We have audited the attached Balance Sheet of “Facor Steels Limited” as
 at 31ST March, 2011, the Profit and Loss Account and the Cash Flow
 Statement for the year ended on that date both 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.
 
 1.We conducted our audit in accordance with the auditing standards
 generally accepted in India. These Standards require that we plan and
 perform the audit to obtain reasonable assurance about whether the
 financial statements are free of material misstatements. 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 presentation of the
 financial statements. We believe that our audit provides a reasonable
 basis for our opinion.
 
 2.As required by the Companies (Auditors’ Report) Order, 2003 as
 amended by the Companies (Auditors’ Report) (Amendment) Order, 2004,
 (together ‘the order’) issued by the Central Government of India in
 terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we
 annex hereto a statement on the matters specified in paragraphs 4 and 5
 of the said Order.
 
 3.Further to 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 account as required by law have
 been kept by the Company, so far as it 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 of the Company;
 
 (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 the written representations received from the
 Directors as on 31st March, 2011 and taken on record by the Board of
 Directors, none of the Directors is disqualified as on 31ST March, 2011
 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 financial statements together
 with the notes thereon and attached thereto 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 the Balance Sheet, of the state of affairs of the
 Company as at 31ST March,2011;
 
 (b) in the case of Profit and Loss Account, of the loss for the year
 ended on that date; and
 
 (c) in the case of Cash Flow Statement, of cash flows for the year
 ended on that date.
 
 ANNEXURE TO AUDITORS''REPORT:
 
 Referred to in paragraph 2 of the Auditors’ Report of even date to the
 Members of FACOR Steels Ltd on the financial statements for the year
 ended 31St March, 2011.
 
 i) a) The Company has maintained proper records showing full
 particulars, including quantitative details and situation of fixed
 assets.
 
 b) All the fixed assets have been physically verified by the Management
 at reasonable intervals and no material discrepancies were noticed on
 such verification.
 
 c) The Company has not disposed off any major part of fixed assets
 during the year.
 
 ii) a) Physical verification of inventory has been conducted at
 reasonable intervals by the Management.
 
 b) In our opinion, the procedures of physical verification of inventory
 followed by the Management are reasonable and adequate in relation to
 the size of the Company and the nature of its business.
 
 c) The Company is maintaining proper records of inventory and no
 material discrepancies were noticed by the Management on physical
 verification.
 
 iii) a) The Company has not granted any loans, secured or unsecured, to
 the Companies, firms and other parties covered in the Register
 maintained under Section 301 of the Companies Act, 1956, and therefore
 Clauses (iii) (b), (iii) (c) and (iii) (d) of the said Order are not
 applicable.
 
 b) 1) The Company has taken unsecured loans from nine companies covered
 in the Register maintained under Section 301 of the Act. The maximum
 amount involved and the year end balance (including interest) of such
 loan aggregate to Rs.3096.88 lacs and Rs. 1784.75 lacs respectively.
 
 2) In our opinion, the rate of interest and other terms and conditions
 of such loans are not prima-facie prejudicial to the interest of the
 Company.
 
 3) In respect of the aforesaid loan, the interest and principal amounts
 are repayable on demand and there is no repayment schedule.
 
 iv) In our opinion and according to the information and explanations
 given to us, there are adequate internal control system commensurate
 with the size of the Company and the nature of its business for the
 purchase of inventory and fixed assets and for the sale of goods and
 services and during the course of our audit, we have not observed any
 continuing failure to correct major weaknesses in internal control
 system.
 
 v) There were no contracts or arrangements referred to in Section 301
 of the Act (except loans reported under paragraph (iii)(2) (a) above)
 that needed to be entered in the Register required to be maintained
 under that section and therefore Clause (v)(b) of the said Order is not
 applicable.
 
 vi) The Company has not accepted any fixed deposits from the public
 within the meaning of Sections 58A, 58AA or any other relevant
 provisions of the Companies (Acceptance of Deposit) Rules 1975.
 
 vii) In our opinion, the Company has an internal audit system
 commensurate with its size and nature of its business.
 
 viii) The Company has made and maintained the cost records, as
 prescribed by the Central Government under Section 209(1)(d) of the
 Companies Act, 1956, in respect of the Company''s products to which the
 said rules are made applicable. We have not, however, made a detailed
 examination of the records.
 
 ix) a) 1) According to the records examined by us, the Company is
 generally regular in depositing the undisputed statutory dues,
 including Provident Fund, Employees State Insurance, Income Tax, Sales
 Tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty and Cess, with
 the appropriate authorities. No amounts are outstanding for transfer to
 the Investors Education and protection Fund under Section 205C of the
 Companies Act, 1956.
 
 2) According to the information and explanations given to us, no
 undisputed amount payable in respect of Income Tax, Wealth Tax, Service
 Tax, Sales Tax, Customs Duty, Excise Duty and Cess were in arrears as
 at 31ST March, 2011 for a period of more than 6 months from the date
 they became payable.
 
 b) On the basis of our examination of the documents and records, there
 are no dues of Sales Tax, Income Tax, Wealth Tax, Service Tax, Excise
 Duty, Customs Duty and Cess which have not been deposited on account of
 any dispute except the following:
 
 Nature of  Rs./Lacs  Forum where the dispute is  Period to which
 dues                 pending                     the amount related
                                                  (various Years 
                                                  covering the 
                                                  period)
 
 Excise     30.67     Customs, Excise & Service   Jan'' 96 to Feb''
 Duty                Tax Appellate Tribunal West  2000
                     Zonal Bench Mumbai.
 
 Excise    185.41    Customs, Excise & Service    Sep'' 01 to Nov'' 03
 Duty                Tax Appellate Tribunal
                     West Zonal Bench Mumbai.
 
 
 x) The accumulated losses at the end of the financial year are less
 than 50% of its net worth and company has not incurred cash losses
 during the financial year. However the Company has incurred cash losses
 in the immediately preceding financial year.
 
 xi) In our opinion and according to the information and explanations
 given to us, the Company has not defaulted in repayment of dues to
 financial institutions, banks or debenture holders.
 
 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 provisions of any special statute applicable to chit
 fund/nidhi/mutual benefit fund/societies are not applicable to the
 Company and, therefore, Clauses (xiii)(a), (xiii) (b), (xiii) (c) and
 (xiii) (d) of the said Order are not applicable.
 
 xiv) The Company is not dealing in or trading in shares, securities,
 debentures and other investments.
 
 xv) The Company has not given any guarantee for loans taken by others
 from banks or financial institutions, the terms and conditions whereof
 are prejudicial to the interest of the Company.
 
 xvi) The company has not raised any term loan during the year.
 
 xvii) On the basis of an overall examination of the Balance Sheet of
 the Company, in our opinion, the funds raised on short-term basis have
 not been used for long term investment.
 
 xviii) During the Period Company has made Preferential allotment of
 15,00,000 5% Redeemable Cumulative Preference Shares of Rs.100/- each
 to Company covered in the register maintained under section 301 of the
 Act. In our opinion, prices at which shares have been issued is not
 prejudicial to the interest of the Company.
 
 xix) During the period covered by our audit report, the Company has not
 issued any secured debentures.
 
 xx) The Company has not raised any money by public issues during the
 year.
 
 xxi) According to the information and explanations given to us, no
 fraud on or by the Company was noticed or reported during the year.
 
                                                  For SALVE & CO,
 
                                           Chartered Accountants,
                                        (Registration No 109003W)
 
                                              C.A. S.D. PARANJPE,
 
                                                         Partner
                                             Membership No.41472
 
 Place : NAGPUR 
 Date  : 29th July, 2011