1. We have audited the attached Balance Sheet of Continental
 Construction Ltd.. New Delhi, as at 31st March, 2002 and also the
 annexed Profit & Loss Account of the Company for the year ended on that
 date. 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 the audit in accordance with auditing standards
 generally accepted in India. These standards require that we plan and
 perform the audit to obtain reasonable assurance about whether the
 financial statements are free from material misstatements. 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 Manufacturing and Other Companies (Auditors
 Report) Order, 1988 issued by the Company Law Board 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 & 5 of the said
 Order on the basis of information and explanations obtained and such
 checks as we considered necessary.
 
 4. Further to our comments in the annexures referred to 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 accounts as required by law have
 been kept by the Company so far as appears from our examination of
 books and proper returns adequate for the purpose of our audit have
 been received from the branches not visited by us;
 
 (iii) The Balance Sheet and Profit & Loss Account dealt with by the
 report are in agreement with the books of accounts and returns.
 
 (iv) In our opinion, Balance Sheet and the Profit and Loss account
 comply with the Accounting Standards referred to in Section 211 (3C) of
 the Companies Act, 1956, except to the extent referred to in Schedule
 L - Accounting Policy A(i) & (v).
 
 (v) On the basis of information obtained, none of the Directors are
 prima facie, disqualified under Section 274(1)(g) of the Companies
 Act, from being appointed as a Director of the Company.
 
 (vi) Attention is drawn to:
 
 (a) Note 2(A) regarding the debits of Rs. 45.00 millions in the
 overdraft account for commission payable to ECGC and SBI and the
 consequential interest for Rs. 53.79 millions, pending resolution; Note
 2(B)(i) to (iv) regarding interest claims of Rs. 694.09 millions by
 State Bank of India/Export Import Bank of India, not accepted by the
 Company; and Note 2B(v) regarding stamp duty and guarantee fee of Rs.
 16.78 millions charged by SBI and Exim Bank, not accepted by the
 Company.
 
 (b) In respect of current assets held in Iraq in local currency or
 equivalent thereof, referred to in Note 3(b), we are unable to comment
 on the repatriability of the same to India and consequently the effect
 thereof.
 
 (c) Note 4 regarding interest accrued of Rs. 574.48 millions till
 31.03.2002 on deferred receivables; we are not in a position to state
 about its recoverability in the near future consequent to the UN trade
 sanctions in force on Iraq.
 
 Subject to the foregoing, in our opinion, and to the best of our
 information and according to the explanations given to us, the accounts
 give the information required by the Companies Act, 1956, in 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, 2002 and
 
 (ii) in the case of the Profit & Loss Account, of the Profit for the
 year ended on the date.
 
 ANNEXURE REFERRED TO IN PARAGRAPH 2 OF OUR REPORT TO THE SHAREHOLDERS
 OF CONTINENTAL CONSTRUCTION LIMITED FOR THE YEAR ENDED 31s1 MARCH, 2002
 
 1. The Company has maintained proper records showing full particulars,
 including quantitative details and situation of its Fixed Assets. We
 are informed that the fixed assets were physically verified by the
 management of the Company during the year and that no material
 discrepancies were noticed on such verification.
 
 2. None of the Fixed Assets has been revalued during the year.
 
 3. (a) The stocks of stores, spares and construction materials were
 physically verified at reasonable intervals by the management.
 
 (b) The procedures of physical verification followed by management are
 reasonable and adequate in relation to the size of the Company and the
 nature of its business.
 
 (c) We are further informed that the discrepancies noticed on
 verification between the physical stock and the book records were not
 material.
 
 (d) In our opinion, the valuation of the above mentioned stock is fair
 and proper in accordance with the normally accepted accounting
 principles and is on the same basis as in the previous year.
 
 4. In respect of interest free loans from Companies, Firms or parties
 listed in the Register maintained under Section 301 of the Companies
 Act 1956, the terms & conditions are not prima-facie prejudicial to the
 interest of the Company.
 
 5. In regard to the loan of Rs. 33.50 millions to Continental Textile
 Mills Ltd., treated as doubtful of recovery, it has been provided for.
 Advance in the nature of loans also includes Rs. 168,840 (interest
 free) to Continental Power Corporation Ltd. There are no stipulation
 regarding repayment of principal & interest of these advances.
 Excepting this, the company has not given loans, secured or unsecured,
 to Companies, Firms or parties listed in the Register maintained under
 Section 301 of the Companies Act, 1956 or to companies under the same
 management as defined under Section 370 (1-B) of the Companies Act.
 
 6. Advances in the nature of loans amounting to Rs. 44.22 millions
 during the year and interest outstanding of Rs. 9.29 millions of
 earlier years due from a subsidiary are also considered doubtful for
 recovery. In respect of other loans and advances in the nature of
 loans, parties have generally repaid the principal amount as stipulated
 and have also been regular in the payment of interest, where
 applicable.
 
 7. In our opinion and according to the information and explanations
 given to us, there are reasonably adequate internal control procedures
 commensurate with the size of the Company and the nature of its
 business with regard to purchase of stores, construction materials
 including components, plant and machinery & equipment and other assets.
 
 8. According to the information and explanations given to us, there are
 no transactions of purchase of goods and materials and sale of goods,
 materials and services made by the Company in pursuance of contracts or
 arrangements entered in the Register maintained under Section 301 of
 the Companies Act 1956.
 
 9. As explained to us, the Company determines unserviceable or damaged
 stores and construction materials at the time of physical verification.
 Adequate provision has been made in the accounts for the loss arising
 on the items so determined.
 
 10. The Company has not accepted any deposits from the public.
 
 11. The Company has no by-products. In our opinion, reasonable records
 have been maintained for sale and disposal of scrap arising during
 construction.
 
 12. A firm of Chartered Accountants have carried out internal audit of
 the accounts of main units and head office. In our opinion, it is
 commensurate with the size and nature of business of the company.
 
 13. The Central Government has not prescribed maintenance of cost
 records under Section 209(1)(d) of the Companies Act 1956.
 
 14. According to the records of the Company, there were delays during
 the year in the deposit of provident fund dues with the appropriate
 authorities. However, there were no arrears as on the balance sheet
 date. Employees State Insurance dues have been paid regularly.
 
 15. According to the records of the Company, there was no undisputed
 amount payable in respect of income tax, wealth tax, sales tax, customs
 duty and excise duty as at 31st March, 2002 which are outstanding for a
 period of more than six months from the date they become payable.
 
 16. According to the information and explanations given to us and the
 records of the Company examined by us, no personal expenses have been
 charged to revenue account other than those payable under contractual
 obligations or in accordance with the generally accepted business
 practice.
 
 17. The provisions of Sick Industrial Companies (Special Provisions)
 Act, 1985 do not apply to the Company as the Company is not an
 industrial undertaking specified in the First Schedule of the
 Industries (Development and Regulation) Act 1951.
 
                                               for V. Sankar Aiyar & Co.
                                                   Chartered Accountants
 
 Place: New Delhi                                          R. RAGHURAMAN
 Dated: 05.08.2002                                               Partner