1.  We have audited the attached Balance Sheet of Bhagyanagar India
 Limited as at 31st March 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 theses
 financial statements based on our audit.
 
 2.  We conduct our audit in accordance with the 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 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 (Auditor''s Report) Order,2003 as
 amended by the Companies (Auditor''s Report) (Amendment) Order, 2004
 (Together henceforth referred to as the ''Order'' issued by the Central
 Government of India in terms of sub-section (4A) of Section 227 of the
 Companies Act 1956 (henceforth referred to as the ''Act'') is given
 below.
 
 A.  Fixed Assets : Clause 4(i) of the Order
 
 i. The Company has maintained proper records showing full particulars,
 including quantitative details and situation of fixed assets.
 
 ii. We are informed that management has conducted verification of
 significant part fixed assets during the course of the year. As per the
 information and explanations given to us the discrepancies found on
 such verification are not material.
 
 iii. 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 in our opinion, has not affected the going concern status
 of the company.
 
 B.  Inventories : Clause 4(ii) of the Order
 
 i. The inventory has been physically verified during the year by the
 management. In our opinion the frequency of verification is reasonable.
 
 ii. The procedures of physical verification followed by the management
 are reasonable and adequate in relation to the size of the Company and
 nature of its business.
 
 iii. The Company is maintaining proper records of inventory. The
 discrepancies noticed on verification between physical stocks and books
 records were not material.
 
 C.  Loans and Advances & Loans against Pledge of Securities (Clauses
 4(iii) of 4 (xii) of the Order.
 
 i. The Company has granted loans to ''2'' Group Companies, ''1'' Wholly
 Owned Subsidiary, ''3'' Subsidiaries,''4'' Associate Companies. The
 aggregate of Maximum amount Involved Rs.10,208.55 Lacs and year end
 outstanding Rs.9,939.13 Lacs.
 
 ii. In our opinion the terms of interest and other terms and conditions
 of the loans given by the company are not ''prima facie'' prejudicial to
 the interest of the Company.
 
 iii. The parties are regular in payment of interest wherever due as per
 the terms and conditions of sanction of loans
 
 iv. There are no overdue amounts in excess of Rs.1 Lakh in respect of
 loans granted, to Companies, firms or other parties in the register
 maintained under section 301 of the Act.
 
 v. The Company has not taken any loans from Companies / Parties and
 other firms covered under section 301 of the Act.  Hence we have not
 reported on sub- claused f & g of this clause of the ''Order''.
 
 vi. We are of the opinion that the Company is maintaining adequate
 records where the Company has granted loans against security of shares,
 debentures and other securities.
 
 D.  Transactions with parties under section 301 of the Act. Clause 4(v)
 of the Order :
 
 i. On the basis of our examination of relevant records and on the basis
 of representation of the management , we are of the opinion that the
 particulars of all contracts or arrangements that need to be entered
 into the register maintained under section 301 of the ''Act'' have been
 so entered.
 
 ii. The transactions made in pursuance of such contracts or
 arrangements have been made at prices reasonable having to the
 prevailing market prices at the relevant point of time.
 
 E.  Internal Control : Clause 4(iv) of the order
 
 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 nature of its business with regard to
 purchase of fixed assets and with regard to sale of services. During
 the course of our audit, we have not observed any continuing failure to
 correct weakness in internal control system of the company.
 
 F.  Deposits -Clause 4(vi) of the Order.
 
 During the year the company has not accepted any deposits within the
 meaning of section 58A and section 58AA of the ''Act''.
 
 G.  Internal Audit - Clause 4(vii) of the Order.
 
 In our opinion, the Company''s internal audit system is commensurate
 with the size and nature of its business.
 
 H.  Cost Records - Clause 4(viii) of the Order
 
 We are informed that the Central Government has not prescribed
 maintenance of cost records under section 209(1)d of the ''Act'', for the
 manufacturing activities carried on by the Company during the year.
 
 I.  Statutory Payments - Clause 4(ix) of the Order.
 
 i. According to the records of the Company, apart from the certain
 instances of delays in depositing undisputed income tax deducted at
 source, Employee''s State Insurance, Provident Fund and Sales tax, the
 Company has been regular in depositing undisputed statutory dues
 including Provident Fund, Employee State Insurance, Income Tax, Sales
 Tax, Service Tax, Custom Duty, Excise Duty, Cess and other statutory
 dues with appropriate authorities. Based on our audit procedures and
 according to the information and explanations given to us, there are no
 arrears of statutory dues which has remained outstanding as at 31st
 March 2011 for a period of more than six months from the date they
 became payable.  ii. According to the information and explanations
 given to us and records of the company the dues of sales tax / income
 tax / customs duty / wealth tax / service tax / excise duty / cess,
 which have not been deposited on account of any dispute are as follows.
 
 Nature of Dues/      Amount               Forum where
 Financial Year to    in Rs                dispute is
 which dispute is                          pending
 related to
 
 Custom Duty          200 Lacs             Supreme Court
 2004-05                                   of India
 
 Excise Duty          2.90 Lacs            CESTAT
 2006-07                                   Mumbai
 
 Excise Duty          25.69 Lacs           Asst
 2005-08                                   Commissioner
                                           III Hyd
 
 J.  Losses : Clause 4(x) of the order
 
 The Company does not have any accumulated losses as at 31st March 2011.
 The Company has not incurred any cash losses during the financial year
 covered by our audit and the immediately preceding financial year.
 
 K.  Utilisation of Funds : Clause 4(xi), (xvi) & (xvii)
 
 i. The Company has not obtained any term loan during the year.
 
 ii. On the basis of review of utilisation of funds, which is based on
 overall examination of the Balance Sheet of the Company, related
 information made available to us and as represented to us by the
 management, funds raised on short term basis have not been used for
 long term investments.
 
 iii. In our opinion and according to the information and explanations
 given to us, the Company has not defaulted in repayment of dues to a
 financial institution, bank or debenture holders.
 
 L.  Miscellaneous : Clauses 4(xiii) to (xv) and (xviii) to (xxi)
 
 i. The Company has not given any Guarantees for loans taken by others
 from Banks or Financial Institutions.
 
 ii. The Company is not a chit fund, nidhi / mutual benefit fund and
 therefore, requirements to such class of Companies are not applicable.
 
 iii. The Company is not dealing in or trading in shares, securities
 debentures and other investments.
 
 iv. The Company has not made any preferential allotment of shares
 during under Section 301 of the ''Act''.
 
 v. The Company has not issued any debentures during the year.
 
 vi. The Company has not raised any money by way of public issue during
 the year
 
 vii. Based upon the audit procedures performed for the purpose of
 reporting the true and fair view of the financial statements as the
 information, representation and explanations given by the management,
 we report that no fraud on or by the company has been noticed or
 reported during the course of our audit.
 
 4.  Further to our comments above :
 
 i. We have obtained all the information and explanations which to the
 best of our knowledge and belief were necessary for the purposes of
 audit;
 
 ii. In our opinion proper books of account as required by law have been
 kept by the Company as 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 Accounting
 Standards referred to in Section 211(3C) of the ''Act''.
 
 v. 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 are disqualified as on 31st March
 2011 from being appointed as a Director in terms of Section 274(1)(g)
 of the ''Act''.
 
 vi.  Without qualifying we invite your attention to:
 
 1. Note 3 : Notes to Accounts wherein it is stated that the Company has
 a commitment towards the remaining FCCB bondholders to pay 8% half
 yearly compounded yield-to-maturity (YTM), in case the option of
 conversion is not exercised by them, within 5 years from the date of
 issue of the Bonds. The YTM accrues to the Bond-holders only at the
 time of repayment. Contingent liability on account of YTM is Rs 2063.63
 lacs as on 31.03.2011 including withholding Tax @ 10%. This will
 undergo a change in accordance to the currency conversion rates and
 Income tax rates prevailing on the date of repayment if it is made on
 non-conversion
 
 2. Note 13 Notes to Accounts : During the year 2009-10, the Company
 paid an advance of Rs 214.22 lacs to M/s United International Shipping
 Agent (T) Ltd, Tanzania, towards part payment for cost of Copper
 cathode which is principal raw material for the copper manufacturing
 units. The payment thus made was disclosed as advances to suppliers
 under Schedule-11 of Loans & Advances.  However, Copper was stolen
 and replaced with worthless material on the sea-way.  The Company
 lodged claims with Insurance Company and the shipping agent. The
 Insurance Company has rejected the claim during the year in the month
 of October 2010. On the basis of legal opinion received and on the
 recommendations of the Board of Directors the amount is written off as
 irrecoverable business loss.
 
 vii. In our opinion and to the best of our information and according to
 the explanations given to us, the said accounts, together with the
 Notes thereon and attached thereto, give in the prescribed manner, the
 information required by the ''Act'' , and also give a true and fair view
 in conformity with accounting principles generally accepted in India.
 
 1.  In the case of Balance Sheet, the state of affairs of the Company
 as at 31st March 2011.
 
 2.  In the case of Profit and Loss account the ''Profit'' for the year
 ended on that date.
 
 3.  In the case of cash flow statement the Cash flows for the year
 ended on that date.
 
                                              For Sekhar & Co.
 
                                        Chartered Accountants
 
                                      Firm Regn No : 003695-S
 
                                                    G. Ganesh
 
 Place: Secunderabad                                  Partner
 
 Date : April 29, 2011                        Mem. No: 211704