Dalmia Cement (Bharat)

1.  We have audited the attached Balance Sheet of DALMIA CEMENT
 (BHARAT) LIMITED, as at 31st March, 2009, and also 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.
 
 2.  We conducted 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
 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 Companies (Auditors Report) Order, 2003 as
 amended by the Companies (Auditors’ Report) (Amendment) Order, 2004
 (collectively the Order) issued by the Central Government of India in
 terms of sub-section (4A) of section 227 of the Companies Act, 1956 and
 on the basis of such checks of the books and records of the Company as
 we considered appropriate and according to the information and
 explanations given to us, 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 in paragraph 3
 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 account as required by law have
 been kept by the Company so 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 the
 accounting standards referred to in sub-section (3C) of section 211 of
 the Companies Act, 1956;
 
 (v) On the basis of written representations received from the directors
 as on 31st March, 2009 and taken on record by the Board of Directors,
 we report that none of the directors is disqualified as on 31st March,
 2009 from being appointed as a director in terms of clause (g) of sub-
 section (1) of section 274 of the Companies Act, 1956;
 
 (vi) In our opinion and to the best of our information and according to
 the explanations given to us, the said accounts read together with
 Significant Accounting Policies and 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:
 
 (a) in the case of Balance Sheet, of the state of affairs of the
 Company as at 31st March, 2009;
 
 (b) in the case of the Profit and Loss account, of the Profit for the
 year ended on that date; and
 
 (c) in the case of the Cash Flow Statement, of the cash flows for the
 year ended on that date.
 
 Annexure to the Auditors Report
 
 Re: Dalmia Cement (Bharat) Limited
 
 Referred to in paragraph 3 of our report of even date
 
 1.  The Company has maintained proper records showing full particulars
 including quantitative details and situation of fixed assets.
 
 2.  As explained to us, all the fixed assets have not been physically
 verified by the management during the year but there is a regular
 programme of verification which, in our opinion, is reasonable having
 regard to the size of the Company and the nature of its assets. No
 material discrepancies were noticed on such physical verification.
 
 3.  In our opinion and according to the information and explanations
 given to us, a substantial part of fixed assets has not been disposed
 off by the Company during the year.
 
 4.  As explained to us, physical verification has been conducted by the
 management at reasonable intervals in respect of finished goods, stores
 and spare parts and raw material. Further, stock in the possession and
 custody of third parties and stock in transit at 31st March, 2009 have
 been verified by the management with reference to confirmation or
 statement of accounts or correspondence of the third parties or
 subsequent receipts of goods. In our opinion, the frequency of such
 verification is reasonable.
 
 5.  In our opinion and according to the information and explanations
 given to us, the procedures of physical verification of inventories
 followed by the management are reasonable and adequate in relation to
 the size of the Company and the nature of its business.
 
 6.  On the basis of our examination of the records of inventories, in
 our opinion, the Company has maintained proper records of inventories
 and as explained to us, the discrepancies noticed on physical
 verification of inventories as compared to book records were not
 material and have been properly dealt with in the books of account.
 
 7.  The Company has not granted or taken any loans, secured or
 unsecured, to/from companies, firms or other parties covered in the
 register maintained under section 301 of the Companies Act, 1956.
 
 8.  Since there are no such loans, the comments regarding repayment of
 the principal amount and interest due thereon and overdue amounts are
 not required.
 
 9.  In our opinion and according to the information and explanations
 given to us, there are adequate internal control systems commensurate
 with the size of the Company and the nature of its business with regard
 to purchase of inventory and fixed assets and for the sale of goods and
 services. Further, on the basis of our examination of the books and
 records of the Company,
 
 carried out in accordance with the generally accepted auditing
 practices in India, we have neither come across nor have we been
 informed of any instance of a continuing failure to correct major
 weaknesses in the aforesaid internal control systems.
 
 10.  Based on the audit procedures applied by us and according to the
 information and explanations provided by the management, we are of the
 opinion that particulars of transactions that need to be entered into
 the register maintained under section 301 of the Companies Act, 1956
 have been so entered.
 
 11.  In our opinion and according to the information and explanations
 given to us, the transactions with parties, with whom transactions
 exceeding the value of Rupees Five Lacs in respect of each party have
 been entered into during the financial year, are at prices, which are
 reasonable having regard to the prevailing market prices at the
 relevant time where such market prices are available.
 
 12.  In our opinion and according to the information and explanations
 given to us, the Company has complied with the provisions of sections
 58A, 58AA and any other relevant provisions of the Companies Act, 1956
 and the Companies (Acceptance of Deposits) Rules, 1975 with regard to
 the deposits accepted from the public.
 
 13.  In our opinion, the Company has an internal audit system
 commensurate with the size and nature of its business.
 
 14.  We have broadly reviewed the books of account maintained by the
 Company pursuant to the Order made by the Central Government of India
 for the maintenance of cost records under section 209(1) (d) of the
 Companies Act, 1956, in respect of the cement and sugar units and are
 of the opinion that, prima facie, the prescribed accounts and records
 have been made and maintained.  However, we are not required to carry
 out a detailed examination of such records.
 
 15.  According to the records of the Company examined by us and the
 information and explanations given to us, in our opinion, the Company
 is regular in depositing with appropriate authorities undisputed
 statutory dues including provident fund, investor education and
 protection fund, employees state insurance, income-tax, sales-tax,
 service tax, wealth-tax, customs duty, excise duty, cess and other
 statutory dues applicable to it and there are no such undisputed dues
 payable as at 31st March, 2009 for a period of more than six months
 from the date they became payable.
 
 16.  According to the records of the Company examined by us and the
 information and explanations given to us, there are no dues of service
 tax, customs duty and wealth tax which have not been deposited on
 account of any dispute, except the following in respect of disputed
 excise duty, sales tax, income tax and cess along with forum where
 dispute is pending:
 
 Name of the Statute             Nature of Dues                     Amount
                                                                Rs. Millions
 
 Central Excise Act, 1944       Disallowance of                        7.23
 Cenvat Credit
 Central Excise Act, 1944       Disallowance of                       48.72
 Cenvat Credit on
 Capital Goods
 Central Excise Act, 1944       Disallowance of                        1.33
 Cenvat Credit
 Central Excise Act, 1944       Denial of cenvat credit                9.47
 on clinker used in
 cement supplied to
 Special Economic units
 in zones
 Tamil Nadu General Sales      Differential tax for non               0.77
 Tax Act, 1959                   acceptance of Form
 XVII for purchase
 Kerala General Sales          Assessment demand                      6.85
 Tax Act, 1963                 addl. 1% on turnover
 Kerala General Sales            Incorrect filing of monthly          9.11
 Tax Act, 1963                         returns
 Mines and Minerals               Royalty on Patta Lands              2.77
 (Regulation & Development)
 Act, 1957
 Coal Mines (Conservation       Cess Charges                          1.28
 & Development) Act, 1974
 Tamil Nadu Electricity        Taxation on consumption               13.44
 (Taxation on Consumption)   of self-generated energy
 Act, 1962                    using Furnace Oil as fuel
 Income Tax Act, 1961           Income Tax                            8.00
 
 Period to which the           Forum where
 amount relates              dispute is pending
 
 Oct. 01 to Apr. ‘02          CESTAT, Southern
                               Region Bench
 Sept. 04 to Feb. ‘06         CESTAT, Southern
                              Regional Bench
 Apr07 to Mar08            Commissioner Central
                             Excise(Appeals)
 July 06 to Oct’ 07         Commissioner Central
                            Excise(Appeals)/CESTAT
 1997-98, 1998-99 &          STAT,  Madurai
 1999-00
 2003-04, 2004-05         Dy. Commissioner (App.),
                              Ernakulam.
 2005-06                  High Court of Kerala
 30.05.1982 to            Supreme Court of India
 31.12.1991
 April 2005               Dy. Commissioner,Customs
 Oct’92 to Sep’99         High Court, Madras
 A/Y 2006-07              Commissioner of Income
                          Tax (Appeals),New Delhi
 
 17.  The Company does not have accumulated losses as at the close of
 the financial year. The Company has not incurred any cash losses during
 the financial year covered by our audit and the immediately preceding
 financial year.
 
 18.  According to the records of the Company examined by us and the
 information and explanations given to us, in our opinion, the Company
 has not defaulted in repayment of dues to any financial institution,
 bank or debenture holders during the year.
 
 19.  In our opinion and according to the explanations given to us and
 based on the information available, no loans and advances have been
 granted by the Company on the basis of security by way of pledge of
 shares, debentures and other securities.
 
 20.  In our opinion, the Company is not a chit fund/nidhi/ mutual
 benefit fund/society.  Therefore, the provisions of
 clause (xiii) of paragraph 4 of the Order are not applicable to the
 Company.
 
 21.  The Company has maintained proper records of the transactions and
 contracts in respect of dealing or trading in shares, securities,
 debentures and other investments and timely entries have been made
 therein. All shares, securities, debentures and other investments have
 been held by the Company in its own name.
 
 22.  In our opinion, the terms and conditions on which the Company has
 given guarantees for loans taken by others from banks or financial
 institutions are not, prima facie, prejudicial to the interest of the
 Company.
 
 23.  According to the records of the Company examined by us and the
 information and explanations given to us, in our opinion, the term
 loans taken by the Company have been applied for the purpose for which
 they were obtained, where such end-use has been stipulated by the
 lender.
 
 24.  According to the information and explanations given to us and on
 the basis of an overall examination of the balance sheet of the
 Company, in our opinion, generally, there are no funds raised by the
 Company on short-term basis which have been used for long-term
 investment.
 
 25.  During the year, 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.
 
 26.  According to the information and explanations given to us, the
 company has created necessary security for debentures issued during the
 year and in earlier years.
 
 27.  During the period covered by our audit report, the Company has not
 raised any money by public issue.
 
 28.  During the course of our examination of the books and records of
 the Company carried out in accordance with the generally accepted
 auditing practices in India, we have neither come across any instance
 of fraud on or by the Company, noticed or reported during the year, nor
 have we been informed of such case by the management.
 
 29.  The other clauses of the Order do not appear to be applicable for
 the year under report.
 
                                For S.S. KOTHARI MEHTA & CO.
                                   Chartered Accountants
 
                                    (ARUN K. TULSIAN)
 Place: New Delhi                        Partner
 Date: 28th May, 2009                Membership No. 89907