1.  We have audited the attached Balance Sheet of ELECTROTHERM (INDIA)
 LIMITED, as at 31st March, 2011, the Profit & Loss Account and also the
 Cash flow statement 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 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 (Auditor''s Report) Order, 2003 as
 amended by the Companies (Auditor''s Report) Amended order 2004, 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
 as we considered appropriate and according to the information and
 explanation given to us, we enclose in the Annexure a statement on the
 matters specified in paragraphs 4 and 5 of the said Order, for the year
 under consideration.
 
 4.  Further to our comments as stated above in para (3) of this report
 and subject to notes on account & significant accounting policies, we
 further broadly 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
 those books;
 
 (iii) The Balance Sheet, Profit & Loss Account and Cash Flow Statement
 dealt with by this report are in agreement with the books of accounts;
 
 (iv) In our opinion, the Balance Sheet, Profit and Loss Account and
 Cash Flow Statement dealt with by this report, read with the notes to
 accounts and accounting policies, comply with the applicable accounting
 standards referred to in sub-section (3C) of section 211 of the
 Companies Act, 1956;
 
 (v) On the basis of written representation received from the Directors
 of the Company as on March 31st, 2011 and taken on record by the Board
 of Directors, we report that none of the directors is disqualified as
 on March 31st, 2011 from being appointed as a Director in terms of
 clause (g) of sub-section (1) of section 274 of the Companies Act,
 1956; and
 
 (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 the
 significant accounting policies and notes appearing thereon, 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, 2011;
 
 (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 AUDITOR''S REPORT
 
 ANNEXURE REFERRED TO IN PARAGRAPH (3) OF THE AUDIT REPORT OF EVEN DATE
 OF THE MEMBERS OF ELECTROTHERM (INDIA) LIMITED, ON THE ACCOUNTS FOR THE
 YEAR ENDED ON 31ST MARCH, 2011.
 
 (1) (a) The company has maintained records showing particulars of
 quantity and situation of fixed assets.
 
 (b) As informed to us, the company has formulated a programme of
 physical verification of all the fixed assets over a period of three
 years, which in our opinion is reasonable having regard to the size of
 the Company and the nature of its assets. Accordingly, the physical
 verification of the fixed assets has been carried out by the management
 during the year and as informed to us, no material discrepancies were
 noticed on such physical verification.
 
 (c) Fixed assets disposed off during the year were not substantial and
 therefore do not affect the going concern assumption.
 
 (2) (a) As informed to us, during the year the management has conducted
 physical verification of the inventories (except good in transit and
 stock lying with third parties) and in our opinion the frequency of
 verification is reasonable.
 
 (b) The procedures of physical verification of inventories followed by
 the management is broadly reasonable and adequate having regard to the
 size of the Company and the nature of its business.
 
 (c) In our opinion and according to the information and explanation
 given to us, the Company has maintained proper records of inventory. As
 informed to us, the discrepancies noticed on verification between the
 physical stocks and the book records were not material and have been
 properly dealt with in the books of account.
 
 (3) (a) As informed to us, the company has taken unsecured loan from
 the Companies, firms and other parties listed in the register
 maintained under section 301 of the Companies Act, 1956. The aggregate
 of loan outstanding of six such parties as on the last day of the year
 is Rs. 11.74 Millions. The rate of interest and the terms of repayment
 are not stipulated and other terms and conditions are not prima facie
 prejudicial to the interest of the Company.
 
 (b) As informed to us, the company has given loans to the companies
 firms and other parties listed in the register maintained under section
 301 of the Companies Act. In respect of the said loans, the amount
 outstanding as on the last day of the year is Rs. 120.10 Millions. The
 rate of interest and the terms of repayment are not stipulated and
 other terms and conditions are not prima facie prejudicial to the
 interest of the Company.
 
 (4) In our opinion and according to the information and explanations
 given to us, there are generally adequate internal control procedures
 commensurate with the size of the company and the nature of its
 business with regards to purchases of inventory and fixed assets and
 for the sale of goods. During the course of our audit, we have not
 observed any continuing failure to correct major weaknesses in internal
 controls.
 
 (5) (a) 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 transactions that need to be entered into the register
 maintained under section 301 have been so entered.
 
 (b) In respect of transactions with parties with whom transactions
 exceeding value of Rs. 5 Lacs have been entered into during the
 financial year, are at the prices which are reasonable having regard to
 the prevailing market prices at the relevant time, except in case of
 transactions where we are unable to comment owing to the unique and
 specialized nature of the items and absence of any comparable prices,
 whether the transactions are made at the prevailing market prices at
 the relevant time or not.
 
 (6) In our opinion and according to the information and explanation
 given to us, the company has not accepted deposits from the public as
 per the directives issued by the Reserve Bank of India and the
 provisions of section 58A, section 58AA and any other relevant
 provisions of the Act and the rules framed there under.
 
 (7) The Company has an Internal Audit Department system; however, the
 same is required to be further strengthened with regard to the scope,
 reporting and its compliance so that it can be commensurate with size
 and nature of business of the company.
 
 (8) The Central Government of India has prescribed maintenance of cost
 records under section 209(1)(d) of the Companies Act, 1956 for the
 Steel Products and Vehicles and on the basis of the explanation given
 and our broad review of the records maintained prima facie the company
 has maintained cost records for the said records for the said Products.
 The contents of these accounts and records have not been examined by
 us.
 
 (9) (a) The Company is generally regular in depositing with appropriate
 authorities undisputed statutory dues including provident fund,
 investor education and protection fund, employees; state insurance,
 income tax, sales tax, wealth tax, custom duty, excise duty, cess and
 other material statutory dues applicable to it.
 
 (b) According to the information and explanations given to us, no
 undisputed amounts payable in respect of Income Tax, Sales Tax, Customs
 Duty, Excise Duty and cess were in arrears as at 31st March, 2011 for a
 period of more than six months from the date they become payable.
 
 (c) On the basis of information furnished to us, following are the
 details of outstanding dues in respect of Sales tax, Income tax, Custom
 duty, Wealth tax, Excise Duty and Cess, which have not been
 deposited/adjusted/reveresed on account of any dispute. :-
 
 NAME OF THE 
 STATUTORY DUES   FORUM WHERE DISPUTE IS PENDING            AMOUNT (Rs.
                                                           In Millions)
 
 Income tax       Commissioner of Income-Tax (Appeals)          1.42
 
 Excise Duty      Central Excise and Custom Appellate 
                  Tribunal                                      5.40
 
 Excise Duty      Commissioner of Central Excise and 
                  Custom (Appeals)                            910.60
 
 Excise Duty      Dy. Commissioner of Excise and Custom       122.30
 
 Excise Duty      Commissioner of Central Excise             1750.10
 
 Vat              Asst Commissioner of Commercial Tax
                  ( Appeals)                                    0.61
 
 (10) In our opinion and on the basis of accounts, read with notes to
 accounts, there are no losses of the Company at the end of financial
 year and the Company has not incurred cash loss in the current
 financial year and in preceding financial year.
 
 (11) Based on our audit procedures and on the information and
 explanations given by the management, we are of the opinion that the
 company has not defaulted in repayment of dues (other than last quarter
 interest) to financial institution or bank. The company does not have
 any borrowings by way issue of debentures.
 
 (12) We are of the opinion, the company has not granted loans and
 advances on the basis of security by way of pledge of shares,
 debentures and other securities.
 
 (13) In our opinion, the company is not a chit fund or a nidhi mutual
 benefit fund/society and therefore, the provisions of clause 4(xiii) of
 the Companies (Auditor''s Report) Order, 2003 are not applicable to the
 company.
 
 (14) In our opinion, the company is not dealing in or trading in
 shares, securities, debentures and other investments and accordingly,
 the provisions of clause 4(xiv) of the Companies (Auditors Report)
 Order 2003 are not applicable to the Company.
 
 (15) According to the information and explanations given to us, the
 Company has not given any guarantees for loans taken by others from
 banks or financial institutions.
 
 (16) According to the Cash Flow Statement and other records examined by
 us as well as information and explanations given to us on an overall
 basis, term loan taken by the company has been utilized for the purpose
 for which they were raised.
 
 (17) According to the Cash Flow Statement and other records examined by
 us as well as information and explanations given to us on an overall
 basis, we report that funds raised on short term basis have not
 prima-facie been used for long term investment.
 
 (18) The Company has not made allotment of shares to companies, firms
 or parties covered in the register maintained under section 301 of the
 Companies Act, 1956.
 
 (19) The company has not issued any debentures and accordingly, the
 provisions of clause 4(xix) of the Companies (Auditor''s Report) Order,
 2003 are not applicable to the company.
 
 (20) During the year, the company has not raised any money through a
 public issue.
 
 (21) During the course of our examination of the books and records of
 the company, carried out in accordance with generally accepted auditing
 practices in India, and according to the information and explanations
 given to us, we have neither come across any instances of material
 fraud on or by the Company, noticed or reported during the year, nor
 have we been informed of such case by the management.
 
                                                For Mehta Lodha & Co.
 
                                            (Registration No.106250W)
 
                                                Chartered Accountants
 
                                                       Prakash D.Shah
 
 Place:Ahmedabad                                              Partner
 
 Date :May 30, 2011                              Membership No. 34363