We have audited the attached Balance Sheet of Annapurna Foils Limited
 (the Company) as at 31st March 2002 and also the Profit & Loss Account
 of the Company for the year ended on that date, annexed thereto, and
 report that:
 
 (1) As required by the Manufacturing and other Companies (Auditors'
 Report) Order, 1988 issued by the Company Law Board in terms of Section
 227 (4A) of the Companies Act, 1956, we enclose in the Annexure a
 statement on the matter specified in paragraphs 4 and 5 of the said
 order.
 
 (2) Further to our comments in the annexure referred to in paragraph 1
 above:
 
 (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 the
 books;
 
 (c) the balance Sheet and the Profit & Loss Account dealt with by this
 report are in agreement with the books of accounts;
 
 (d) in our opinion, the balance sheet and profit and loss account dealt
 with by this report have been prepared in compliance with the
 accounting standards referred to in sub-section (3C) of Section 211 of
 the Companies Act, 1956, to the extent applicable;
 
 (e) on the basis of written representations received from the Directors
 of the Company as on 31st March, 2002, and taken on record by the Board
 of Directors, we report that no Directors of the Company is
 disqualified from being appointed as a Director in terms of Clause (g)
 of sub-Section (1) of Section 274 of the Companies Act, 1956; and
 
 (f) in our opinion and to the best of our information and according to
 the explanations given to us, the said accounts read together with
 notes thereon give the information required by the Companies Act, 1956,
 in the manner so required and give a true and fair view:
 
 i. in the case of the Balance Sheet of the state of affairs of the
 Company as at 31st March 2002
 
 ii. in the case of Profit and Loss Account, of the Loss for the year
 ended on that date.
 
 Annexure referred to in paragraph 1 of our report of even date to the
 members of Annapurna Foils Limited (the Company).
 
 1. The Company has maintained proper records showing quantitative
 details and the situation of its fixed assets. A major portion of fixed
 assets have been physically verified by the management during the year.
 In our opinion, the frequency of verification of fixed assets by the
 management is reasonable, having regard to the size of the Company and
 the nature of its assets. No material discrepancy has been noticed
 between the book records and the assets physically verified.
 
 2. None of the fixed assets have been revalued during the year.
 
 3. The stocks of finished goods, stores and maintenance spares,
 components and raw materials have been physically verified by
 management during the year. In respect of stock lying with third
 parties, confirmation for most of the stocks held has been received. In
 our opinion, the frequency of such verification is reasonable.
 
 4. The procedures for the physical verification of stocks followed by
 the management are reasonable and adequate in relation to the size of
 the company and nature of its business.
 
 5. The discrepancies identified on such verification between the
 physical stocks and the book records were not material and were
 properly dealt with in the books of account.
 
 6. On the basis of our examinations of the stock records, we are of
 the opinion that the valuation of the stocks is fair and proper, in
 accordance with the normally accepted accounting principles and is on
 the same basis as in previous years.
 
 7. As per BIFR Scheme, the Company has taken interest free loans from
 Companies, firms or other parties listed in the registers maintained
 under Section 301 of the Companies Act, 1956.
 
 8. The Company has not granted any loans, secured or unsecured to
 Companies, Firms or other parties listed in the register maintained
 under Section 301 of the Companies Act, 1956 or Companies under the
 same management as defined under Section 370(1B) of Companies Act,
 1956.
 
 9. The Company has given loans and advances in the nature of interest
 free loans to its employees and the same are not prejudicial to the
 interest of the Company.
 
 10. In our opinion and according to the information and explanations
 given to us, there are adequate internal control procedures
 commensurate with the size of the Company and the nature of its
 business for the purchase of stores, spares, raw materials including
 components, plant and machinery, equipment, other assets and for the
 sale of goods.
 
 11. In our opinion, and according to the information and explanations
 given to us and having regard to the fact that some of the items
 purchased are of a special nature and suitable alternative sources do
 not exist for obtaining comparative quotations, the transactions of
 purchase of goods and materials and sale of goods, materials and
 services, made in pursuance of contracts or arrangements entered in the
 register maintained under Section 301 of the Companies Act, 1956 and
 aggregating during the year to Rs. 50,000 or more in respect of each
 party, were made at prices which are reasonable having regard to
 prevailing market prices as available with the Company for such goods,
 materials or services or the prices at which transactions for similar
 goods or services were made with other parties.
 
 12. The Company has a regular procedure for the determination of
 unserviceable or damaged stores, raw materials, finished goods and
 adequate provision has been made in the accounts for the loss arising
 on the items so determined.
 
 13. The Company has not accepted deposits from public.
 
 14. In our opinion reasonable records have been maintained by the
 Company for the sale and disposal of realizable scrap. The Company has
 no realizable by-products.
 
 15. The Company has an internal audit system commensurate with the
 size and nature of its business.
 
 16. We were informed that the Central Government has not prescribed the
 maintenance of cost records u/s 209(1) (d) of the Companies Act, 1956.
 
 17. According to the records of the Company, Provident Fund and
 Employee State Insurance dues have been regularly deposited during the
 year with the appropriate authorities.
 
 18. According to the information and explanations given to us, no
 undisputed amount payable in respect of Income Tax, Wealth Tax, Sales
 Tax, Customs Duty and Excise Duty were outstanding as on 31st March
 2002 for a period of more than six months from the date they become
 payable.
 
 19. According to the information and explanations given to us and the
 records of the Company examined by us, no personal expenses have been
 charged to the revenue account, other than those payable under
 contractual obligations or in accordance with generally accepted
 business practice.
 
 20. The Company has paid all the principal dues to the Financial
 Institutions, Bank and erstwhile promoters, in terms of One Time
 Settlement Scheme (OTS) sanctioned by Hon'ble Appellate Authority for
 Industrial and Financial Reconstruction (AAIFR) vide its order dated
 26th September, 2001. The Company is still continues to be a sick
 industrial company within the meaning of Clause (o) of Section 3(1) of
 the Sick Industrial Companies (Special Provisions) Act, 1985.
 
 Further the AAIFR vide Order dated 8th March 2002 sanctioned the scheme
 of merger of the Company with Indian Aluminium Company, Limited with
 effect from 1st April, 2002 subject to compliance of requisite
 formalities.
 
                                           For C. B. Mouli & Associates
                                                  Chartered Accountants
 
 Place: Hyderabad                                           Mani Oommen
 Date: 17th April, 2002                                         Partner