1.  We have audited the attached Balance Sheet of M/s. GARNET
 INTERNATIONAL LIMITED (hereinafter referred to as the company) as at
 31st March 2012, the Statement of Profit and Loss and Cash Flow
 Statement for the year ended on that date, annexed thereto, which we
 have signed under reference to this report. 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 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 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 for our opinion.
 
 3.  As required by the Companies (Auditor''s Report) Order, 2003
 (hereinafter referred to as ''the CARO 2003'') issued by the Central
 Government of India in terms of section 227(4A) of the Companies Act,
 1956, (hereinafter referred to as ''the Act'') we enclose in the Annexure
 a statement on the matters specified in paragraphs 4 and 5 of the said
 order.
 
 4.  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 purpose 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;
 
 c.  the Balance Sheet, the Statement of Profit and Loss and Cash Flow
 Statement dealt with by this report are in agreement with the books of
 account;
 
 d.  in our opinion, the Balance Sheet, Statement of Profit and Loss and
 Cash Flow Statement comply with the mandatory accounting standards
 referred to in sub-section (3C) of Section 211 of the Act;
 
 e.  based on the representation made by the directors of the company
 and information and explanation given to us, none of the directors is
 prima-facie disqualified as on 31st March, 2012, from being appointed
 as director in terms of clause (g) of sub section (1) of section 274 of
 the Act, on the said date; and
 
 f.  as stated in note 28 to financial statements,
 
 i) Loans & Advances, involving an amount of Rs. 150,58,300/- (year end
 outstanding Rs. 1,32,50,000/- given during the year under review, are in
 contravention of provisions of Section 295 of the Act; and
 
 ii) Contracts of purchase and sale of shares, amounting to Rs.
 8,62,13,380/- and Rs. 4,90,49,060/- respectively entered in to during the
 year, are in contravention of provisions of section 297 of the Act;
 
 The possible impact of these non-compliances, in the event of the
 company''s condonation requests are not granted has not been determined
 or recognized in the financial statements.
 
 g.  in our opinion and to the best our information and according to the
 explanations given to us, the said accounts, subject to our comments in
 paragraphs 4 (f) above and the consequential effects thereof which are
 not quantifiable, read together with Significant Accounting Policies
 and Notes on financial statements attached thereto, give the
 information required by the Act, in the manner so required and give a
 true and fair view in conformity with the accounting principles
 generally accepted in India:
 
 i) in case of Balance Sheet, of the state of affairs of the company as
 at 31st March, 2012;
 
 ii) in the case of statement of Profit and Loss, 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 AUDITORS'' REPORT
 
 Referred to in paragraph 3 of the Auditors'' Report of even date to the
 members of Garnet International Limited on the financial statements for
 the year ended 31st March, 2012
 
 1.  in respect of fixed assets:
 
 a) the company has maintained records, showing particulars including
 quantitative details and situation of its fixed assets;
 
 b) as explained to us, all the fixed assets have been physically
 verified by the management at the end of year. We are informed that no
 material discrepancies have been noticed by the management on such
 verification as compared to the aforesaid records of fixed assets; and
 
 c) during the year company has not disposed off any of its fixed
 assets.
 
 2.  in respect of inventory:
 
 a) as explained to us, inventories of shares and securities have been
 physically verified during the year by the management. In our opinion,
 the frequency of verification is reasonable;
 
 b) the procedures, as explained to us, that followed by the management
 for physical verification of shares and securities, are, in our
 opinion, reasonable and adequate in relation to the size of the company
 and the nature of its business; and
 
 c) on the basis of our examination of the records of shares and
 securities of the company, we are of the opinion that, the company is
 maintaining proper records. No material discrepancies have been noticed
 on physical verification of shares and securities held as
 stock-in-trade as compared to book records.
 
 3.  according to information and explanation given to us :
 
 a) the company has granted interest free unsecured loan to the
 companies, firm and other parties covered in the register maintained
 under section 301 of the Act. The maximum amount involved during the
 year was Rs.  2,90,58,300/- to 7 parties. The year end balance was Rs.
 2,42,50,000/- from such 5 parties ( including 4 parties having
 outstanding since last year);
 
 b) the terms and conditions of the aforesaid interest free loans
 granted are prima facie not prejudicial to the interest of the company;
 
 c) the receipt of principal amount of the aforesaid loans granted is
 regular;
 
 d) since the aforesaid loans granted, as informed to us, are receivable
 on demand, no amount has been classified as overdue;
 
 e) the company has taken unsecured loan from the companies, firm and
 other parties covered in the register maintained under section 301 of
 the Act. The maximum amount involved during the year was Rs.
 2,99,41,700/- from 3 parties. The year end balance was Z 1,03,91,700/-
 from such 2 parties;
 
 f) the terms and conditions of the aforesaid loans taken were prima
 facie not prejudicial to the interest of the company and such loans
 were taken free of interest; and
 
 g) since the aforesaid unsecured loans taken, as informed to us, were
 repayable on demand, therefore the payment of the principal amount is
 considered to be regular.
 
 4.  on the basis of selective checks carried out during the course of
 audit and according to the information and explanations given to us,
 there is adequate internal control system commensurate with the size of
 the company and nature of its business for purchase of fixed assets and
 for sale of services. During the course of our audit, we have not
 observed any major weaknesses in internal control system.
 
 5.  a) according to the information and explanations given to us, we
 are of the opinion that the particulars of contracts or arrangements
 referred to in section 301 of the Act, have been entered in the
 register required to be maintained under that section; and
 
 b) in our opinion and according to information and explanations given
 to us, the transactions made in pursuance of contracts or arrangements
 entered in the register maintained under Section 301 of the Act and
 exceeding the value of rupees five lacs in respect of any party during
 the year have been made at prices which are reasonable having regard to
 the prevailing market prices at the relevant time where such market
 prices are available. However, in respect of certain transactions of
 purchase and sale of shares, we are unable to comment in absence of
 similar transactions with other parties at the relevant time.
 
 6.  in our opinion, the company has not accepted any deposit from the
 public within the meaning of section 58A and 58AA of the Act and the
 Rules framed there under.
 
 7.  the company is required to have an internal audit system as apart
 from being a listed company, the company''s paid-up capital and reserves
 at the commencement of financial year exceeds Rs. fifty lacs and its
 average annual turnover of preceding three years also exceeds Rs. five
 crores, however, the company, during the year, had no such internal
 audit system;
 
 8.  we are informed that the Central Government has not prescribed the
 maintenance of cost records under Section 209 (1) (d) of the Act.
 
 9.  in respect of statutory dues:
 
 a) according to the information and explanations given to us, 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, Custom Duty, Excise Duty, Cess and other statutory dues with the
 appropriate authorities as applicable to it. There are no arrears of
 undisputed statutory dues as at the last day of financial year
 concerned, outstanding for a period of more than six months from the
 date they became payable; and
 
 b) according to the information and explanations given to us, there are
 no dues of Income tax/ Sales Tax/ Wealth Tax/ Service Tax/ Custom Duty/
 Excise Duty/ Cess, outstanding on account of any dispute.
 
 10.  the accumulated losses of the company at the end of the financial
 year have not exceeded fifty percent of its net worth.  The company has
 not incurred cash losses during the financial year under audit and also
 in the immediately preceding financial year;
 
 11.  as per the information and explanation given to us and based on
 documents and record produced to us, there were no dues payable to any
 financial institution, bank or debenture holders during the year;
 
 12.  according to the information and explanation given to us and based
 on documents and record produced to us, 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 or a nidhi / mutual
 benefit fund or a society;
 
 14.  in respect of dealing / trading in shares, securities, debentures
 and other investments, in our opinion and according to the information
 and explanations given to us, records have been maintained of the
 transactions and contracts and timely entries have been made therein.
 The shares and other investments have been held by the company in its
 own name or in process of transfer in the name of the company except to
 the extent of exemptions provided by section 49 of the Act;
 
 15.  according to the information and explanations given to us, the
 company has not given any guarantee for loans taken by others from
 banks or financial institutions;
 
 16.  as per the records of the company, the company has not obtained
 any term loan during the year;
 
 17.  as per the information and explanation given to us and on the
 overall examinations of the financial statements of the company, we are
 of the opinion that funds raised on short-term basis have not been
 utilized for long-term investments;
 
 18.  during the year, the company has not made any preferential
 allotment of share to parties and companies covered in the Register
 maintained under Section 301 of the Act;
 
 19.  the company did not have any outstanding debenture during the
 year;
 
 20.  the company has not raised any money through a public issue during
 the year; and
 
 21.  based on the audit procedures performed and the information and
 explanations given to us by the management, we report that no fraud on
 or by the company has been noticed or reported during the course of our
 audit.
 
                                                For and on behalf of
 
                                            R.S.AGRAWAL & ASSOCIATES
 
                                               Chartered Accountants
 
                                           (Registration no. 100156W)
 
                                                        Anuja Dedhia
 Place: Mumbai 
 
                                                             Partner
 
 Date: 3rd September 2012                                  
                                               Membership No. 123589