1.  We have audited the attached Balance Sheet of CORAL NEWSPRINTS
 LIMITED as at 31st March 2011 and also the Profit & Loss Account 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.
 
 2.  We have 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.
 
 3.  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, (''the Act''), we enclose in the
 Annexure a statement on the matters specified in paragraphs 4 and 5 of
 the said Order.
 
 4.  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 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 & Loss Account dealt with by this report
 are in agreement with the books of account;
 
 d) In our opinion, the Balance Sheet, profit and loss account & cash
 flow statement dealt with by this report comply with the Accounting
 Standards referred to in Sub-Section (3C) of the Section 211 of the
 Companies Act, 1956;
 
 e) On the basis of the written representation received from the
 Directors, as on 31 March 2011 and taken on record by the Board of
 Directors, we report that none of the Directors is disqualified as on
 March 31, 2011 from being appointed as a Director in terms of clause
 (g) of sub-section (1) of Section 274 of the Act;
 
 f) As indicated in note 6, the accounts of the Company have been
 prepared on the basis that the Company is a going concern, however
 having regard to the accumulated losses of the Company which have
 eroded the paid-up Capital, the ability of the Company to continue as a
 going concern depends on the adequate finance and future profitability.
 
 g. Reference is invited to :
 
 Note 2. Regarding non confirmation of balance of Unsecured loans, few
 Debtors & Creditors.
 
 Note 4. Regarding non confirmation of Term Loans from UPFC & PICUP.
 
 Note 16. Regarding the Arbitration award passed by Hon''ble Justice S.C.
 Jain (Retd.) appointed by Hon''ble High Court regarding settlement of
 dispute with the Narayan Prasad Jalan.
 
 h) Subject to matters referred in Para g, in our opinion and to the
 best of our information and according to the explanation given to us,
 the said accounts read with notes there on give the information
 required by the Act, in the manner so required to 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, 20011;
 
 ii) In the case of the Profit and Loss Account, of the Profit for the
 year ended on that date; and
 
 iii) In the case of Cash Flow Statement, of the cash flow for the year
 ended on that date.
 
 (i) (a) The Company is maintaining proper records showing full
 particulars, including quantitative details and situation of fixed
 assets.
 
 (b) The Company physically verifies the fixed assets on a rotational
 basis and accordingly, certain fixed assets have been physically
 verified by the management during the year and no material
 discrepancies were noticed on such verification.
 
 (c) There was no disposal of fixed assets during the year.
 
 (ii) (a) As explained to us, inventories were physically verified
 during the year the management at reasonable intervals.
 
 (b) In our opinion and according to the information and explanations
 given to us, the procedures of physical verification of inventories
 followed by the management were 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, the Company has maintained proper records of its
 inventories and no material discrepancies were noticed on physical
 verification.
 
 (iii) The Company has not taken any interest free loans or advances in
 the nature of loans from any party covered in the register maintained
 under section 301 of the Act during the year. The closing balance
 outstanding as on 31.03.2011 in case of Unsecured loan taken from
 directors was Rs. 10.39 Lacs. The maximum balance outstanding during
 the year in respect of above loans was Rs. 23.09 Lacs.
 
 The Company has not given any loan or advance to the companies, firms
 or other parties listed in the register maintained under section 301 of
 the Companies Act, 1956 during the year.
 
 The terms and conditions of such loans are, in our opinion, prima facie
 not prejudical to the interest of the Company.
 
 (iv) 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 for the purchase of inventory, fixed assets and also for the
 sale of goods and services.
 
 (v) According to the information and explanations provided by the
 management, we are of the opinion that there were no contracts or
 arrangements during the year that need to be entered into the register
 maintained under section 301 of the Act.
 
 (vi) The Company has not accepted any deposits from the public to which
 the directives issued by the Reserve Bank of India and the provisions
 of section 58A of the Act and the rules framed there under apply.
 
 (vii) In our opinion, the Company has an internal audit system
 commensurate with the size and nature of its business.
 
 (viii) In respect of maintenance of cost records under clause (d) of
 sub-section (1) of section 209 of the act for the products of the
 Company. We based on our examination of the company''s records are of
 the opinion that the Company is not required to maintain the cost
 records prescribed under section 209(1 )(d).
 
 (ix) (a) According to the records of the company, undisputed statutory
 dues including Investor Education and Protection Fund, Income-tax,
 Service Tax, Sales-Tax, Custom Duty, Excise-Duty, Cess and other
 statutory dues have been regularly deposited with the appropriate
 authorities except the company is irregular in depositing the previous
 year dues related to provident fund, water cess and TDS with the
 appropriate authorities.  However, there is an arrear of Rs. 5,97,929/-
 w.r.t. Provident fund, Rs.  6,24,189/- w.r.t. Water Cess and Rs.
 16,243/- w.r.t. TDS as on 31.03.2011 and no other undisputed amounts
 payable in respect of aforesaid dues were outstanding as at 31st March,
 2011 for a period of more than six months from the date of becoming
 payable.
 
 (b) According to the records of the company, there are no dues of
 Custom duty, Wealth Tax, Excise Duty, Cess which has not been deposited
 on account of any dispute except :
 
 1.  Income tax (Penalty) demand of Rs. 2,16,322/- for the Asst Year
 1996-97, the matter for which is pending before Hon''ble Delhi High
 Court.
 
 2.  Income tax (Penalty) demand of Rs. 2,69,105/- for the Asst Year
 1995-96, the matter for which is pending before Hon''ble Delhi High
 Court.
 
 3.  Water Cess - Rs. 2,29,891/- pending under appeal.
 
 4.  Sales Tax - Rs. 6,46,883/- pending under appeal.
 
 (x) The accumulated losses of the company have exceeded Fifty percent
 of its net worth as at 31st March, 2011. The Company has not incurred
 any cash losses during the financial year covered by our Audit and also
 not incurred any cash loss in the immediately preceeding F.Y. in
 arriving at the accumulated losses and the net worth we have considered
 the qualifications which are quantifiable in the Audit Report of the
 year which these locess pertain.
 
 (xi) The Company has defaulted in repayment of dues to financial
 institutions. The Company had already paid the OTS amount of UPFC loan
 during the previous year. However in respect of the DADP Interest
 demanded by UPFC (i.e. Rs.  51.83 lacs) vide its letter dated
 24.03.2011, the Company has requested for a waiver of 75% vide its
 letter dated 04.08.2011 which is still pending before BIFR Board.
 However, as per the previous DADP demand of Rs. 51.83 Lacs, the Company
 has already paid Rs. 14.82 lacs till 31.03.2011.
 
 During the previous year, the Company had requested for OTS with PICUP
 at Rs. 235 lacs which was not approved by them. Though as per the
 directions given by BIFR, the Company laid down the new OTS proposal on
 25.06.2011 for final settlement and reduce the previous OTS to Rs. 201
 lacs on the basis of new OTS Policy of PICUP. The Company has already
 paid Rs. 37 lacs in the F.Y. 2003-04. Further, during the year the
 Company has paid Rs. 1 lac to PICUP towards earnest money against the
 proposal.
 
 No confirmation of closing balance was available in respect of above
 loans.  Hence, no provision of interest was made in the books in
 respect of UPFC & PICUP Loan.
 
 (xii) The Company has not granted loans and advances on the basis of
 security by way of pledge of shares, debentures and other securities.
 
 (xiii)The nature of activities of the Company does not attract any
 special statute applicable to chit fund and nidhi/mutual benefit
 fund/societies.
 
 (xiv)The Company does not deal or trade in shares, securities,
 debentures and other investment.
 
 (xv)According to the information and explanations given to us, the
 Company has not given a guarantee for a loan taken by a third party
 from a bank or financial institutions.
 
 (xvi)According to the record of the company, the company has not
 obtained any term loans during the year.
 
 (xvi) According to the information and explanations given to us and on
 overall examination of the balance sheet of the Company, we report that
 no funds raised on short terms basis have been used for long-term
 investment.
 
 xvi) According to the records of the Company and 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 Companies Act, 1956
 during the year.
 
 (xix)According to the record of the company, the company has not issued
 any debentures during the year.
 
 (xx) The Company has not raised any money by public issue during the
 period covered by our Audit Report.
 
 (xxi)Based upon Audit procedures performed and information and
 explanation given by the management we report that no fraud on or by
 the Company has been noticed or reported during the course of Audit.
 
                                              For L.N. Malik & Co.
 
                                              Chartered Accountants
 
                                              L.N. Malik 
 
                                              Partner 
 
                                              M. No 10423 
 
                                              FRN : 015992N
 
 Place : New Delhi
 
 Date : 6th September, 2011