We have audited the attached Balance Sheet of Ahmednagar Forgings
 Limited as at 30th June 2010, the 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 the Companys
 management. Our responsibility is to express an opinion on these
 financial statements based on our audit.
 
 We conducted our audit in accordance with auditing standards generally
 accepted in India (Indian GAAP). 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 management, as well as evaluating the overall financial statement
 presentation. We believe that our audit provides a reasonable basis for
 our opinion.
 
 As required by the Companies (Auditors Report) Order, 2003 (as
 amended) by the companies (Auditors Report) (amended) order, 2004
 (together the order) 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
 paragraph 4 and 5 of the said order.
 
 Further to our comments in the Annexure referred to above, we report
 that:
 
 (i) 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;
 
 (ii) 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.
 
 (iii) The Balance Sheet, Profit and Loss Account and Cash Flow
 Statement of the Company, dealt with by this report are in agreement
 with the books of account.
 
 (iv) 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 sub-section (3C) of section 211 of
 the Companies Act, 1956;
 
 (v) On the basis of written representations received from the
 directors, as on 30th June 2010 and taken on record by the Board of
 Directors, we report that none of the directors is disqualified as on
 30th June 2010 from being appointed as a director in terms of clause
 (g) of sub-section (1) of section 274 of the Companies Act, 1956;
 
 (vi) 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:
 
 (a) in the case of the Balance Sheet, of the state of affairs of the
 Company as at 30th June 2010;
 
 (b) in the case of the Profit and Loss Account, of the Profit for the
 year ended on that date; and
 
 (c) in the case of Cash Flow Statement, of the cash flow for the year
 ended on that date.
 
 ANNEXURE REFERRED TO IN PARAGRAPH 3 OF OUR REPORT OF EVEN DATE OF
 AHMEDNAGAR FORGINGS LIMITED FOR THE YEAR ENDED 30™ JUNE 2010
 
 (i) (a) The Company has maintained proper records showing lull
 particulars including quantitative details and situation of fixed
 assets.
 
 (b) As explained to us, fixed assets, according to the practice of the
 Company, have been physically verified by the management at reasonable
 intervals. In our opinion, the frequency of physical verification of
 fixed assets is reasonable having regard to the size of the Company and
 nature of its assets.  According to the information and explanations
 given to us, no material discrepancies were noticed on such physical
 verification.
 
 (c) During the year, the Company has not disposed off any substantial
 part of the fixed assets and the going concern status of the Company is
 not affected.
 
 (ii) (a) The inventory has been physically verified during the year by
 the management. In our opinion, the frequency of physical verification
 is reasonable.
 
 (b) The procedure for physical verification of inventories followed by
 the management is reasonable and adequate in relation to the size of
 the Company and nature of its business.
 
 (c) The Company is maintaining proper records of inventory. The
 discrepancies noticed on verification between the physical stocks and
 the book records were not material.
 
 (iii) The Company, during the year under report, has neither given nor
 taken loan from the companies, firms or other parties covered in the
 register maintained under Section 301 of the Companies Act, 1956.
 Hence, clause no. iii (a), (b), (c) (d), (e), (f) & (g) are not
 applicable to the Company.
 
 (iv) In our opinion and according to the information and explanations
 given to us, there are adequate internal control system commensurate
 with the size of the Company and the nature of its business, for the
 purchase of inventory, Fixed Assets and for the sale of goods and
 services. During the course of our audit, we have not observed any
 continuing failure to correct major weaknesses in internal controls.
 
 (v) (a) According to the information and explanations given to us, we
 are of the opinion that the particulars of contracts or arrangement
 referred to in section 301 of the act has been entered in the register
 required to be maintained under section 301 of the Companies Act, 1956.
 
 (b) In our opinion and according to the information & explanations
 given to us, the transactions made in pursuance of contracts or
 arrangements entered in the register maintained under section 301 of
 the Companies act, 1956 in respect of any party during the year have
 been made at prices which are reasonable having regard to prevailing
 market prices at the relevant time.
 
 (vi) In our opinion and according to the information and explanation
 given to us, the Company has complied with all the provisions of
 section 58A and 58AA and any other relevant provisions of the Companies
 Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 with
 regard to deposits accepted from public. No order has been passed by
 the Company Law Board, Reserve Bank of India, National Company Law
 Tribunal or any other Court or any Tribunal.
 
 (vii) In our opinion, the Company has an internal audit system
 commensurate with the size and nature of its business.
 
 (viii) The Central government has prescribed maintenance of cost
 accounting records under section 209 (1) (d) of the Companies Act, 1956
 in respect of certain machining activities of the Company. We have
 broadly reviewed the accounts and records of the Company in this
 connection and are of the opinion that prima facie, the prescribed
 accounts and records have been properly maintained.
 
 (ix) (a) The Company is regular in depositing with appropriate
 authorities undisputed statutory dues including provident fund,
 investor education protection fund, employees state insurance, income
 tax, sales tax/ VAT, wealth tax, service tax, custom duty, excise duty,
 cess and other material statutory dues applicable to it.
 
 (b) According to the information and explanation given to us, no
 undisputed amounts payable in respect of income tax, wealth tax,
 service tax, sales tax / VAT, custom duty, excise duty and cess were in
 arrears, as at 30th June 2010 for a period of more than six months from
 the date they became payable.
 
 (c) The disputed statutory dues aggregating to Rs.134.87 Lacs, that
 have not been deposited on account of matters pending before
 appropriate authorities are as under:
 
 S.  Name of the Statute       Nature of        Year to which
 No                            Dues             the amount relate
 
 1.  Customs &                 Valuation of          2006
     Central Excise Act        Goods
 
 2.  Customs &                 Scrap at Job          2002
     Central Excise Act        Workers end
 
 3.  Customs &                 Valuation of          2007
     Central Excise Act        Goods
 
 4.  Customs &                 CENVAT                2008
     Central Excise Act        related matter
 
 5.  Customs &                 CENVAT                2010
     Central Excise Act        related matter
 
 6.  Customs &                 CENVAT                2007
     Central Excise Act        Credit of
                               Service Tax
                               & Interest
 
 7.  Customs &                 Valuation of          2002
     Central Excise Act        Goods                 2008
 
 8.  Customs &                 CENVAT                2007
     Central Excise Act        related matter
 
     Total
 
 
 
 Name of the Statue               Forum where            Amount
                              dispute is pending      (Rs. in Lacs)
 
 Customs &
 Central Excise Act            Jt. Commissioner,         18.35
                               Aurangabad
 
 Customs &
 Central Excise Act            High Court Bench at        4.32
                               Aurangabad
 
 Customs &
 Central Excise Act            CESTAT, Mumbai             3.85
 
 Customs &
 Central Excise Act            Addl. Commissioner,       12.05
                               Aurangabad
 
 Customs &
 Central Excise Act            Dy. Commissioner,          0.27
                               Ahmednagar
 
 Customs &
 Central Excise Act            Commissioner (Appeals),   81.77
                               Pune
 
 Customs &
 Central Excise Act            Supreme Court, Delhi       7.90
                               Asst. Commissoner,         0.92
                               Pune
 
 Customs &
 Central Excise Act             Asst. Commissoner,         5.44
                                Pune
 
 Total                                                  134.87
 
 (x) The Company has no accumulated losses and has not incurred any cash
 loss during the year under report or in the immediately preceding
 financial year.
 
 (xi) In our opinion and according to the information and explanations
 given to us, the Company has not defaulted in repayment of dues to
 financial institutions, banks or debenture holders.
 
 (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) In our opinion, the Company is not a chit fund or a nidhi /
 mutual benefit fund / society. Therefore, the provisions of clause of
 4(xiii) of the Companies (Auditors Report) Order, 2004 (as amended)
 are not applicable to the Company.
 
 (xiv) In our opinion, the Company is not dealing in or trading in
 shares, securities, debentures and other investments. Accordingly, the
 provisions of clause 4(xiv) of the Companies (Auditors Report) Order,
 2003 (as amended) are not applicable to the Company. The Company,
 however, is maintaining proper records of transactions and contracts in
 respect of long term investment made by it and timely entries have been
 made therein. Further, all the securities including shares, debentures
 and other investments have been held by the Company in its own name.
 
 (xv) The Company has not given guarantees for loans taken by others
 from Banks or Financial Institutions.
 
 (xvi) According to the information & explanation given to us, in our
 opinion, term loan availed by the Company were, prima facie, applied by
 the Company during the year under report for the purpose for which the
 term loans were obtained, other than temporary deployment pending
 applications.
 
 (xvii) According to the information and explanation given to us and on
 an overall examination of the balance sheet of the Company, we report
 that no funds raised on short term basis have been used for long term
 investment and no long term funds have been used to finance short term
 assets except permanent working capital.
 
 (xviii) According to the information & explanation given to us, the
 Company, during the year under report, has made preferential allotment
 of 18,30,000 equity shares of Rs.10/- each at a premium of Rs.37/- per
 shares against warrants issued by it in the earlier years, to parties
 and companies covered in the register maintained under section 301 of
 the Companies Act, 1956.
 
 (xix) According to the information given to us, and the record of the
 Company examined by us, the Company has not issued any debentures.
 
 (xx) According to the information and explanation given to us and the
 record of the Company examined by us, the Company has not raised any
 money by public issue during the year.
 
 (xxi) According to the information and explanations given to us, no
 fraud on or by the Company has been noticed or reported during the
 course of our audit.
 
                                         For & on behalf of Manoj 
                                               Mohan & Associates
 
                                            Chartered Accountants
                                           Firm Regn. No. 009195C
 
                                                             Sd/-
                                                 (M. K. Aggarwal)
 
 Place :    New Delhi                                   (Partner)
 
 Date   :    24th November, 2010           Membership No.: 76980