We have audited the attached Balance Sheet of Finolex Industries
 Limited as at 31st March 2011, 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.
 
 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 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 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 the paragraphs 4 and 5 of the said Order.
 
 2.  Further to our comments in the Annexure referred to in paragraph 1
 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 appears from our examination of the books
 and proper returns adequate for the purpose of our audit have been
 received from the branches not visited by us;
 
 c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement
 dealt with by this report are in agreement with the books of account;
 
 d) 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;
 
 e) 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, we report that none of the Directors are disqualified as on
 31st March, 2011 from being appointed as director in terms of clause
 (g) of sub-section (1) of Section 274 of the Companies Act, 1956 on the
 said date;
 
 f) 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
 Companys accounting policies and the Notes 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:
 
 i) in the case of the Balance Sheet, of the state of affairs of the
 Company as on 31st March, 2011; 
 
 ii) in the case of the Profit and Loss Account, of the profit for the
 year ended on that date; and 
 
 iii) in the case of Cash Flow Statement, of the cash flows for the year
 ended on that date.
 
 Annexure to the Auditors Report
 Referred to in paragraph 1 of our Report of even date:
 
 i.  (a) The Company has maintained proper records showing full
 particulars including quantitative details and situation of fixed
 assets.
 
 (b) Assets have been physically verified by the management during the
 year based on the regular program of verification, which in our opinion
 is reasonable having regard to the size of the Company and the nature
 of its assets. As explained, the discrepancies noticed were not
 material and the same have been properly dealt with in the books of
 account.
 
 (c) In our opinion and according to the information and explanations
 given to us, during the year, the Company has not disposed of any
 substantial / major part of fixed assets.
 
 ii.  (a) As explained to us, the inventory has been physically verified
 during the year by the management. In our opinion, the frequency of
 verification is reasonable.
 
 (b) In our opinion and according to the information and explanations
 given to us, the procedures for the 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.
 
 (c) In our opinion and according to the information and explanations
 given to us and on the basis of our examination of the records of the
 inventory, the Company is maintaining proper records of inventory.
 Discrepancies noticed on verification between the physical stocks and
 the book records were not material and have been appropriately dealt
 with in the books of account.
 
 iii.  1.  (a) The Company has not granted any secured or unsecured loan
 to any Company listed in the register maintained under Section 301 of
 the Companies Act, 1956.  
 
 (b) Accordingly, our comments in respect of sub – clauses (b), (c) and
 (d) are not called for and therefore not offered.  
 
 2.  (a) According to the information and explanations given to us and
 on the basis of our examination of the records, the Company has
 accepted Inter-Corporate Deposits from six parties listed in the
 register maintained under Section 301 of the Companies Act, 1956. The
 maximum amount involved during the year is Rs.1560 lakhs and the year
 end balance of the deposits taken is Rs.2963 lakhs.
 
 (b) According to the information and explanations given to us, in our
 opinion, the rate of interest and other terms and conditions of above
 deposits accepted by the Company, are not prima facie, prejudicial to
 the interest of the Company.
 
 (c) According to the information and explanations given to us, the
 Company is regular in repayment of principal and payment of interest.
 
 (d) There is no overdue amount of Inter-Corporate Deposits accepted
 from the parties listed in the register maintained under Section 301 of
 the Companies Act, 1956.
 
 iv.  In our opinion and according to the information and explanations
 given to us, there is an adequate internal control system commensurate
 with the size of the Company and the nature of its business with regard
 to purchase of inventories and fixed assets and with regard to the sale
 of goods and services. In our opinion and according to the information
 and explanations given to us, there is no continuing failure to correct
 major weakness in internal control system.
 
 v.  In respect of transactions entered in the register maintained in
 pursuance of Section 301 of Companies Act, 1956:
 
 (a) Based on audit procedures applied by us, 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 particulars of contracts or
 arrangements have been entered in the register required to be
 maintained under Section 301 of the Companies Act, 1956.
 
 (b) According to the information and explanations given to us and
 excluding certain transactions of purchase of goods and materials of
 special nature for which alternate quotations are not available, in our
 opinion, the transactions have been made at prices which are, prima
 facie, reasonable having regard to the prevailing market prices at the
 relevant time.
 
 vi.  In our opinion and according to the information and explanations
 given to us, the Company has not accepted any deposits from the public.
 Hence, the provisions of Section 58A and 58AA and any other relevant
 provisions of the Companies Act, 1956 and rules framed there under are
 not applicable.
 
 vii.  In our opinion, the Company has an internal audit system
 commensurate with the size and nature of its business.
 
 viii.  We have broadly reviewed the books of accounts maintained by the
 Company relating to the manufacture of PVC Resin, pursuant to the rules
 made by the Central Government for the maintenance of cost records
 under Section 209(1)(d) of the Companies Act, 1956 and are of the
 opinion that prima facie the prescribed accounts and records have been
 maintained. We have not, however, made a detailed examination of the
 records with a view of determining whether they are accurate and
 complete.
 
 ix.  (a) According to the information and explanations given to us and
 on the basis of our examination of the records of the Company, the
 Company has generally been regular in depositing undisputed statutory
 dues including Provident Fund, Investor Education and Protection Fund,
 Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Service
 Tax, Customs Duty, Excise Duty, cess and other material statutory dues
 with the appropriate authorities.  (b) According to the records of the
 Company and information and explanations given to us, dues of Income
 Tax, Sales tax, Wealth Tax, Service Tax, Customs Duty and Excise Duty
 and cess, which have not been deposited on account of disputes and
 forums where dispute are pending are as under;
 
 Name of                 Nature of              Amount 
 statute                 dues                   (Rs. lakhs) 
 
 
 Finance Act, 1994 
 (Service Tax)           Service Tax Demand      167.45   
 
 
 Finance Act, 1994 
 (Service Tax)           Service Tax Demand      489.12 
 Court
 
 Finance Act, 1994 
 (Service Tax)           Service Tax Demand      67.22 
 Commissioner
 
 Finance Act, 1994 
 (Service Tax)           Service Tax Demand      0.79 
 
 Finance Act, 1994 
 (Service Tax)           Service Tax Demand      305.52 
 
 Finance Act, 1994 
 (Service Tax)           Service Tax Demand      6.18 
 
 
 Finance Act, 1994 
 (Service Tax)           Service Tax Demand      100.00 
 
 Finance Act, 1994 
 (Service Tax)           Service Tax Demand      141.31 
 
 
 Finance Act, 1994 
 (Service Tax)           Service Tax Demand      3.61 
 
 The Customs Act, 
 1962                    Customs Demand          26.94 
 
 The Customs Act, 
 1962                    Customs Demand          14.03 
 
 The Customs Act, 
 1962                    Customs Demand          3.00 
 
 The Central Excise 
 Act, 1944               Excise Demand           32.54 
 
 The Central Excise 
 Act, 1944               Excise Demand           2.07 
 
 The Central Excise 
 Act, 1944               Excise Demand           18.17 
 
 The Central Excise 
 Act, 1944               Excise Demand           13.11 
 (A)
 
 The Central Excise 
 Act, 1944               Excise Demand           0.96 
 
 The Central Excise 
 Act, 1944               Excise Demand           2.71 
 
 The Central Excise 
 Act, 1944               Excise Demand           0.46 
 
 The Central Excise 
 Act, 1944               Excise Demand           981.99 
 
 The Central Excise 
 Act, 1944               Excise Demand           48.57 
 
 
 The Central Excise 
 Act, 1944               Excise Demand           3.44 
 
 The Central Excise 
 Act, 1944               Excise Demand           0.02 
 
 
 
 
 Name of                 Period to          Forum where
 statute                 which the          pending
                         amount relates
 
 Finance Act, 1994 
 (Service Tax)           2001-02            Commissioner
 
 Finance Act, 1994 
 (Service Tax)           2005-06            High Court
 
 Finance Act, 1994 
 (Service Tax)           2006-07            Commissioner
 
 Finance Act, 1994 
 (Service Tax)           2008-09            CESTAT
 
 Finance Act, 1994 
 (Service Tax)           2008-09            Commissioner/Dy.
                                            Commissioner
 
 Finance Act, 1994 
 (Service Tax)           2009-10            Deputy
                                            Commissioner
 
 Finance Act, 1994 
 (Service Tax)           2007-08            Commissioner
 
 Finance Act, 1994 
 (Service Tax)           2010-11            Commissioner/Dy.
                                            Commissioner
 
 Finance Act, 1994 
 (Service Tax)           2007-08            CESTAT
 
 The Customs Act, 
 1962                    2000-01            CESTAT
 
 The Customs Act, 
 1962                    2001-02            CESTAT
 
 The Customs Act, 
 1962                    1995-96            Additional
                                            Commissioner
 
 The Central Excise 
 Act, 1944               1996-97            High Court
 
 The Central Excise 
 Act, 1944               1999-00            High Court
 
 The Central Excise 
 Act, 1944               2002-03            CESTAT
 
 The Central Excise 
 Act, 1944               2005-06            Commissioner
 (A)
 
 The Central Excise 
 Act, 1944               2005-06            CESTAT
 
 The Central Excise 
 Act, 1944               2005-06            High Court
 
 The Central Excise 
 Act, 1944               2006-07            Commissioner
 
 The Central Excise 
 Act, 1944               2007-08            Commissioner
 
 The Central Excise 
 Act, 1944               2008-09            Dy./Additional
                                            Commissioner
 
 The Central Excise 
 Act, 1944               2010-11            Commissioner
 
 The Central Excise 
 Act, 1944               1998-99            Commissioner
 
 
 
 x.  The Company does not have accumulated losses at the end of the
 financial year and the Company has not incurred any cash loss in the
 current and the immediately preceding financial year.
 
 xi.  Based on our audit procedures and on the basis of information and
 explanations given by the management, we are of the opinion that the
 Company has not defaulted in the payment of dues to its bankers,
 financial institutions and debenture holders.
 
 xii.  According to the information and explanations given to us, the
 Company has not granted any 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 or
 nidhi / mutual benefit fund / societies are not applicable to the
 Company.
 
 xiv.  (a) Based on the records examined by us and according to the
 information and explanations given to us, we are of the opinion that
 the Company is maintaining proper records of the transactions and
 contracts of dealing in shares and securities and timely entries have
 been made in these records.  
 
 (b) Based on our audit procedures and to the best of our knowledge and
 belief and according to the information and explanations given to us,
 the shares and securities have been held by the Company in its own
 name.
 
 xv.  According to the information and explanations given to us, the
 Company has not given any guarantee for loans taken by others from
 banks and financial institutions.
 
 xvi.  To the best of our knowledge and belief and according to
 explanations given to us, term loans availed by the Company were, prima
 facie, applied by the Company during the year for the purpose for which
 loans were obtained.
 
 xvii.  According to the Cash Flow Statement and records examined by us
 and according to the information and explanations given to us, on
 overall basis, funds raised on short-term basis have, prima facie, not
 been used during the year for long term investment.
 
 xviii.  The Company has not made preferential allotment of shares to
 parties covered in the register maintained under Section 301 of the
 Companies Act, 1956 during the year.
 
 xix.  According to the information and explanations given to us,
 security or charge has been created in respect of debentures issued.
 
 xx.  The Company has not raised any money by public issues during the
 year.
 
 xxi.  To the best of our knowledge and belief and according to the
 information and explanations given to us, no fraud on or by the Company
 has been noticed or reported during the course of our audit.
 
 
                                              For B.K. Khare & Co.  
                                              Chartered Accountants
 
                                              U.B. Joshi
 
                                              Partner
 
                                              Membership No. 044097
 
                                              Firm Reg. No. 105102W
 
 Place : Pune
 
 Dated : 30th April, 2011