1.  We have audited the attached Balance Sheet of Gokak Textiles
 Limited as at March 31, 2011 and the Profit and Loss Account and the
 Cash Flow Statement of the Company 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 (Auditors'' Report) Order (Amendment) Order
 2004, issued by the Central Government in terms of Section 227(4A) of
 the Companies Act, 1956, we give 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 in paragraph
 (3) 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 it appears from our examination of the
 books and proper returns adequate for the purposes of our audit have
 been received from the branches not visited by us. The Branch Auditor''s
 Report has been forwarded to us and has been appropriately dealt with.
 
 c) The Balance Sheet, Profit and Loss Account and the Cash Flow
 Statement dealt with by this report are in agreement with the books of
 account and with the audited returns from the branches.
 
 d) In our opinion, the Balance Sheet, the Profit and Loss Account and
 the Cash Flow Statement comply with the Accounting Standards referred
 to in sub-section (3C) of section 211 of the Companies Act, 1956.
 
 e) In our opinion and to the best of our information and according to
 the explanations given to us, the said accounts read with the notes
 thereon give the information required by the Companies Act, 1956, in
 the manner so required, 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 at March 31, 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.
 
 5.  On the basis of the written representations received from the
 Directors as on March 31, 2011, and taken on record by the Board of
 Directors, we report that, none of the Director is disqualified as on
 March 31, 2011 from being appointed as a Director in terms of clause
 (g) of sub-section (1) of section 274 of the Companies Act, 1956.
 
 ANNEXURE TO THE AUDITORS'' REPORT
 
 Referred to in Paragraph (3) of our report of even date on the accounts
 of Gokak Textiles Limited for the year ended 31st March, 2011.
 
 1) (i) The Company is maintaining proper records showing full
 particulars, including quantitative details and situation of fixed
 assets.
 
 (ii) The Company has a program for physical verification of fixed
 assets at periodic intervals. As informed to us the fixed assets have
 been verified by the Company during the year and were informed that no
 material discrepancies were noticed.
 
 (iii) In our opinion and according to the information and explanations
 given to us, substantial part of the fixed assets has not been disposed
 off by the Company during the year.
 
 2) (i) The Management has conducted physical verification of inventory
 at reasonable intervals.
 
 (ii) 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.
 
 (iii) The Company is maintaining proper records of inventory. The
 discrepancies noticed on verification between physical inventories and
 book records were not material in relation to the operations of the
 Company and the same have been properly dealt with in the books of
 account.
 
 3) The Company has neither granted nor taken any loans, secured or
 unsecured to companies, firms or other parties covered in the register
 maintained under section 301 of the Act. Hence clause iii(b), iii(c),
 iii(d), iii(f) and iii(g) are not applicable.
 
 4) In our opinion and according to the information and explanations
 given to us, there are adequate internal control procedures
 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.
 
 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 the particulars of contracts or arrangements referred to
 in section 301 of the Act have been entered in the register required to
 be mintained under that section.
 
 (b) In our opinion and according to the information and explanations
 given to us, having regard to the explanation that many of the items
 are of a special nature and their prices cannot be compared with
 alternative quotations, the transactions made in pursuance of contracts
 or arrangements entered in the register maintained under Section 301 of
 the Companies Act, 1956 have been made at prices which are reasonable
 having regard to the prevailing market prices at the relevant time.
 
 6) During the year under audit, the company has not accepted fixed
 deposits from the public.
 
 7) The Company has an internal audit system, which in our opinion is
 commensurate with the size of the Company and the nature of its
 business.
 
 8) We have broadly reviewed the books of account maintained by the
 Company in respect of cost records as prescribed by the Central
 Government under section 209(1)(d) of the Companies Act, 1956, and are
 of the opinion that prima facie the prescribe accounts and records have
 been maintained. We have not, however, made a detailed examination of
 the records with a view to determine whether they are accurate or
 complete.
 
 9) (a) According to the records examined by us, the Company is
 generally regular in depositing undisputed statutory dues including
 Provident Fund, Investor Education and Protection Fund, Employees''
 State Insurance, Income Tax, Wealth Tax, Service Tax, Customs Duty,
 Excise Duty, cess and other statutory dues applicable to it with the
 appropriate authorities. According to the information and explanations
 given to us, no undisputed amounts payable in respect of aforesaid
 statutory dues were outstanding, at the year end for a period of more
 than six months from the date they became payable except Rs.302,245 on
 account of Service Tax.
 
 (b) According to the information and explanations given to us, there
 are no dues of Sales Tax, Income Tax, Customs Duty, Wealth Tax, Service
 tax, Excise Duty or cess outstanding on account of any dispute other
 than following:
 
 Name of Statute   Amount   Period to which the  Forum where dispute
                   (Rs.)    amount is pending    relates
 
 Entry Tax       14,458,194 Oct,04 to Mar,07     High court of 
                                                 Karnataka Bangalore
 
 Income tax         300,912 2001-02 & 2002-03    CIT (A)
 
 Excise Duty      5,938,424 July,04 to April,10  High court of Karnataka
                                                 Bangalore
                 20,697,530
 
 10) The Company''s accumulated losses at the end of the financial year
 are not in excess of fifty percent of its net worth. The Company has
 not incurred cash losses during the financial year, however the company
 incurred cash losses in the immediately preceding financial year.
 
 11) According to the information and explanations given to us and based
 on the documents and records produced to us, the Company has not
 defaulted in repayment of dues to a financial institution, bank or
 debenture holders.
 
 12) According to the information and explanations given to us, the
 Company has not granted loans and advances on the basis of security by
 way of pledge of shares and other securities.
 
 13) In our opinion and according to the information and explanations
 given to us, the nature of activities of the Company does not attract
 any special statute applicable to chit fund and nidhi/ mutual benefit
 fund/ societies.
 
 14) 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.
 
 15) According to the information and explanations given to us and the
 records examined by us, the Company has applied the term loans for the
 purpose for which the loans were obtained.
 
 16) On the basis on an overall examination of the balance sheet and
 cash flows of the Company and the information and explanations given to
 us, we report that the Company has not utilized the funds raised on
 short-term basis for long-term investment.
 
 17) The Company has not made any preferential allotment of shares to
 parties or companies covered in the register maintained under section
 301 of the Companies Act, 1956.
 
 18) The Company did not issue any debentures during the year.
 
 19) The Company has not raised any money through a public issue during
 the year.
 
 20) Based on the audit procedures performed and information and
 explanations given by the management, we report that no fraud on or by
 the Company has been noticed or reported during the year.
 
 21) In our opinion and according to information and explanation given
 to us, clause 4(xiv) is not applicable.
 
                                                 For and on behalf of
                                                Kalyaniwalla & Mistry
                                                Chartered Accountants 
                                                Firm Regn No. 104607W
 
                                                     Vinayak M Padwal
                                                              Partner
                                                 Membership No. 49639
 
 Mumbai, 
 May 26, 2011