We have audited the attached Balance Sheet of Blue Bird (India)
 Limited, as at March 31, 2011 and the Profit and , Loss Account for the
 year ended on that date annexed thereto and cash flow statement for the
 year ended on the time date. These financial statements are the
 responsibility of the Company''s Management. Our responsibility express
 an opinion on these financial statements based On our audit.
 
 We have conducted our audit in accordance with auditing standards
 generally accepted in India. Those standard* require that we plan and
 perform the audit to obtain reasonable assurance about whether
 financial statements ore free of material misstatement. An audit
 includes examining, on a test basis, evidence supporting, the 
 and disclosures in the financial statements. An audit also includes
 assessing the accounting principle used ''< significant estimates made
 by management, as well as evaluating the overall financial statement
 presentation. > < believe that our audit provides a reasonable basis
 for our opinion.
 
 1) 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 annex hereto, a statement on
 for matters specified in paragraph 4 of the said order,
 
 2) Further to our comments in the Annexure referred to above, we report
 that:
 
 a) We have obtained all the information and explanations, which to the
 best of our knowledge to 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 and Profit & Loss Account dealt with by this
 report or* in agreement with the books Of account Of the Company; - .,
 
 
 d) In our opinion, the Balance Sheet and Profit & Loss Account dealt
 with by this report are# in camplianc4 with accounting standards
 referred to in section 211(3C) of the Companies Act, 1956; 
 
 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 directors is disqualified as on March 31st, 2011 from being
 appointed as a director 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,, Subsidiary  to Annual for Auditor''s Report
 
 a) note ne.2 regarding verification and valuation of inventories,
 ordinary. 4regardfag credit assessment of Debtor? and recovery of
 deferrer*, - e} note no 7 regarding reasonableness of Internal Audit
 system,
 
 d) no. if regarding accounts prepared on going concern bath, since
 the company confident of revival after implementation of CDft proposal
 despite tosh lose and\: notice*
 tecelvedfromalenderandafevrcredltonu/s433and434ofmeCompanlesAct,1936 v)
 note no. 16 regarding estimated written off debtors, and f) note no>3
 of Significant Accounting Policies regarding Inventories , the said
 accounts read with Notes to 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 Balance Sheet, of the state of affairs of the
 Company as at March 31st, 2011.
 
 (ii) In the case of the Profit & Loss Account, of the loss of the
 Company for the year ended on that date.  
 
 (iii) In the case of the Cash flow statement of the cash flows of the
 company for the year ended on that date.
 
 ANNEXURE TO THE AUDITORS REPORT (Referred to in paragraph 1 of our
 report of even date on the accounts for the year ended March 31, 2011
 of Blue Bird (India) Limited)
 
 1) a) The Company has maintained proper computerized records showing
 full particulars, including quantitative details and situation of its
 fixed assets.
 
 b) As informed to us, major fixed assets (Land, Buildings and Plant &
 Machinery) of the Company have only been physically verified by the
 Management during the year. The company has formulated a policy of
 verification of land, Buildings and Plant and Machinery once in a year
 and of other assets once in two years. No material discrepancies were
 reportedly noticed by the management on such verification.
 
 c) The company has not disposed off any part of fixed assets during the
 year.
 
 2) a) As informed to us, the inventory of the company has once been
 physically verified by the management during the year.
 
 b) In our opinion and according to the information and explanations
 given to us, the procedures for physical verification of inventories
 followed by the management are not reasonable and adequate in relation
 to the size of the company and 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 discrepancies noticed on physical verification between
 stock and the book records are material/and have been properly dealt with
 in the accounts.
 
 3) The Company has taken unsecured interest free loan from directors.
 As per information and explanation given to us, the terms and
 conditions thereof are prima- facie, not prejudicial to the interests
 of the company. Except this, according to the information and
 explanations given to us, the company has not granted/ taken any loans
 secured or unsecured to/from companies, firms or other parties covered
 in the register maintained u/s 301 of the Companies Act, 1956.
 
 4) In our opinion and according to the information and explanations
 given to us, the company has an material\ control system for the purchase
 of inventory and fixed assets and for the sale of goods and services.
 However, the same (including for credit assessment of debtors and
 recovery from Debtors) needs to be strengthened so as to be
 commensurate with the size of the company and nature of its business.
 Further, on the basis of our examination and according to the
 information and explanations given to us, we have neither come across
 nor have we been informed of any other it. since of continuing failure
 to correct major weaknesses in internal control.
 
 5) a) In our opinion and to the best of our knowledge and belief, and
 according to the information and explanations given to us, the
 transactions that needed to be entered in the Register maintained under
 Section 301 of the Companies Act, 1956, have been so entered.
 
 b) According to the information and explanation 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, exceeding the value of Rs. Five Lacs in respect of any party
 during the year.
 
 6) As per the information and explanations given to us, there are no
 deposits accepted from the public within the meaning of Section 58A and
 58AA or any other relevant provisions of the Companies Act, 1956 and
 the rules framed there under.
 
 7) In our opinion, the Company''s internal audit system needs to be
 strengthened commensurate with its size and nature of its business.
 
 8) According to the information and explanations, given to us, the
 Central Government has not prescribed maintenance of cost records under
 clause (d) of sub-section (1) Section 209 of the Companies Act, 1956
 for the industry in which the company operates.
 
 9) a) According to the information and explanations given to us and the
 records of the Company examined by us, in our opinion, the company is
 irregular in depositing undisputed amounts outstanding including
 Provident fund. Employees State Insurance, Sales tax and other material
 statutory dues with the appropriate authorities. IDS of Rs. 66.15 Lacs
 and Income Tax of Rs. 21.41 lacs was outstanding on 31st March 2011 for
 more than six months.
 
 b) Disputed Income Tax & Sales Tax demands have not been deposited with
 the respective Tax Authorities.
 
 10) The Company has accumulated losses as at 31.03.2011, & it has
 incurred cash losses during the financial year ended on that date,
 resulting in to negative net worth.
 
 11) According to the information and explanations given to us, the
 company defaulted in the payment of its dues to financial institutions,
 banks during the year. As mentioned in Note No. 11, the Company had
 submitted a CDR proposal & it has been approved by CDR cell of Reserve
 Bank of India.
 
 12) According to the information and explanations given to us, the
 company has not granted any loans or advances on the basis of security
 byway of pledge of shares, debentures and other securities.
 
 13) The company is not a chit or a nidhi /mutual benefit fund/society,
 therefore, the clause 4(xiii) of the Companies (Auditor''s Report)
 Order, 2003 is not applicable to the Company.
 
 14) In our opinion and according to the information and explanations
 given to us, the Company is not dealing or trading in shares,
 securities, debentures or other investments and hence, the requirements
 of Para 4 (xiv) are not applicable to the company.
 
 15) According to the information and explanations given to us, the
 Company has not given any guarantee for loans taken by others from
 banks and financial institutions.
 
 16) The Company has not during the year, availed any term loans from
 Bank. Term loans availed In earlier years have not been utilized for
 the purpose for which they were sanctioned.
 
 17) According to the information and explanations given to lis and on
 an overall examination of the Balance Sheet and Cash Flow of the
 Company, we report that no funds raised on Short Term Basis have been
 used for Long Term Investment.
 
 18) 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 during the year.
 
 19) During the year, the company has not issued Non Convertible
 debentures. As informed to us, no security has been created for the Non
 Convertible Debentures issued for the earlier years.
 
 20) The Company has not raised any money by public issue of shares
 during the year.
 
 21) According to the information and explanations given to us, no fraud
 on or by the Company has been noticed or reported during the course of
 our audit.
 
 For M/s Khandelwal Gandhi & Asso.
 Firm Regn. No. 113047W
 Chartered Accountants
 
 CA Rajendra P Gujarathi
 
 Partner
 
 Membership No. 048337
 
 Mace: - Pune
 Date: June 30, 2011