1.  We have audited the attached Balance Sheet of ALPS INDUSTRIES
 LIMITED as at 31st March 2011, the Profit and Loss Account and the Cash
 Flow Statement 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 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 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.
 
 3.  As required by the Companies (Auditor''s Report) Order,2003 issued
 by the Central Government 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 paragraphs4 and 5 of the said order.
 
 4.  Further to our comments in the Annexure referred to aboveand
 Para5below,wereportthat:- 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 examination of those
 books;
 
 c) The Balance Sheet, Profit and Loss account and 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 are in compliance with the
 applicable 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
 as on 31st March, 2011 and taken on record by the Board of Directors,
 in our opinion, none of the director is disqualified as on 31.03.2011
 from being appointed as director u/s 274(1)(g) of the Companies Act,
 1956.
 
 5.  Referring to note nos. 1(g) I,II and III of part B of Schedule 20,
 Notes to Accounts, the Company has not assessed and made any provision
 towards the losses on derivative contracts crystallized amounting to Rs
 206.64 Crore and claims of Rs 44.65 Crore against the corporate
 guarantee provided by the Company on behalf of one of it''s subsidiary
 company (refer to note no. 1 (g) IV of part B of schedule 20 notes to
 accounts), hence to that extent the loss as shown in the profit and
 loss account, accumulated losses and current liabilities as
 understated.
 
 6.  In our opinion and to the best of our information and according to
 the explanations given to us, the said Accounts subject to para 5 above
 read together with Accounting Policies and Notes thereon, 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
 Balance Sheet, of the state of affairs of the Company as at 31st March,
 2011.
 
 b) In the case of the Profit and Loss account, of the Loss for the year
 ended on that date and
 
 c) 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, 2011 of Alps Industries Ltd.
 
 In terms of the information and explanations given to us and the books
 and records examined by us in the normal course of audit and to the
 best of our knowledge and belief, we state as under:
 
 I.  (a) The Company has maintained proper records showing full
 particulars including quantitative details and situation of its fixed
 assets, however, these records are in process of updation.
 
 (b) As explained to us, the management has during the year physically
 verified all the fixed assets in a phased periodical manner which in
 our opinion is reasonable having regard to the size of the company. We
 have been informed that no material discrepancies were noticed on such
 physical verification during the period.
 
 (c) During the year the Company has not disposed off substantial part
 of its 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 at reasonable intervals. In our opinion and according to
 the information and explanations given to us, the procedure 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.
 
 (b) The Company has maintained proper records of inventories. As
 explained to us, the discrepancies noticed on physical verification as
 compared to book records were not material, however, the same have been
 properly dealt with in the books of account.
 
 III.  There are no companies, firms or other parties covered in the
 register maintained under section 301 of the Companies Act, 1956, to
 which the company has granted any loans, secured or unsecured, as per
 information and explanation given to us. Consequently paras 4 (III)
 (b), (III) (c) and (III) (d) of the order are not applicable to the
 company.
 
 The company has not taken any loan secured or unsecured from companies,
 firms and other parties covered in the register maintained under
 section 301 of the Companies Act, 1956, as per information and
 explanation given to us.  Consequently paras 4 (III) (e), (III) (f) and
 (III) (g) of the order are not applicable to the company.
 
 IV.  In our opinion and according to the information and explanations
 given to us, there is adequate internal control system commensurate
 with the size of the Company and the nature of its business, for
 purchase of inventory and fixed assets and for the sale of goods and
 services. In our opinion, there is no continuing failure to correct
 major weaknesses in internal control procedures.
 
 V.  (a) According to the information and explanations given to us, we
 are of the opinion that particulars of contracts or arrangements
 referred to in section 301 of the Act have been entered in the register
 as required to be maintained under that section, wherever applicable.
 
 (b) In our opinion and according to the information and 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 have been made at the prices, which appear
 reasonable as per information available with the company.
 
 VI.  In our opinion and according to the information and explanations
 given to us, the company has complied with the provisions of section
 58A and 58-AA or any other relevant provisions of the Companies Act,
 1956, the Companies (Acceptance of Deposits) Rules, 1975 and the
 directives issued by the Reserve Bank of India, with regard to the
 deposits accepted from the public by private circulation. No order has
 been passed with respect to the deposits accepted from the public by   
 private circulation by National Company Law Tribunal/Company Law Board.
 
 VII.  In our opinion, the Company has an adequate internal audit system
 commensurate with the size and nature of its business.
 
 VIII.  The Central Government has prescribed maintenance of cost records
 under section 209(1) (d)of the Companies Act, 1956 in respect of
 manufacturing activity of Cotton yarn of the Company. We have broadly
 reviewed the accounts and records of the Company and are of the opinion
 that prima facie, the prescribed records are being maintained.  We have
 not, however, made a detailed examination of the records with a view to
 determine whether they are accurate and complete.
 
 IX.  a) The Company is generally regular in depositing undisputed
 statutory dues including Provident Fund, Investor Education and
 Protection Fund, Employees'' State Insurance, Income-tax, Sales-tax,
 Wealth Tax, Service Tax, Custom duty, Excise duty, Cess and any other
 statutory dues applicable to it with the appropriate authorities.
 
 
 b) According to the information and explanations given to us, no
 undisputed amounts payable in respect of Income-tax, Wealth tax,
 Service Tax, Sales-tax, Custom duty, Excise duty, Cess and other
 statutory dues were outstanding as at 31st March, 2011 for a period of
 more than six months from the date they became payable.
 
 c) The disputed statutory dues aggregating to Rs. 563.93 Lac have not
 been deposited on account of disputed matters pending before
 appropriate authorities as on 31st March, 2011 , are as under:
 
 Sr.                                             From where Dispute
 
 N     Name of the 
       Statute           Nature of 
                         Dues          Amount    is Pending
 
 1     U.P. Tax on
       entry of Goods    Entry Tax    Rs. 219.59
                                          Lac     Hon''ble Allahabad 
                                                  High Court
 
 2     Nagar Nigam 
       Act, 1959         Sewerage Tax   Rs. 4.75
                                          Lac     Hon''ble Allahabad 
                                                  High Court
 
 3     Income Tax       Disallowance 
                        of            Rs. 339.59 
                                          Lac     I.T.A.T New Delhi
                       Depreciation
                       for the A.Y.
                       2007-08
 
 X.  (a) The accumulated losses of the company as at 31st March, 2011
 are more than fifty percent of its net worth.  (b) The Company has
 incurred cash losses during the current year ended 31st March, 2011.
 
 XI.  Based on our audit procedure and the information and explanations
 given to us, the Company has defaulted in repayment to the financial
 institutions/Banks as given below.
 
 Name of the Statute                                   Rs. in Lacs
 
 Principal               Interest              Default w.e.f
 
 1500.00                   339.67              February 2009
 
 1000.00                   160.38              March 2009
 
 2052.31                    17.61              January 2011
 
 38098.09                  266.36              February 2011
 
 57833.62                  641.62              March 2011
 
 XII.  Based on our examination of records and explanations given to us,
 the company has not granted loans and advances on the basis of security
 by way of pledge of shares, debentures and other securities.
 
 XIII.  As per the information and explanations given to us, the
 provisions of special statute applicable to chit fund do not apply to
 the company. The company is also not a Nidhi/Mutual Benefit Fund/
 Society.
 
 XIV.  In our opinion, and according to the information and explanations
 given to us, the Company is not dealing or trading in Shares,
 Securities.
 
 XV.  Based on our examination of records and information and
 explanations given to us, the company has not given corporate
 guarantees on behalf of other body corporate to the banks during the
 year.
 
 XVI.  Based on information and explanations given to us by the
 management, the term loans have been applied for the purpose for which
 they were obtained.
 
 XVII. According to the information and explanation given to us and on
 an overall examination of the Balance sheet of the company, we are of
 the opinion that funds raised on short-term basis have not been used
 for long-term investment.
 
 XVIII.As explained to us, the company has not made any preferential
 allotment of shares to companies or parties covered in the register
 maintained under section 301 of the Act during the period.
 
 XIX.  According to information and explanations given to us, during the
 period, company has not issued debentures and accordingly, the creation
 of securities thereof does notarise.
 
 XX.  The company has not raised any money byway of public issue
 during the period.
 
 XXI.  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 instances of
 material fraud on or by the company, noticed or reported during the
 year, nor we have been informed of such case by the management.
 
 
                                                    For P Jain & Co.
 
                                              Chartered Accountants
 
                                             (Firm Reg. No. 000711C)
 
                                                    Munish Kr. Jain
 Place : Ghaziabad                                          Partner
 
 Date  : August 6th, 2011                       Membership No.70335