Great Eastern Shipping Company

1) We have audited the attached Balance Sheet of The Great Eastern
 Shipping Company Limited as at March 31,2009 and also the Profit and
 Loss Account and Cash Flow Statement of the Company for the year ended
 on that date, both 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.
 
 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 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 (Auditors Report) Order, 2003, issued
 by the Central Government of India in terms of Section 227 (4A) of the
 Companies Act, 1956, we annex hereto 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 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 such
 books.
 
 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) Without qualifying our opinion, we draw attention to:
 
 i) Note 13 of Schedule 20, Notes to Accounts regardingchange in
 accounting policy, pursuant to the notification issued by the Ministry
 of Corporate Affairs inserting paragraph 46 in Accounting Standard (AS)
 11 The Effects of Changes in Foreign Exchange Rates. Consequent
 thereto, the Company has opted for accounting the exchange differences
 arising on long-term foreign currency monetary items relating to
 acquisition of depreciable capital assets in the cost of such asset and
 the loss on foreign currency loans relating to acquisition of
 depreciable assets amounting to Rs. 54023 lakhs for the year ended
 March 31,2009 are added to the cost of such assets. The corresponding
 gains of Rs. 12260 lakhs (net of depreciation of Rs. 1005 lakhs) for
 the year ended March 31, 2008 has been reversed from General Reserve
 and deducted from the cost of such assets.
 
 ii) The Company has with effect from April 1, 2008 adopted the
 principles of hedge accounting enunciated in Accounting Standard (AS)
 30 - Financial Instruments Recognition and Measurement, in respect of
 derivative transactions entered into to hedge currency, interest rate
 and bunker price risks. Accordingly, the unrealised gains or losses
 amounting to Rs. 36002 lakhs on such derivative transactions which have
 been designated as part of a hedging relationship and which qualify as
 effective hedges, have been recorded in the Hedging Reserve account.
 Further, cancellation loss of Rs. 511 lakhs has also been debited to
 the Hedging Reserve account in accordance with the principles of hedge
 accounting.
 
 iii) Consequent to the changes in the aforesaid accounting policies,
 the fixed assets as at March 31, 2009 are higher by Rs. 40427 lakhs,
 current liabilities are higher by Rs. 36312 lakhs, depreciation for the
 year is higher by Rs. 2253 lakhs, profit for the year is higher by Rs.
 53197 lakhs and the Reserves as at March 31,2009 are higher by Rs. 4423
 lakhs.
 
 f) 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 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 at March 31, 2009;
 
 ii) in the case of the Profit and Loss Account, of the profit of the
 Company for the year ended on that date; and
 
 iii) in the case of the Cash Flow Statement, of the cash flows for the
 year ended on that date.
 
 5) On the basis of written representations received from the Directors
 of the Company as on March 31, 2009, and taken on record by the Board
 of Directors, we report that none of the Directors of the Company is
 disqualified as on March 31, 2009, 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 The Great Eastern Shipping Company Limited for the year ended March
 31, 2009:
 
 1.  (a) The Company has maintained proper records showing full
 particulars, including quantitative details and situation of fixed
 assets.
 
 (b) The fixed assets are physically verified by the management as per a
 phased programme of verification. In our opinion, the frequency of
 verification is reasonable having regard to the size of the Company and
 the nature of its assets. To the best of our knowledge no material
 discrepancies were reported on such verification.
 
 (c) In our opinion, a substantial part of the fixed assets has not been
 disposed off by the Company during the year.
 
 2.  (a) The management has conducted physical verification of inventory
 at reasonable intervals.
 
 (b) In our opinion, the procedures followed by the management for such
 physical verification are reasonable and adequate in relation to the
 size of the Company and nature of its business.
 
 (c) In our opinion, the Company is maintaining proper records of
 inventory. The discrepancies noticed on physical verification of
 inventories as compared to the 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.  (a) 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 Act. Accordingly, paragraphs 4 (iii) (b), (c)
 and (d) of the Order are not applicable.
 
 (b) The Company has not taken any loans, secured or unsecured, from
 companies, firms or other parties covered in the register maintained
 under section 301 of the Act. Accordingly, paragraphs 4 (iii) (f), and
 (g) of the Order are not applicable.
 
 4.  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, for the
 purchase of inventory and fixed assets, and for the sale of goods and
 services. Further on the basis of our examination and according to the
 information and explanations given to us, no major weakness in the
 aforesaid internal control system has been noticed.
 
 5.  (a) Based on the audit procedures applied by us and according to
 the information and explanations provided by the management, 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.
 
 (b) In our opinion and according to the information and explanations
 given to us, the transactions made in pursuance of such contracts or
 arrangements have been made at prices which are reasonable having
 regard to the 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 any deposits from the public
 within the meaning of Sections 58A, 58AA or any other relevant
 provisions of the Act.
 
 7.  In our opinion, the Company has an internal audit system, which is
 commensurate with the size and nature of its business.
 
 8.  As informed to us, the maintenance of cost records has not been
 prescribed by the Central Government under Section 209(l)(d) of the
 Companies Act, 1956 in respect of the activities carried on by the
 Company.
 
 9.  (a) According to the information and explanations given to us and
 according to the books and records as produced and examined by us, in
 our opinion, except for the provident fund dues of floating staff, the
 Company is generally regular in depositing undisputed statutory dues
 including Shore Staff Provident Fund, Investor Education and Protection
 Fund, Employees State Insurance, Income tax, Sales tax, Wealth tax,
 Service tax, Excise duty, Customs duty, Cess, and other statutory dues
 with the appropriate authorities. We are informed that in respect of
 floating staff it is not possible to accurately ascertain the provident
 fund dues in view of the nature of the Companys activities. The
 Company regularly makes ad hoc payments to the appropriate authorities
 and on final determination the balance, if any, is paid.
 
 (b) According to the books of account and records as produced and
 examined by us, there are no dues of Sales tax, Income tax, Customs
 duty, Wealth tax, Service tax, Excise duty or cess which have not been
 deposited on account of any dispute, other than those stated below :
 
 NO.    NAME OF THE STATUTE            NATURE OF DUES
 
 1      The Customs Act, 1962          Import duty
 2      The Tamilnadu General          Lease tax
        Sales Tax Act, 1959
 3      The Central Sales Tax          Sales Tax
        Act, 1956 & Bombay
        Sales tax Act, 1959
 4      Maharashtra Land               Transfer charges for
        Revenue Code, 1966             office premises under
                                       the scheme of demerger
                                       Transfer Charges for
                                       office Premises
 5      Major Ports Trust              Demand for Pilotage
        Act, 1963                      and Berth Charges on
                                       gross tonnage
 
 AMOUNT        PERIOD TO WHICH THE          FORUM WHERE
 (RS.LAKHS)    AMOUNT RELATES               DISPUTE IS PENDING
 
        31     2000-01                      High Court, Mumbai
      1740     1995-96 to                   The Sales Tax
               1997-98                      Appellate Tribunal.
       746     1995-96 to                   The Sales Tax
               1998-99 and                  Appellate Tribunal
               2001-02
       124     2002-03                      The High Court at
                                            Bombay
       310     2003-04                      Estate Department
                                            Joint Municipal
                                            Commissioner
       137     2001-02 to                   Karnataka High
               2002-03                      Court at Bangalore
 
 10.  The Company had no accumulated losses at the end of the financial
 year and it has not incurred any cash losses in the current year and in
 the immediately preceding financial year.
 
 11.  According to the information and explanations given to us and the
 records examined by us, the Company has not defaulted in repayment of
 dues to a financial institution or bank or debenture holders.
 
 12.  According to the information and explanations given to us and the
 records examined by us, the Company has not granted loans and advances
 on the basis of security by way of pledge of shares, debentures or
 other securities.
 
 13.  In our opinion and according to the information and explanation
 given to us, the nature of the activities of the Company does not
 attract any special statute applicable to the chit fund and
 nidhi/mutual benefit fund/societies.
 
 14.  In our opinion, the Company has maintained proper records of the
 transactions and contracts of the investments dealt in by the Company
 and timely entries have been made therein. The investments made by the
 Company are held in its own name except to the extent of the exemption
 under Section 49 of the Act.
 
 15.  According to the information and explanations given to us and the
 records examined by us, the Company has given guarantees for loans
 taken by its subsidiaries from banks or financial institutions,
 however, in our opinion, the terms and conditions thereof are not prima
 facie prejudicial to the interest of the Company.
 
 16.  As informed to us, the term loans were applied by the Company for
 the purpose for which they were obtained.
 
 17.  On the basis of an overall examination of the Balance Sheet and
 Cash Flows of the Company and the information and explanation given to
 us, we report that the company has not utilised any funds raised on
 short-term basis for long-term investments.
 
 18.  The Company has allotted 10,000 shares on preferential basis to a
 party covered in the Register maintained under Section 301 of the
 Companies Act, 1956. In our opinion, the price at which such shares
 have been issued is not prima facie prejudicial to the interest of the
 Company.
 
 19.  According to the explanation given to us, securities have been
 created in respect of the debentures issued by the Company.
 
 20.  The Company has not raised any money through a public issue in the
 recent past.
 
 21.  Based upon the audit procedures performed and the information and
 explanation given by the management, we report that no fraud on or by
 the Company has been noticed or reported during the year.
 
                                         For and on behalf of
                                       Kalyaniwalla & Mistry
 
                                        Chartered Accountants
                                                Viraf R.Mehta
                                                      Partner
                                         Membership No: 32083
 Place: Mumbai
 Date : May 08,2009