We have audited the attached Balance Sheet of B S Refrigerators Limited
 as at March 31; 2004 and 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.
 
 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 the management, as well as evaluating the overall financial
 statement presentation. We believe that our audit provides a reasonable
 basis for our opinion.
 
 We report as follows:
 
 1. As required by the Companies (Auditors Report) Order, 2003, issued
 by the Central Government of India, in terms of Section 227 (4A) of the
 Companies Act, 1956, we enclose in the Annexure a statement on the
 matters specified in paragraphs 4 and 5 of the said order.
 
 2. Further to our comments in the Annexure referred to in paragraph 1
 above;
 
 a) We have obtained all the information and explanations which to the
 best of our knowledge and belief were necessary for the purpose of our
 audit;
 
 b) In our opinion proper books of account as required by law have been
 kept by the Company so far as it appears from our examination of such
 books;
 
 c) The Balance Sheet and Profit and Loss Account referred lo in this
 Report are in agreement with the Books of account of the Company;
 
 d) In our opinion the Balance Sheet and Profit and Loss account dealt
 with by this report comply with the Accounting Standards referred to in
 Sub section (3C) of Section 211 of the Companies Act, 1956, other than
 Accounting Standard 26.
 
 e) On the basis of the written representations received from the
 Directors as on 31st March, 2004 and taken on record by the Board of
 Directors, we report that none of the Directors are disqualified as on
 31st March, 2004 from being appointed as 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, the said accounts read together with the
 notes thereto, 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 March 31, 2004,
 
 ii. in the case of the Profit and Loss Account, of the Loss of the
 Company for the year ended on that date; and
 
 iii. in the case of the Cash Flow Statement, of the cash flows for the
 year ended on that date..
 
                                                 For T Velupillai & Co.,
                                                   Chartered Accountants
 Bangalore                                                       M S Ram
 11th August, 2004                                               Partner
 
 ANNEXURE TO THE AUDITORS REPORT
 
 (Annexure referred to in Paragraph 1 of Auditors Report to the members
 of B S Refrigerators Limited)
 
 1. (a) The Company has maintained proper records showing full
 particulars including quantitative details and situation of fixed
 assets.
 
 (b) Alt the assets have not been physically verified by the management
 during the year but there is a regular programme verification which, in
 our opinion, is reasonable having regard to the size of the company and
 the nature of its assets. No material discrepancies have been noticed
 on such verification.
 
 (c) During the year, the Company has not disposed of any
 substantial/major part of its fixed assets.
 
 2. (a) As explained to us, the inventory has been physically verified
 at reasonable intervals, during the year, by the management. 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 inventory
 followed by the management are 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 and on the basis of our examination of the records of
 inventory, the Company is maintaining proper records of inventory. The
 discrepancies noticed on physical verification of inventory as compared
 to the book records were not material and have been properly dealt with
 in the books of account.
 
 3. During the year, the Company has neither granted nor taken any
 loans secured or unsecured to or from Companies, firms or other parties
 covered in the Register maintained under Section 301 of the Companies
 Act, 1956
 
 4. 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 the purchase of inventory and fixed assets, and
 with regard to the sale of goods. During the course of our audit, no
 major weakness has been noticed in the internal control.
 
 5. In respect of transactions entered in the register maintained in
 pursuance of Section 301 of the Companies Act, 1956,
 
 (a) Based on audit procedures applied by us, to the best of our
 knowledge and belief and according to the information and explanations
 given to us, we are of the opinion that the transactions that needed to
 be entered into the register maintained under Section 301 have been so
 entered.
 
 (b) In our opinion and according to the information and explanations
 given to us, excluding certain transactions of purchase of goods and
 material of special nature for which alternate quotations are not
 available, the transactions made in pursuance of Contracts or
 arrangements entered in the registers maintained under Section 301 of
 the Act, and exceeding five lakh rupees in respect of any party during
 the year, have been made at prices which are prima facie reasonable
 having regard to the prevailing market prices at the relevant time.
 
 6. In our opinion and according to the information and explanations
 given to us, the Company has not accepted deposits from the public and
 therefore, the provisions of Section 58A and 58AA of the Companies Act,
 1956 and. rules made thereunder are not applicable to the Company.
 
 7. In our opinion, the Company has an internal audit system
 commensurate with the size and the nature of its business.
 
 8. We have broadly reviewed the books of account relating to
 materials, 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 (l)(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.
 
 9. (a) According to the records of the Company and information and
 explanation given to us, there have been instances of delays in
 depositing undisputed statutory dues including Provident Fund,
 Investors Education and Protection fund Gratuity Fund, Superannuation
 fund, and Income Tax dues with the appropriate authorities during the
 year. Other than dues towards Investors Education and Protection Fund
 amounting to Rs.10-17 Lacs which has been subsequently remitted by the
 Company, Income Tax deducted at Source amounting to Rs. 4.59 Lacs,
 Provident Fund dues amounting to Rs.5.99 Lacs, Gratuity &
 Superannuation Contributions Payable amounting to Rs. 60.42 Lacs, there
 were no undisputed statutory dues outstanding for a period of more than
 six months from the date they became payable.
 
 (b) According to the records of the company, there are no dues of
 Income Tax, Sales Tax, Wealth Tax, Customs Duty, Excise Duty and Cess,
 which have not been deposited on account of any dispute other than
 Excise Duty demand disputed as to method of valuation amounting to
 Rs.233 Lacs which is pending with the Assistant Commissioner of Central
 Excise. Service tax Demands disputed by the Company amounting to
 Rs.103.68 Lacs and Sales Tax Assessment Demands amounting to Rs. 48
 Lacs, which are pending at various appellate authority levels.
 
 10. The accumulated losses of the Company have exceeded fifty percent
 of its net worth as at 31st March, 2004. The Company has incurred a
 cash loss of Rs. 1797.73 Lacs in the current financial year and
 Rs-1666.05 Lacs in the immediately preceding financial year. In
 arriving at the accumulated losses and net worth as above, we have
 considered the qualifications, which are quantifiable, in the Audit
 Reports of the years to which these losses pertain.
 
 11. The Company has defaulted in repayment of principal sum of Rs. 31
 Crores and interest amounting to Rs. 20 Crores to ICICI on account of
 Term Loan and the period of default as at 31st March, 2004 is 28
 months. The Company has also defaulted in repayment of principal sum
 amounting to Rs.8.48 Crores and interest amounting to Rs-52,76 Lacs on
 account of term loan taken from UBI and the period of default as at
 31st March, 2004 is 5 months. The Company has defaulted in repayment of
 principal amount of Rs.26 Crores and interest amounting to Rs.16.19
 Crores on account of debentures due to UTI and the period of default as
 at 31st March, 2004 is 33 months.
 
 12. According to the records of the company, the Company has not
 granted any loans and advances on the basis of security by way of
 pledge of shares, debentures and other securities.
 
 13. To the best of our information and according to the explanations
 provided by the management, we are of the opinion that the Company is
 neither a Chit Fund nor a Nidhi/Mutual Benefit Society. Hence in our
 opinion, the requirements of para 4 (xiii) of the order do not apply to
 the Company.
 
 14. As per records of the company and according to the information and
 explanations given to us by the management, the Company is not dealing
 or trading in shares, securities, debentures and other investments.
 
 15. The Company has given a guarantee of Rs. 42 Crores to Industrial
 Finance Corporation of India on behalf of M/s India Paging Services
 Private Limited, in our opinion, [he terms and conditions of the
 guarantee are not considered prejudicial to the interests of the
 company.
 
 16. To the best of our knowledge and belief and according to the
 information and explanations given to us, there were no term loans
 availed or utilized during the period, hence the question of commenting
 on the utilization thereof does not arise.
 
 17. According to the information and explanations given to us and on an
 overall examination of the Balance Sheet of the company, we report that
 funds raised on short term basis have, prima facie, not been used
 during the year for long term investments and vice versa.
 
 18. According to the records of the Company and the information and
 explanations provided by the management, 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.
 
 19. According to the records of the Company, the Company has not issued
 any debentures during the period under audit.
 
 20. The Company has not raised any money by public issues during the
 year under audit.
 
 21. Based on audit procedures performed and according to the
 information and explanations given to us by the management, we report
 that no fraud on or by the company has been noticed or reported during
 the year under audit.
 
                                                 For T Velupillai & Co.,
                                                   Chartered Accountants
 Bangalore                                                       M S Ram
 11th August, 2004                                               Partner