1.  We have audited the attached Balance Sheet of Ashco Niulab
 Industries Limited as at 31st March, 2012 and also the Statement of
 Profit and Loss and the Cash Flow Statement of the Company for the six
 months period ended on that date annexed thereto. These financial
 statements are the responsibility of the management of the Company.
 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 (Auditor''s Report) Order, 2003 as
 amended by the Companies (Auditor''s Report) (Amendment) Order, 2004
 (the ''Order''), issued by the Central Government of India in terms
 sub-section (4A) of Section 227 of the Companies Act, 1956, of India
 (the ''Act'') and on the basis of such checks of the books and records of
 the Company as we considered appropriate and according to the
 information and explanations given to us, we give in the Annexure 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 purposes 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, Statement of Profit and Loss and Cash Flow
 Statement dealt with by this report are in agreement with the books of
 account;
 
 d) In our opinion, the Balance Sheet, Statement of Profit and Loss and
 Cash Flow Statement comply with the mandatory Accounting Standards
 referred to in sub- section 3C of Section 211 of the Companies Act,
 1956, except for non-provision of gratuity liability and leave
 encashment, which is not as per AS-15 Employee Benefits
 
 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 said directors is disqualified as on 31st March, 2012 from being
 appointed as directors of the Company under clause (g) of sub-section
 (1) of Sec 274 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 read together with the
 Notes thereon give the information required by the Companies Act, 1956
 in the manner so required and subject to Note No.2.1 (ii) of the Notes
 to the Accounts for non provision of gratuity liability and leave
 encashment as the same is accounted for on cash basis 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 the Statement of Profit and Loss , of the loss of
 the Company for the six months period ended on that date
 
 and
 
 iii) in the case of Cash Flow Statement, of the cash flows for the six
 months period ended on that date.
 
 ANNEXURE TO THE AUDITOR''S REPORT OF ASHCO NIULAB INDUSTRIES LIMITED FOR
 THE PERIOD ENDED ON 31ST MARCH, 2012
 
 (Referred to in paragraph 3 of our Report of Even Date)
 
 i. (a) The Company has maintained proper records showing major
 particulars including quantitative details and situation of fixed
 assets.
 
 (b) All the assets have not been physically verified by the management
 during the period but there is a regular programme of verification by
 the management at reasonable intervals. In our opinion the frequency of
 verification may be increased. No material discrepancies were noticed
 on such verification by the management.
 
 (c) In our opinion, the Company has not disposed off substantial part
 of Fixed Assets during the period.
 
 ii. (a) We are informed that the management has a regular programme of
 physical verification of inventories. In our opinion the frequency of
 verification may be increased.
 
 (b) The procedures of physical verification of inventories followed by
 the management needs to be strengthened significantly in relation to
 the size of the Company and the nature of its business.
 
 (c) The Company is maintaining proper records of inventory. We are
 informed that the discrepancies noticed on verification between the
 physical stocks and the book records were not material.
 
 iii. (a) The Company has granted an advance of Rs.  50,92,13,465/- to
 wholly owned subsidiary company covered in the register maintained
 under Section 301 of the Companies Act, 1956. The maximum amount
 involved during the period was Rs.50,92,13,465/- and the year-end
 balance of advance given to such party was Rs. 50,92,13,465/-.
 
 (b) In our opinion and according to the information and explanations
 given to us, the terms and conditions of interest free advance given by
 the Company, are prima facie not prejudicial to the interest of the
 Company.
 
 (c) The Company had taken unsecured loans from two parties covered in
 the register maintained under Section 301 of the Companies Act 1956.
 The maximum amount involved during the period was Rs.  2,13,67,534/-
 and the year-end balance of loan taken from such parties was Rs.
 1,93,39,799/-.
 
 (d) In our opinion and according to the information and explanations
 given to us, the terms and conditions of interest free unsecured loans
 taken by the Company, are prima facie not prejudicial to the interest
 of the Company.
 
 (e) The Company is regular in repaying the principal amount wherever
 stipulated.
 
 iv. In our opinion and according to the information and explanations
 given to us, the internal control systems need to be significantly
 strengthened to be commensurate with the size of the Company and the
 nature of its business, for the purchase of inventory and fixed assets
 and for the sale of goods and services.  During the course of our
 audit, no continuing failure to correct major weakness in the internal
 control system has been noted.
 
 v. (a) According to the information and explanations given to us, we
 are of the opinion that the particulars of contracts or arrangements
 referred to in section 301 of the Companies Act, 1956 have been entered
 in the register required to be maintained under that section.
 
 (b) In our opinion and according to the information and explanations
 given to us, there were no transactions made in pursuance of contracts
 or arrangements entered in the Register maintained under section 301 of
 the Companies Act, 1956, aggregating Rs. 5,00,000/- or more during the
 period.
 
 vi. In our opinion and according to the information and explanations
 given to us, the Company has not accepted deposits from public, and
 consequently the directives issued by the Reserve Bank of India and the
 provisions of sections 58A, 58AA or any other relevant provisions of
 the Companies Act, 1956 and the rules framed there under are not
 applicable to the Company.
 
 Vii The Company presently has no separate internal audit system. It has
 an internal control system which needs to be significantly strengthened
 to be commensurate with the size and nature of its business.
 
 viii. According to the information and explanations given to us, the
 maintenance of cost records has not been prescribed by the Central
 Government under clause (d) of sub section 1 of Section 209 of the
 Companies Act, 1956, and hence, the provisions of clause (viii) of
 paragraph 4 of the Companies (Auditor''s Report) Order, 2003 are not
 applicable to the Company.
 
 ix. (a) The Company is irregular in depositing undisputed statutory
 dues including Provident Fund, Investor Education and Protection Fund,
 Employees'' State Insurance, Income-Tax, Wealth Tax, Customs Duty,
 Excise Duty, Cess and any other statutory dues with the appropriate
 authorities. Further, Service Tax, Profession Tax and Tax Deducted at
 Source which are outstanding as at the last day of the financial period
 concerned for a period of more than six months from the date they
 became payable are furnished below:
 
 Nature of Dues                   Amount in Rs.
 
 Service Tax                      2,64,26,652
 
 Sales Tax                          52,63,905
 
 Tax Deducted at Source             22,52,702
 
 Provident Fund                     27,22,284
 
 ESIC                                7,61,197
 
 Profession Tax                      2,89,015
 
 Labour Welfare Fund                    2,208
 
 Total                            3,77,17,963
 
 (b) According to the information and explanations given to us, there
 are no dues of Income Tax/ Sales Tax/ Wealth Tax/ Service Tax/ Custom
 Duty/ Excise Duty/ Cess which have not been deposited on account of any
 dispute and hence the provisions of clause (ix) (b) of paragraph 4 of
 the Companies (Auditor''s Report) Order, 2003 are not applicable to the
 Company.
 
 x. The accumulated losses of the company are not more than fifty
 percent of its net worth. The company has incurred cash losses during
 the financial period and in the immediately preceding financial period.
 
 xi. The company has defaulted in repayment of dues to Financial
 Institutions and Banks. The company has not issued any debentures. The
 period and amount of default are as under:
 
 Name of Bank /           Over dues     Over dues   Month
 Institution              Interest      Principle   Pending
 
 SIDBI                     2,07,330     40,50,000   Jan-12 to Mar-12
 
 Punjab National          12,76,442     25,00,000   Jan-12 to
 Bank – Term Loan                                   Mar-12
 
 Punjab National          10,63,984     25,00,000   Jan-12 to
 Bank – Term Loan                                   Mar-12
 
 Citi Bank –               2,00,647        86,982   Mar-12
 Home Loan
 
 Total                    27,48,403     91,36,982
 
 xii. In our opinion and according to information 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,
 and hence, the provisions of clause (xii) of paragraph 4 of the
 Companies (Auditor''s Report) Order, 2003 are not applicable to the
 Company.
 
 xiii. In our opinion and according to information and explanations
 given to us, the Company is not a chit fund or a nidhi/mutual benefit
 fund/society and hence the provisions of clause (xiii) of paragraph 4
 the Companies (Auditor''s Report) Order, 2003 are not applicable to the
 Company.
 
 xiv. In our opinion, the Company is not dealing or trading in shares,
 securities, debentures and other investments. All the shares,
 securities, debentures and other investments have been held by the
 Company, in its own name.
 
 xv. In our opinion and according to information and explanations given
 to us, the Company has not given any guarantees for the loans taken by
 others from banks or financial institutions, and hence the provisions
 of clause (xv) of paragraph 4 the Companies (Auditor''s Report) Order,
 2003 are not applicable to the Company.
 
 xvi. According to the information and explanations given to us, the
 term loans availed in the recent past have been applied for the purpose
 for which they were obtained.
 
 xvii. According to the information and explanations 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 by the Company.
 
 xviii. 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.
 
 xix The Company has not issued any debentures and hence the provisions
 of clause (xix) of paragraph 4 the Companies (Auditor''s Report) Order,
 2003 are not applicable to the Company.
 
 xx. The Company has raised an amount of Rs. 33,77,95,000/- by issue of
 GDR in April, 2010. The management has invested the proceeds in the
 wholly owned subsidiary Ashco Niulab FZE.
 
 xxi. According to the information and explanations given to us, no
 fraud on or by the Company has been noticed or reported during the
 year.
 
                                                          For GMJ & Co
 
                                                 Chartered Accountants
 
                                                       FRN No. 103429W
 
                                                       CA S.MAHESHWARI
 
                                                               Partner 
 
                                                          M. No. 38755
 
 Place : Mumbai
 
 Date : 5th January, 2013