We have audited the attached Balance Sheet of M/s. Bannari Amman
 Spinning Mills Limited as at 31.03.2011, 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 Company''s management. Our responsibility is to express an opinion
 on these financial statements based on our audit.
 
 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 asevaluating the overall financial statement
 presentation, We believe that our audit providesa reasonable basis for
 our opinion.
 
 I. As required by the Companies. (Auditor''s Report) Order 2003 issued
 by the Central Government of india in terms of sub-section (4A) of
 section 227 of the Companies Act, 1956, we furnish below a statement on
 the matters specified in paragraphs 4 and 5 of the said Order.
 
 i In res pect of Its fixed assets:
 
 a.  The Company has maintained proper records showing full particulars
 including quantitative details and situation of fixed assets.
 
 b.  All the assets have not been physically verified by the management
 during the year but there is a regular programme of verification which
 in our opinion is reasonable having regard to the size of the company
 and nature of its assets. No material discrepancies were noticed on
 such verification,
 
 c.  During the year, the Company has disposed off substantial part of
 plant and machinery. According to the information and explanation given
 to us, we are of the opinion that the sale of said part of plant and
 machinery has not affected the going concern status of the company.
 
 ii.  In respect of its inventories:
 
 a.  The inventories have been physically verified by the management. In
 our opinion, the frequency of verification is reasonable.
 
 b.  The procedures of physical verification of inventories followed by
 the management are reasonable and adequate in relation to the size of
 the Company and the nature of its business,
 
 c.  The Company is maintaining proper records of inventories. As
 explained to us, there were no material discrepancies noticed on
 physical verification of inventory as compared of the book records.
 
 iii. The company has not granted/taken any loans, secured or unsecured,
 to/from companies, firms or other parties covered in the register
 maintained under Section 301 of the Companies Act, 1956.
 
 iv. In our opinion and according to the information and explanations
 given to us, there exists an adequate internal control system
 commensurate with the size of the Company and the nature of its
 business with regard to purchase of inventory, fixed assets and with
 regard to the sale of goods and services. During the course of our
 audit, we have not observed any continuing failure to correct major
 weaknesses in internal control system of the company.
 
 v. a In our opinion and according to the information and explanations
 given to us, the particulars of all contracts or arrangements 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
 furnished to us, the 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 any party during the year have been made at prices which are
 reasonable having regard to the prevailing market prices at the
 relevant time.
 
 vi.  The Company has not accepted any deposits from the public.
 Therefore the provisions of clause (vi) of the Companies (Auditor''s
 Report) Order, 2003 are not applicable.
 
 vii.  In our opinion, the company has an internal audit system
 commensurate with the size and nature of its business.
 
 viii. We have broadly reviewed the books of accounts relating to
 material, labour and other items of cost 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 Companies
 Act, 1956 and we 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 same.
 
 ix.  In respect of statutory dues:
 
 a.  The Company is regular in depositing with appropriate authorities
 undisputed statutory dues including Provident Fund, Investor Education
 and Protection Fund, Employees'' State Insurance, Income-tax, Sales-tax,
 Wealth tax, Service tax, Customs Duty, Excise Duty, Cess and other
 material statutory dues applicable to it.
 
 b.  According to the information and explanations given to us, no
 undisputed amounts payable in respect of Income-tax, Sales-tax, Wealth
 tax, Service tax, Customs Duty and Excise Duty were in arrears as at
 31st March, 2011 for a period of more than six months from the date of
 becoming payable.
 
 c.  The disputed statutory dues aggregating to Rs.139.13 Lakhs that
 have not been deposited on account of matters pending before
 appropriate authority are as under:
 
                                Amount     Period to
 Name of        Nature of                            Forum where
                               (Rs. in    which the
 the Statute    the Dues                             dispute is pending
                               Lakhs) amount relates
 
                                                     The Commissioner
 Income Tax     Income
                                75.79    2004 - 05    of Income Tax
 Act, 1961      Tax
                                                        (Appeals)
 
 Central
                Excise Duty                            The CESTAT,
 Excise Act,                    59.09    2009 - 10
                Rebate                                   Chennai
 1944
 
                                                      The Revision
 Central
                Excise Duty                          Authority, Ministry
 Excise Act,                     4.25    2008 - 09
                Rebate                                  of Finance,
 1944
                                                         New Delhi
 
 x.  The Company has no accumulated losses and has not incurred any cash
 losses during the financial year covered by our audit or in the
 immediately preceding financial year.
 
 xi.  In our opinion and according to the information and explanation
 given to us, the Company has not defaulted in repayment of dues to
 financial institutions or banks.
 
 xii.  In our opinion and according to the information and explanation
 given to us, no loans and advances have been granted by the Company 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 or a nidhi /
 mutual benefit fund / society. Therefore, clause 4(xiii) of the
 Companies (Auditor''s Report) Order 2003 is not applicable to the
 Company.
 
 xiv. In our opinion, the company is not dealing or trading in shares,
 securities, debentures and other investments.  Therefore, clause 4(xiv)
 of the Companies (Auditor''s Report) Order 2003 is not applicable to the
 Company.
 
 xv. According to information and explanations given to us, the company
 has not given any guarantee for loans taken by others from banks or
 financial institutions.
 
 xvi.  In our opinion, the term loans have been applied for the purpose
 for which the they have been raised.
 
 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 the no funds raised on short term basis have been used for long
 term investments.
 
 xviii. According to the information and explanations given to us, 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 debentures during the year.
 
 xx.  The Company has not raised any money by way of public issue during
 the year.
 
 xxi. In our opinion and according to the information and explanations
 given to us, no fraud by the company has been noticed or reported
 during the course of our audit. We have been informed that an executive
 had committed a fraud by undervaluing/ misappropriation of goods for a
 value of Rs 82.19 Lakhs and Company had taken criminal proceedings
 against the executive.
 
 II.  Further to the 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, 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 comply with the Accounting
 Standards referred to in subsection (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, we
 report that none of the directors is disqualified as on 31st March,
 2011 from being appointed as directors in terms of clause (g) of
 sub-Section (1) of section 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 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:
 
 (i) In the case of the Balance Sheet, of the state of affairs of the
 Company as at 31st March, 2011;
 
 (ii) In the case of the Profit and Loss Account, of the Profit for the
 year ended on that date: and
 
 (iii) In case of the Cash Flow Statement, of the cash flows for the
 year ended on that date.
 
                                         For P N Ragavendra Rao & Co.,
                                         Chartered Accountants
                                         P R Vittel 
                                         Partner
                                         M.No. 200/18111
                                         FIRM REGN.No.003328S
 Coimbatore
 23rd May 2011