We have audited the attached Balance Sheet of M/s. DCL Maritech Limited
 as at 31st March, 2002 and the Profit and Loss Account 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 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.
 
 1. As required by the Manufacturing and Other Companies (Auditors
 Report) Order, 1988 issued by the Central Government of India in terms
 of sub-section (4A) of Section 227 of the Companies Act, 1956 we
 enclose in the Annexure a statement on the matters specified in
 paragraphs 4 & 5 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 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 it appears from our examination of such
 books.
 
 c) The Balance Sheet and the Profit & Loss Account dealt with by us in
 this report are in agreement with the books of account;
 
 d) In our opinion, the Balance Sheet and Profit & Loss Account dealt
 with by this report comply with the Accounting Standards referred to in
 Sub-Section 3(C) of Section 211 of the Companies Act, 1956.
 
 e) Written representation has not been produced by Dr. R S Raju,
 Director of the Company, whether other Companies in which he is
 Director has defaulted in terms of Section 274 (1)(g) of the Companies
 Act, 1956. In the absence of this representation, we are unable to
 comment whether this Director is disqualified from being appointed as
 Director under clause (g) of sub-section (1) of Section 274 of the
 Companies Act, 1956. As far as other Directors are concerned, on the
 basis of written representations received from such Directors as on
 31st March, 2002 and taken on record by the Board of Directors, we
 report that none of the remaining Directors is disqualified as on 31st
 March, 2002 from being appointed as Director in terms of clause (g) of
 sub-section (1) of Section 274 of the Companies Act, 1956.
 
 f) The Company has. drawn its accounts on a going concern basis, on
 which, we are unable to express an opinion in view of uncertainties,
 including our inability at this point of time to assess the likely
 shortfall in the realisation of the assets of the Company, associated
 with the actions initiated as explained in Note No. 10 of Schedule - N.
 
 g) i) As stated in Note No. 2 of Schedule - N regarding the reference
 made to a larger bench of the Honourable Supreme Court of India and
 pending the pronouncement of its final order, we are unable to express
 an opinion of its impact on the operations and financials of the
 Company.
 
 ii) For the reasons stated in Note No. 7 of Schedule - N regarding
 directions by the Appellate Authority for Industrial and Financial
 Reconstruction (AAIFR) to the Board for Industrial and Financial
 Reconstruction (BIFR) and non reference to BIFR by the Company, due to
 disposal of the processing plant on as is where is basis by ICICI Ltd
 in terms of Orders of DRT, Mumbai, we are unable to express an opinion
 of its impact on the operations and financials of the Company.
 
 h) Subject to paras (e), (f) and (g) above, and read with Note No. 3 of
 Schedule - N regarding Acquisition of Land by the Government of Andhra
 Pradesh, Note No. 6(b) of Schedule - N regarding Non-provision of
 interest on outstanding to the consortium of Banks and other notes
 thereon, in our opinion and to the best of our information and
 according to the explanations given to us, the said 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 the Balance Sheet, of the state of affairs of the
 Company as at 31st March, 2002; and
 
 ii) in the case of the Profit and Loss Account, of the loss for the
 year ended on that date.
 
 ANNEXURE TO AUDITORS REPORT
 
 Re: DCL Marirtech Limited
 
 Statement Referred to in paragraph 1 of our report of even date
 
 1. The Company has maintained proper records showing full particulars,
 including quantitative details and situation of fixed assets. As
 explained to us, the Company has conducted physical verification of its
 Fixed Assets at the end of the year and no discrepancies were noticed
 on such verification.
 
 2. None of the Fixed Assets of the company have been revalued during
 the year.
 
 3. The Company did not have stocks of raw materials, finished goods,
 stores, packing materials and consumables at the end of the year. Hence
 the question of physical verification of stocks does not arise.
 
 4. The Company has not taken any loans, secured or unsecured from
 companies, firms or other parties listed in the register maintained
 under Section 301 of the Companies Act, 1956. In terms of sub section 6
 of Section 370 of the Companies Act, 1956, provisions of Section 370
 are not applicable to a Company.
 
 5. The company has not granted any loans, secured or unsecured to
 companies, firms or other parties listed in the register maintained
 under section 301 of the Companies Act, 1956. In terms of sub section 6
 of Section 370 of the Companies Act, 1956, provisions of Section 370
 are not applicable to a Company.
 
 6. There are no loans or Advances in the nature of loans which are
 outstanding in the books of the Company.
 
 7. 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 nature of its business with regard to
 purchase of stores including components and for the sale of goods.
 
 8. There are no Contracts or Arrangements entered in the register
 maintained under Section 301 of the Companies Act, 1956. Hence, the
 requirement of reporting regarding transactions of purchase of goods,
 materials and services made in pursuance of such Contracts aggregating
 during the financial year to Rs. 50,000/- or more in respect of each
 party does not arise.
 
 9. The Company has not accepted deposits from the Public during the
 year.
 
 10. The Company has no internal audit system for the year under audit.
 
 11. As explained to us the Central Government has not prescribed the
 maintenance of cost records under Section 209 (1) (d) of the Companies
 Act, 1956.
 
 12. The Company had employees till December, 2001. The Provident Fund
 dues were regularly deposited with the appropriate authorities. As per
 the information and explanations given to us, Employees State Insurance
 Act was not applicable to the Company.
 
 13. There are no undisputed amounts 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 became payable except:
 
 - Arrears payable in respect of APGST - Rs. 4,14,499.27.
 
 14. According to the information and explanations given to 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.
 
 15. The Company is a Sick Industrial Company within the meaning of
 clause (o) of sub section (1) of the Section 3 of the Sick Industrial
 Companies (Special Provisions) Act, 1985 and a reference has been made
 to Board for Industrial & Financial Reconstruction (BIFR). Consequent
 to the rejection of the reference on technical grounds by BIFR, an
 appeal has been made with Appellate Authority tor Industrial and
 Financial Reconstruction (AAIFR). The AAIFR has vide their order dated
 28-4-2000 stated that the Company is free to make fresh reference to
 the BIFR on the basis of its accounts for the 12 months period
 (1-4-1998 to 31-3-1999) and in case such reference is made, it should
 be considered by BIFR on merits. The Company has not made any reference
 to BIFR.
 
 16. Clauses (iv), (v), (vi), (xii) and (xiv) of paragraph 4(A) of the
 said Order are not applicable to the Company.
 
                                               for M. Bhaskara Rao & Co.
                                                   Chartered Accountants
 
 Place: Hyderabad                                              E V K RAO
 Date: 02-09-2002                                                Partner