We have audited the attached Balance Sheet of M/s Enchante Jewellery
 Ltd. as at 31st March 2005 and also the Profit & 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 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 of our opinion.
 
 As required by the Companies (Auditors Report) order, 2003 issued by
 the Central Government 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 paragraph 4 and 5 of the said order.
 
 Furtherto our comments in the annexure 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 ourexamination of
 those books.
 
 iii) The Balance Sheet and Profit and Loss Account dealt with by this
 report are in agreement with the books of account.
 
 iv) In our opinion, the Balance Sheet, the Profit & Loss Account and
 Cash Flow Statement 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 to the extent applicable to the company.
 
 v) On the basis of the written representations received from the
 directors as on 31.3.2005 and taken on record by the Board of
 Directors, we report that none of the directors is disqualified as on
 31st March 2005 from being appointed as a director in terms of
 clause(g) of sub-section (1) of section 274 of the companies Act,
 1956.
 
 vi) Attention is invited to:
 
 a) The preparation of accounts going on concern basis, despite the
 company being a sick industrial company, and incurring operational
 losses continuously.
 
 vii) a) Note no. 6 of part B of schedule K regarding writing back of Rs
 624.65 lakhs in the Profit & Loss Account during the financial year
 2002-03 and non provision of interest on amount payable to SBI (amount
 unascertained), in respect of Loan of State Bank of India. The bank has
 denied for the OTS proposal as not being acceptable by the banks
 appropriate authority, in view of the sacrifice involved on the part of
 the bank.
 
 b) Note no. 14 of part B of Schedule K regarding accounting of
 liability for bonus on payment basis. (amount unascertained).
 
 We further report that the profit for the year and balance in the
 Profit and Loss Account are without considering the impact of terms
 mentioned in (vi) and (vii) (b) above, the impact of which could not be
 determined. Had the effect of item mentioned in para 2 (vii) (a) above
 been given, the secured loans in the balance sheet would have been Rs.
 1031.89 Lakhs (as against the reported figure of Rs. 407.24 lakhs), and
 the debit balance in the Profit & Loss Account would have been Rs.
 1284.77 lakhs (as against the reported figure of Rs 660.12 lakhs).
 
 Subject to the foregoing, 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:
 
 a. in the case of Balance Sheet, of the state of affairs of the
 Company as at 31st March 2005; and
 
 b. in the case of Profit & Loss account, of the profit for the year
 ended on that date.
 
                                              For Anuj Kumar Gupta & Co.
                                                   Chartered Accountants
 Place : Gurgaon                                            (Anuj Kumar)
 Date : 23rd August, 2005                                     Proprietor
 
 ANNEXURE REFERRED TO IN PARAGRAPH 3 OF THE REPORT OF EVEN DATE OF THE
 AUDITORS TO THE MEMBERS OF M/S ENCHANTE JEWELLERY LIMITED ON THE
 ACCOUNTS FOR THE YEAR ENDED 31ST MARCH 2005.
 
 1. a) As informed to us, the company is in the process of compiling
 the Fixed Assets Records showing full particulars including
 quantitative details and situation of fixed assets.
 
 b) The company has a program of physical verification of fixed assets
 over a period of three years which is, in our opinion, reasonable
 having regard to the size of the company and the nature of the assets.
 However no fixed assets have been physically verified by the management
 during the year.
 
 c) In our opinion, the company has not disposed off a substantial part
 of the fixed assets during the year and therefore paragraph 4 (i) (c)
 of the Companies (Auditors Report) order, 2003 (hereinafter referred
 to as the Order) is not applicable.
 
 2. a) Physical verification of inventory has been conducted by the
 management during the year and, in our opinion, the frequency of
 verification is reasonable.
 
 b) The procedures of physical verification of inventories followed by
 the management are reasonable and adequate, in relation to the size of
 the company and nature of its business.
 
 c) The company is maintaining proper records of inventories and no
 material discrepancies have been noticed on physical verification of
 inventories as compared to the book records.
 
 3. According to the information and explanation given to us the
 company has not granted any loans, secured or unsecured, to companies,
 firms or other parties covered in the register maintained under section
 301 of the Companies Act, 1956, and therefore paragraph 4(iii) of the
 said order is not applicable.
 
 4. In our opinion and according to information and explanations given
 to us, there are adequate internal control procedures commensurate with
 the size of the Company and the nature of the business, for the
 purchase of inventories and fixed assets and for the sale of goods. We
 have neither come across nor have we been informed of any major
 weakness in the internal control procedures.
 
 5. a) To the best of our knowledge and belief and according to the
 information and explanations given to us, we are of the opinion that
 the transactions that need to be entered in the Register in pursuance
 of Section 301 of the Companies Act, 1956 have been so entered.
 
 b) In our opinion and according to the information and explanation
 given to us, transactions during the year exceeding the value of five
 lakhs rupees in respect of any party which required to be entered in
 the register u/s 301 of the Companies Act, 1956 have been made at
 prices which are reasonable having regard to prevailing market prices
 at the relevant time.
 
 6. In our opinion and according to the information and explanations
 given to us, the company has not accepted deposit from the public to
 which the provisions of section 58A ana 58AA of the Companies Act, 1956
 and the rules framed there under are applicable, and therefore
 paragraph 4 (vi) of the order is not applicable.
 
 7. In our opinion, the Company has an internal audit system which is
 commensurate with its size and nature of business.
 
 8. It has been informed to us that the central Governments has not
 prescribed maintenance of cost records under section 209 (1) (d) of the
 Companies Act.1956 for the products of the company.
 
 9. (a) In our opinion and according to the information and
 explanations given to us, the company, due to its financial sickness,
 is on occasion irregular in depositing undisputed statutory dues
 including provident fund, employees state insurance, and income tax
 deducted at source with the appropriate authorities. However, all of
 the undisputed statutory dues as on 31.03.2005 have been paid and
 therefore the delay does not appear to be wilful or intentional. As on
 31st March 2005, according to the records of the company, the following
 are the particulars of undisputed dues on account of provident fund,
 employees state insurance, sales tax and income tax deducted at source,
 on which the company was irregular and the dates on with the said
 payments were made.
 
 Name of    Nature of dues            Amount Rs.                Due Date
 the statue
 
 Provident  Employer contribution        76932/-             15th of the
 Fund       and PF charges for the                             following
            period from September 04                        month of the
            to March 05                                         month in
                                                            which amount
                                                            is deducted.
 
 Provident  Employee contribution        10139/-        15th of April 05
 Fund       for the month of March 2004
            is Errplcysrs
            contribution for March,       4164/-
            21st April, 2004           Rs 1675/-
            deposited on Gurgaon 05    Rs.1675/-,
            and OT and                            15/4/05 and balance on
            trial staff for 2002-03                            20-6-2005
 
 ESI        Payabletowards Employers    119402/-       21st of following
 Gurgaon    contribution from October                       month of the
            2002 to Sept 05 and March 05,                 month in which
                                                        payment made for
                                                            Contractors.
 
 ESI Delhi  For the month of               318/-   21.04.2005 16.04.2005
 March 05
 
 Tax        Deducted on 20.9.04          12830/-  7th of following month
            deducted Rs.472/-Deducted on           of the month in which
            at source 31.3.2005       Rs 11698/-,    amount is deducted.
            Interest for the year                     Amount deducted on
            2004-05                     Rs 660/-     the last day of the
                                                   year can be deposited
                                                      in two months from
                                                     the end of the year
 
 Name of         Date of payment
 the statue
 
 Provident       Rs. 67129/-pertaining to the
 Fund            period from Sept 04 to Feb 05
                 has been paid during the
                 month of May 05 and June 05.
                 However the companyis still
                 to pay the employer
                 contribution and PF charges
                 for the month of March 05
                 amounting to Rs 9803/-.
 
 Provident       27-04-2005
 Fund            15/4/05 and balance on
                 20-6-2005
 
 ESI             deposited from 30.04.05
 Gurgaon         to 23.06.05
                 month in which
                 payment made for
                 amount is deducted.
                 Overtime and Staff on trial,
                 relating to the financial
                 year 2002-03.
 
 ESI Delhi       21.04.2005 16.04.2005
 March 05
 
 Tax            depositedon20.5.05.
                depositedon 30.6.05
                depositedon20.5.05
                deposited on 30.6.05
 
 10. The companys accumulated losses at the end of the financial year
 are more than fifty percent of its net worth and it has incurred cash
 losses in such financial year. The company has been declared a sick
 industrial company during the year 1999-2000, within the meaning of
 clause (0) of Sub section (1) of Section (3) of Sick Industrial
 companies, (Special Provisions) Amendment Act, 1992 vide BIFR letter
 dated 25-10-2002.
 
 11. In view of the note number 6 of Part B of Schedule K, we are unable
 to comment to determine whether there is a default in repayment of
 loans due to the State Bank of India.
 
 12. The company has not granted any loans or advances on the basis of
 security by way of pledge of shares, debentures and other securities
 and therefore paragraph 4(XII) of the order is not applicable.
 
 13. The provisions of any special statute applicable to chit fund and
 nidhi/mutual benefit fund/society are not applicable to the company
 and therefore paragraph 4(XIII) of the Order is not applicable.
 
 14. The company is not dealing or trading in shares, securities,
 debentures and other investments and therefore paragraph 4(XIV) of the
 Order is not applicable.
 
 15. According to the information and explanations given to us, during
 the year the company has not given any guarantee for loans taken by
 others from banks or .financial institutions and therefore paragraph
 4(XV) of the Order is not applicable.
 
 16. According to the information and explanations given to us the
 company has not availed any term loans during the year and therefore
 paragraph 4(XVI) of the Order is not applicable.
 
 17. According to the information and explanations given to us and on an
 overall examination of the balance sheet of the company, in our
 opinion, there are no funds raised on short term basis which has been
 used for long term investments and vice versa.
 
 18. The company has not made any preferential allotment of shares
 during the year and therefore paragraph 4(XVIII) of the Order is not
 applicable.
 
 19. The company has not issued any debentures during the year and
 therefore paragraph 4 (XIX) of the Order is not applicable.
 
 20. The company has not raised any money by way of public issues during
 the year and therefore paragraph 4 (XX) of the Order is not applicable.
 
 21. Based upon the audit procedures performed and as per the
 information and explanations given to us by the management, we report
 that no fraud on or by the company has been noticed during the year.
 
                                              For Anuj Kumar Gupta & Co.
                                                   Chartered Accountants
 Place : Gurgaon                                            (Anuj Kumar)
 Date : 23rd August, 2005                                     Proprietor