Balkrishna Industries

1.  We have audited the attached Balance Sheet of BALKRISHNA INDUSTRIES
 LIMITED, as at 31st March, 2009 and also 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
 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 (the
 Order) issued by the Central Government of India in terms of
 sub-section (4A) of Section 227 of the Companies Act, 1956, (the
 Act), we enclose 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 :
 
 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, 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 Act;
 
 v) On the basis of written representations received from the directors,
 as on 31st March, 2009 and taken on record by the Board of Directors,
 we report that none of the directors is disqualified as on 31st March,
 2009 from being appointed as a director in terms of clause (g) of
 sub-section (1) of Section 274 of the Act;
 
 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
 Accounting Policies and Notes to Accounts, appearing in Schedule R to
 the accounts, give the information required by the Act, 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 31st March, 2009;
 
 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 flows for the year
 ended on that date.
 
                   FOR JAYANTILAL THAKKAR & CO.  Chartered Accountants
                                                      ASHOK J. THAKKAR
 Mumbai,                                                       Partner
 Dated : 16th May, 2009                            Membership No. 7860
 
 Annexure to the Auditors A
 
 Referred to in paragraph 3 of our Report of even date on the accounts
 of Balkrishna Industries Limited for the year ended 31st March, 2009.
 
 i) a) The Company has maintained proper records showing full
 particulars, including quantitative details and situation of fixed
 assets.
 
 b) As explained to us, physical verification of these fixed assets is
 being conducted in a phased programme by the management designed to
 cover all the assets over a period of three years, which in our opinion
 is reasonable having regard to the size of the Company and the nature
 of assets. According to the information and explanations given to us no
 material discrepancies were noticed on such verification.
 
 c) The fixed assets disposed of during the year, in our opinion, do not
 constitute substantial part of the fixed assets of the Company and such
 disposal has, in our opinion, not affected the going concern status of
 the Company.
 
 ii) a) As explained to us, the inventories were physically verified
 during the year at intervals by the management. The goods in the
 possession of third parties as on 31st March, 2009 have been verified
 by the management with reference to the confirmation obtained from the
 third parties. In our opinion, the frequency of verification is
 reasonable.
 
 b) In our opinion and according to the information and explanations
 given to us, the procedures of physical verification of inventories
 followed by the management were reasonable and adequate in relation to
 the size of the Company and the nature of its business.
 
 c) In our opinion and according to the information and explanations
 given to us, the Company has maintained proper records of its
 inventories and the discrepancies noticed on such physical verification
 between physical stocks and book records were not material considering
 the operations of the Company and the same have been properly dealt
 with in the books of account.
 
 iii) a) As per the information and explanations given to us the Company
 has granted unsecured loans to three parties, of which two are wholly
 owned subsidiaries, covered in the register maintained under Section
 301 of the Act. The maximum amount involved during the year was Rs.
 13,26,79,220 and the year-end balance of the loans granted was Rs.
 1,68,67,690.
 
 b) According to the information and explanations given to us, the rate
 of interest and other terms and conditions of the loans, including that
 of not charging the interest to one of the subsidiaries, in our opinion
 and having regard to the holding and subsidiary company relationship,
 are not, prima facie, prejudicial to the interest of the Company.
 
 c) As per the information and explanations given to us and in our
 opinion, the receipt of the principal amount and interest, wherever
 applicable, are regular.
 
 d) As per the information and explanations given to us, the outstanding
 amount of the loans given was not overdue.
 
 e) As per the information and explanations given to us, the Company has
 taken unsecured loans from two parties, covered in the register
 maintained under Section 301 of the Act. The maximum amount involved
 during the year was Rs. 5,45,00,000 and the year-end balance of loans
 taken was Rs. 1,75,00,000.
 
 f) In our opinion and as per the information and explanations given to
 us, the rate of interest and other terms and conditions of such loans
 taken by the Company were not, prima facie, prejudicial to the interest
 of the Company.
 
 g) In our opinion and as per the information and explanations given to
 us, the Company was regular in repaying the principal amount as
 stipulated and was regular in payment of interest.
 
 iv) In our opinion and according to the information and explanations
 given to us, there is an adequate internal control system commensurate
 with the size of the Company and nature of its business for the
 purchase of inventory and fixed assets and for sale of goods. During
 the course of audit, we have not observed any continuing failure to
 correct major weaknesses in internal control system.
 
 v) a) Based on the audit procedures applied by us and 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 Act have been entered in the register required to be maintained
 under that Section.
 
 b) In our opinion and as per 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 Act and
 exceeding the value of rupees five lakhs 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 except the interest free
 loan granted by the Company to one of its subsidiaries.
 
 vi) In our opinion and according to the information and explanations
 given to us, the directives issued by the Reserve Bank of India and the
 provisions of Sections 58A, 58AA or any other relevant provisions of
 the Act and the rules framed there under, to the extent applicable,
 have been complied with in respect of the deposits accepted by the
 Company from the public. We are informed by the management that no
 order has been passed by Company Law Board or National Company Law
 Tribunal or Reserve Bank of India or any Court or any other Tribunal
 with respect to the deposits accepted from the public.
 
 vii) In our opinion, the Company has an internal audit system
 commensurate with its size and nature of its business.
 
 viii) We have broadly reviewed the books of account maintained by the
 Company pursuant to the Rules made by the Central Government for the
 maintenance of cost records under Section 209 (1) (d) of the Act and
 are of the opinion that, prima facie, the prescribed accounts and
 records have been made and maintained. We have not, however, made a
 detailed examination of the records with a view to determine whether
 they are accurate or complete.
 
 ix) a) According to the information and explanations given to us and on
 the basis of our examination of the books of account, the Company has
 been generally regular in depositing undisputed statutory dues
 including Provident Fund, Investor Education and Protection Fund,
 Employees State Insurance, Income-tax, Sales-tax, Service Tax, Custom
 Duty, Excise Duty, Cess and other material statutory dues, to the
 extent applicable, during the year with the appropriate authorities
 though there have been delays in few cases. However, as at 31st March,
 2009 there were no undisputed dues outstanding for a period of more
 than six months from the date they became payable.  During the year,
 the Company was not required to deposit any dues in respect of Wealth
 Tax.
 
 b) According to the information and explanations given to us, the dues
 in respect of Income-tax, Sales-tax, and Excise Duty that have not been
 deposited with the appropriate authorities on account of dispute and
 the forum where the disputes are pending are given below :
 
 Name of Statute           Nature of                       Amount
                                Dues                        (Rs.)
 
 Income Tax Act               Income Tax                  2,31,81,522
                             (Including interest)         7,64,39,974
                              Fringe Benefit Tax            7,65,361
                              (Including Interest)
 
 Sales Tax Act                 Sales Tax                    68,81,715
                              (Including Interest
                              and Penalty)                5,39,34,367
                                                          9,99,15,314
 Central Excise Act            Excise Duty                  68,85,258
                              (Including Interest
                              and Penalty)                  83,63,845
                                                            34,88,646
 
 Period to which             Forum where
 the Amount Relates     dispute is pending
 
 2001-04                    Tribunal
 2004-06               Commissioner (Appeals)
 2005-06               Commissioner (Appeals)
 1992-93, 1997-98,          Tribunal
 1999-2000
 1996-99, 2000-02       Commissioner (Appeals)
 2003-06
 2003-04                Assessing Authority
 2004-06, 2007-08             Tribunal
 1999-2001,2004-07      Commissioner (Appeals)
 1994-96                Assessing Authority
 
 As per the information given to us, there are no dues of Service Tax,
 Custom Duty or Cess, which have not been deposited on account of any
 dispute.  The Company is not liable to pay Wealth Tax.
 
 x) The Company does not have any accumulated losses at the end of the
 current financial year and has not incurred cash losses during current
 financial year and in the immediately preceding financial year.
 
 xi) Based on our audit procedures and according to the information and
 explanations given to us, we are of the opinion that the Company has
 not defaulted in repayment of dues to banks or debenture holders.
 
 xii) 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.
 
 xiii) In our opinion, the Company is not a chit fund/nidhi/ mutual
 benefit fund/society. Therefore, the provisions of clause 4 (xiii) of
 the Order are not applicable to the Company.
 
 xiv) According to the information and explanations given to us, the
 Company is not dealing or trading in shares, securities, debentures and
 other investments. Accordingly, the provisions of clause 4 (xiv) of the
 Order are not applicable to the Company.
 
 xv) As per the information and explanations given to us, the Company
 has not given any guarantee for loans taken by others from bank or
 financial institutions.
 
 xvi) On the basis of the records of the Company examined by us and as
 per the information and explanations given to us, the Company has not
 obtained any term loan during the year.
 
 xvii) According to the information and explanations given to us and on
 an overall examination of the balance sheet of the Company, in our
 opinion, no funds raised on short-term basis have been used for long-
 term investment.
 
 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 Act during the year.
 
 xix) The Company has not issued any debentures during the year.
 
 xx) During the year the Company has not raised funds by public issue.
 Therefore, the provisions of clause 4 (xx) of the Order are not
 applicable to the Company.
 
 xxi) Based upon the audit procedures performed and to the best of our
 knowledge and belief and 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 JAYANTILAL THAKKAR & CO.  Chartered Accountants
                                                            ASHOK J. THAKKAR
 Mumbai,                                                             Partner
 Dated : 16th May, 2009                                  Membership No. 7860