appropriate authorities undisputed statutory dues including Provident Fund, Income Tax, Sales Tax, Wealth Tax, Custom Duty, Excise Duty, Cess and other statutory dues applicable to it.

(b) According to the records of the Company and the information and explanations given to us, no undisputed amounts payable in respect of Income Tax, Wealth Tax, Sales Tax, Custom Duty, and Excise Duty were outstanding as at 31st March, 2010.

10. The Company has no accumulated losses as at 31st March, 2010 and has not incurred any cash losses during the financial year ended on that date or in the immediately preceding financial year.

11. According to the records of the Company and the information and explanations given by the management, the Company has not defaulted in repayment of dues to a financial institution, bank as at the Balance Sheet date.

12. According to information & explanations given to us, the Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

13. The provisions of any special statute applicable to chit fund/nidhi/mutual benefit fund/societies are not applicable to the Company.

14. According to the records & the information & explanations given to us, the Company is not a dealer or trader in shares, securities, debentures, and other investments.

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

16. According to the records of the Company & the information & explanations given to us, term loans raised during the year for expansion have been used for capital expansion.

17. According to information and explanations given to us and as per the books and records of the Company, as on the date of balance sheet, the funds raised by the Company on short term basis have not been applied for long term investments.

18. According to the records & the information & explanations given to us, the Company has not made any preferential allotment of shares to parties and Companies covered in the register maintained under section 301 of the Companies Act, 1956.

19. According to records of the Company & the information & explanations given to us, no debentures have been issued by the Company.

20. The company has not raised any money by public issues during the year.

21. During the course of our examination of the books and records of the company carried out in accordance with the generally accepted auditing practices in India and according to the information and explanations given to us., we have neither come across any instance of fraud on or by the company noticed or reported during the year, nor have we been informed of such case by the management.



For M.P. Goyal & Co.

Chartered Accountants



Place: Ludhiana (Rajnish Goyal,F.C.A)

Date : 28.05.2010 Partner