1. We have audited the attached Balance Sheet of ATHENA FINANCIAL
 SERVICES LIMITED, (the Company) as at 31st March, 2005, 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.
 
 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 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.
 
 3. As required by the Companies (Auditors Report) Order, 2003 issued
 by the Central Government of India in terms of sub-section (4A) of
 section 227 of the Companies Act, 1956 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
 enclose in the Annexure a statement on the matters specified in
 paragraphs 4 and 5 of the said Order.
 
 4. Attention is invited to:
 
 a Sundry debtors amounting to Rs.205.56 crores are not fully supported.
 During the year the Company has made attempts to reconcile stock on
 hire, unmatured finance charges, repossessed stock, sundry debtors,
 security deposit, advance EMI, individual hirer account in
 institutional finance business, control account etc. but has not been
 able to reconcile all items. In view of the above, we are unable to
 express an opinion on the realisibility of the sundry debtors.
 
 5. Attention is invited to the following Notes in the schedule Q:
 
 a. Note No.4 regarding amount due to VTl Bank Ltd., in relation to
 arrangement entered into with the bank. In the absence of adequate
 information and reconciliation of account, we are unable to express an
 opinion about the extent of liability and its consequential effect on
 loss/or the year and accumulated loss as stated in the balance sheet.
 
 b. Note No.8 regarding non provision ofinterest. We are unable to
 express an opinion on the loss for the year and liabilities and
 accumulated loss as stated in the balance sheet.
 
 c. Note No. 4 regarding Tie-up debtors account which is under
 reconciliation. We are unable to express an opinion on the loss for the
 year, assets and accumulated loss as stated in the balance sheet.
 
 d. Note No. 24 regarding bank accounts which are under reconciliation.
 We are unable to express an opinion on the loss for the year,
 liabilities, assets and accumulated loss as stated in the balance
 sheet.
 
 e. Note No. 19 regarding non availability of balance confirmation in
 respect of sundry debtors, sundry creditors, loans and advances given
 and taken, balance with bank and assets under hire purchase and lease.
 We are unable to express an opinion on the loss for the year.
 liabilities, assets and accumulated loss as stated in the balance
 sheet.
 
 6. The Company incurred a net toss of Rs.l22.42 crores during the year
 ended March 31, 2005 and, as of that date, the Companys total
 liabilities exceeded its total assets. Further considering our comments
 in paragraph 4 & 5 above with consequential aggregate effects on the
 loss for the year and accumulated loss, there is total erosion of
 networth of the Company. Some of the lenders have initiated legal steps
 for recovery as well as issued notices for winding up of the Company.
 The Company does not have means to discharge the liability fully. These
 facts raise substantial doubt that the Company will be able to continue
 as a going concern. Consequently, adjustments may be required to the
 recorded assets and classification of liabilities.
 
 7. Subject to our comments in paras 4, 5 and 6 above, and farther 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 purposes 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 dealt with by this report are in agreement with the books of
 account;
 
 (iv) in our opinion, the Balance Sheet, the 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 representation received from the directors,
 as on 31st March, 2005 and taken on record by the Board of Directors,
 we report that none of the directors is disqualified as on 31st March,
 2005 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 read together with the
 notes thereon give the information required by the Companies Act, 1956.
 in the manner so required.
 
 8. In view of our comments in paras 4, 5 and 6 above, the
 consequential aggregate effect could not be determined on the loss for
 the year, accumulated losses, reserve and surplus, assets and
 liabilities as at the Balance Sheet date Subject to above and notes
 thereon 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 31st March, 2005
 
 b. in the case of the Profit and Loss Account, of the loss of the
 Company for the year ended on that date; and
 
 i. in case of Cash Flaw statement, of the cashflows for the year ended
 on that date.
 
                                             For Pawan Jain & Associates
                                                   Chartered Accountants
                                                              Pawan Jain
 Place : Pune                                                 M. No32900
 Date : 15.10.2005
 
 Annexure referred to in paragraph 3 of our report of even date on the
 accounts of ATHENA FINANCIAL SERVICES LIMITED for the year ended 31st
 March, 2005.
 
 (i) (a) The Company is in the process of updating records showing
 particulars including quantitative details and situation of fixed
 assets.
 
 (b) Majority of the fixed assets other than the assets given on lease
 have been physically verified by the management during the year and no
 material discrepancies have been noticed on such verification.
 According to the information and explanations given to us, there is a
 regular program of verification which, in our opinion, is reasonable
 having regard to the size of the Company and the nature of its assets.
 
 (c) In our opinion, a substantial part of fixed assets has not been
 disposed off by the Company during the year.
 
 (ii) The Company is in the business of financing and hence it does not
 hold any finished goods, stores, spare parts and raw materials.
 Accordingly, clause 4(il) of the Companies (Auditors Report), Order
 2003 is not applicable.
 
 (iii) (a) The Company has taken unsecured loans from the companies
 covered in the register maintained under section 301 of the Companies
 Act, 1956. The maximum amount involved during the year was Rs.
 10,97,56,495/- and the year-end balance of loans taken from such
 companies was Rs.10,97,56,495/-. The Company has not given any loans to
 companies, firms or other parties covered in the register maintained
 under section 301 of the Companies Act, 1956.
 
 (b) In our opinion, the rate of interest, wherever applicable and other
 terms and conditions of such loans taken are not, prima facie,
 prejudicial to the Interest of the Company.
 
 (c) The Company is irregular in making the payment of interest. There
 is no stipulation for repayment of the loans taken.
 
 (d) As informed to us, there is no overdue amount of unsecured loans
 taken from the companies taken u/s 301 of the Companies Act, 1956 as on
 31st March, 2005 since there is no repayment stipulation.
 
 (iv) 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 with regard to purchases of fixed assets. Further, on the
 basis of our examination of the books and records of the Company, and
 according to the information and explanations given to us, we have
 neither come across nor have been informed of any continuing failure to
 correct major weaknesses in the aforesaid internal control procedures.
 
 (v) (a) According to the information and explanations given to us, we
 are of the opinion that the transactions that need to be entered into
 the register maintained under section 301 of the Companies Act, 1956
 have been so entered.
 
 (b) In our opinion and according to the information and explanations
 given to us, there are no transactions made in pursuance of contracts
 or arrangements entered in the register maintained under section 301 of
 the Companies Act, 1956 and exceeding the value of rupees five lakhs in
 respect of each party during the year.
 
 (vi) In our opinion and according to the information and explanations
 given to us, the Company has complied with the provisions of Sections
 58A and 58AA of the Companies Act, 1956 and the Companies (Acceptance
 of Deposits) Rule, 1975 with regard to the deposits accepted by the
 public.
 
 (vii) In our opinion, the Company does not have an internal audit
 system commensurate with the size and nature of its business.
 
 (viii) According to the information and explanations given to us,
 maintenance of cost records has not been prescribed by the Central
 Government under section 209(1)(d) of the Companies Act, 1956 with
 regard to the nature of the business of the Company. Therefore the
 provisions of clause 4(viii) of the Companies (Auditors Report), Order
 2003 is not applicable.
 
 (ix) (a) According to the information and explanations given to us and
 the records of the Company examined by us, in our opinion, the
 undisputed statutory dues including provident fund, employees state
 insurance, income tax, sales tax, wealth tax, custom duty, excise duty,
 cess and other material statutory dues as applicable have generally
 been regularly deposited with Appropriate Authorities though there has
 been delay in few cases. The Company has not regularly deposited the
 service tax and there has been delay in a large number of cases. The
 Company has not deposited service tax for the period July, 2003 to
 March, 2005. The Company has not deposited amount due for transfer to
 Investor Education and Protection Fund.
 
 (b) According to the information and explanations given to us, no
 undisputed dues payable in respect of income tax, wealth tax, sales
 tax, customs duty, excise duty and cess were in arrears, as at 31st
 March, 2005 for a period of more than six months from the date they
 became payable except in case of Service Tax as mentioned below:
 
 Name of the Nature of    Amount  Period to which Due date       Date of
 statute          dues     (Rs.)  the amount relates             payment
 
 Central   Service Tax 1,20,000   July 03        25/08/03      Not paid
 
           Excise Act  1,00,000   August 03      25/09/03      Not paid
 
           Income tax  2,09,453   July 2004 to   24/3/2005
           TDS Act.               September 2004 12/7/2005
           respectively
 
 (c) According to the records of the Company and information and
 explanations given to us, dues of sales tax which has not been
 deposited on account of dispute and the forum where it is pending is as
 under:
 
 Name of statute Nature of dues      Amount  Period to which Forum where
                                      (Rs.)  amount relates      dispute
                                                              is pending
 Sales Tax Act   Assessment Dues 3,66,000/-  1997-98        First Appeal
                                                                   Level
                                        decided in favor of the Company.
 
 (x) The accumulated losses at the end of the financial year is more
 than 50% of its networth. The Company has not incurred cash losses
 during the financial year covered by our audit.
 
 xi) (a) The Company has defaulted in repayment of dues to financial
 institutions, banks and debenture holders. The default is made in
 respect of Rs 190.39 crores The duration of such default is based on
 the dates on which the amount has become due. The default starts from
 3rd July, 2003 being the first due date on which the amount has become
 due and payable but not paid. In respect of all defaults there are
 various due dates on which the installments have became due and payable
 and default continues from the due dates to the year end.
 
 (b) The Company has made repayment of dues of Rs. 14,69,02,940/- to
 financial institutions, banks and debenture holders with certain delay
 during the year.
 
 (xii) Based on our examination and according to the 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. Therefore, the provisions of clause
 4(xii) of the Companies (Auditors Report) Order, 2003 are not
 applicable to the Company.
 
 (xiii) In our opinion, the Company is not a chit fund or a nidhi mutual
 benefit fund/society. Therefore, the provisions of clause 4(xiii) of
 the Companies (Auditors Report) Order, 2003 are not applicable to the
 Company
 
 (xiv) The Company is not engaged in dealing or trading in shares,
 securities, debentures and other investments. All the investments are
 held as long term investments. Therefore, the provisions of clause
 4(xiv) of the Companies (Auditors Report) Order, 2003 are not
 applicable to the Company.
 
 (xv) According to the information and explanation given to us, the
 Company has not given any guarantee for loans taken by others, from
 banks or financial institutions during the year. Accordingly, the
 provisions of clause 4(xv) of the Companies (Auditors Report) Order,
 2003 are not applicable to the Company.
 
 (xvi) To the best of our knowledge and belief and according to the
 information and explanations given to us, no term loan was availed by
 the Company during the year.
 
 (xvii) According to the information and explanations given to us and on
 the basis of our examination of the cash flow statement and overall
 examination of the balance sheet of the Company, in our opinion no
 funds raised on short term basis have, prima facie, been used during
 the year for long term investment. The Company has not raised any funds
 during the year on long term basis.
 
 (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. Accordingly, the provisions of
 clause 4(xviii) of the Companies (Auditors Report) Order, 2003 are not
 applicable to the Company.
 
 (xix) The Company has created securities in respect of debentures, as
 mentioned in the Note No 5(f) of Schedule Q to the Balance Sheet.
 
 (xx) The Company has not raised any money by public issues during the
 year. Accordingly, the provisions of clause 4(xx) of the Companies
 (Auditors Report) Order, 2003 are not applicable to the Company.
 
 (xxi) Based upon the audit procedures performed and according to the
 information and explanation given and representations made by the
 management, we report that no fraud on or by the Company had been
 noticed or reported during the year.
 
                                             For Pawan Jain & Associates
                                                   Chartered Accountants
 Place: Pune                                                  Pawan Jain
 15-10-2005                                                 M. No 32900.