1.  We have audited the attached Balance Sheet of GUJARAT NATURAL
 RESOURCES LIMITED Ahmedabad as at 31st March, 2012 and also the
 Statement of Profit and Loss and Cash Flow Statement 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 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 from any 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 presentation of
 financial statement. 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 (Auditor''s Report) (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 & 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 ou r 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 and Statement of Profit & Loss and Cash Flow
 Statement dealt with, by this report are in agreement with the books of
 accounts.
 
 (d) In our opinion, Balance Sheet and Statement of Profit and Loss and
 Cash flow statement dealt with by this report comply with the
 Accounting Standard referred to in sub Section (3C) of section 211 of
 the Companies Act, 1956 to the extent applicable.
 
 (e) On the basis of the written representations received from the
 Directors and taken on record by the Board of Directors, we report that
 none of the Directors of the company are prima facie disqualified as at
 31st March 2012 from being appointed as Directors of the company in
 terms of Clause (g) of Section 274(1) of the Companies Act,1956.
 
 (f) In our opinion and to the best of our information and according to
 the explanation given to us, the attached accounts subject to the
 following qualificatory notes give the information required by the
 Companies Act, 1956 in the manner so required.
 
 a) Point No. 2 at Additional Notes to Accounts in Notes - 20 regarding
 non-provision of doubtful debts amounting to Rs. 519.71 lacs, as a
 result thereof the debit balance of profit & loss A/c gets understated
 by the said sum and correspondingly Sundry debtors is overstand by the
 said sum.
 
 b) The company has in past granted/ renewed loans and advances to
 certain parties which has been identified as non-performing asset.
 Accordingly company has not recognized any income from the same. In the
 opinion of the directors, the process of recovery is going on and the
 same is not fully doubtful of recovery. However in our opinion company
 needs to make provision for such long outstanding non-performing assets
 amounting to Rs. 138.65 lacs. Due to non provision in this regard, the
 debit balance of profit & loss account is under stated and the balance
 of loans and advances is over stated by the said sum.
 
 Subject to the above qualificatory notes, the attached accounts give
 the information required by the Companies Act, 1956 in the manner so
 required and it gives a true and fair view.
 
 (I) In the case of the Balance Sheet, of the state of the affairs of
 the Company as at 31st March, 2012, and
 
 (ii) In the case of the Statement of Profit & Loss, of the Loss of the
 Company for the year ended on that date.
 
 (iii)In the case of Cash Flow Statement, of the cash flows of the
 company for the year ended on that date :
 
 ANNEXURE TO THE AUDITORS'' REPORT
 
 Annexure referred to in paragraph 3 of the Auditor''s report to the
 members of GUJARAT NATURAL RESOURCES LIMITED, on the accounts for the
 year ended on 31st March, 2012.
 
 1.  a. According to the information and explanation given to us, the
 fixed assets records showing full particulars including quantitative
 details and situation of fixed assets are under compilation.
 
 b.  As explained to us, the fixed assets have been physically verified
 by the management during the year in a phased periodical manner which
 in our opinion is reasonable having regard to the size of the Company
 and the nature of its assets.  No material discrepancies were noticed
 on such physical verification.
 
 c.  In our opinion, the company has not disposed of substantial part of
 its fixed assets during the year and the Going Concern status of the
 Company is not effected.
 
 2.  (a) According to the information and explanations given to us, the
 Company has taken/granted unsecured loans from/to companies covered in
 the Register maintained under Section 301 of the Companies Act, 1956;
 
 (I) (a) The company has taken interest free loan from its step down
 subsidiary company covered in the Register maintained u/s 301 of the
 Companies Act, 1956. The amount involved (i.e. the maximum amount
 outstanding during the year was Rs. 525.37 lacs). Rs. 87.55 lacs was
 payable to this party as at the close of the accounting year.
 
 (b) The Company has taken interest free loans from Three parties
 covered in the aforesaid Register. The amount involved (i.e. the
 maximum amount outstanding during the year was Rs. 26.64 lacs). Rs.
 1.94 lacs were payable to these parties as at the close of the
 accounting year.
 
 (ii) (a) The company has granted interest free loan to its wholly owned
 subsidiary company covered in the Register maintained u/s 301 of the
 Companies Act, 1956. The amount involved (i.e. the maximum amount
 outstanding during the year was Rs. 4750.70 lacs). Rs. 4750.70 lacs was
 receivable from this party as at the close of the accounting year.
 
 (b) The company has also granted interest free loans to Six parties
 covered in the Register maintained u/s 301 of the Companies Act, 1956.
 The amount involved (i.e. the maximum amount outstanding during the
 year was Rs. 1112.10 lacs). Rs. 28.50 lacs was receivable from these
 parties as at the close of the accounting year.
 
 (b) According to the information and explanation given to us, the terms
 and conditions in respect of unsecured loans taken/granted by the
 Company are not prima-facie prejudicial to the interest of the Company.
 
 (c) In our opinion and according to the information and explanations
 given to us, the payment of principal amount are on demand.
 
 (d) In our opinion and according to the information and explanation
 given to us, there are no overdue amounts in respect of the
 transactions listed in clause (a) above.
 
 3.  In our opinion and on the basis of test checks carried out by us,
 it appears that there are adequate internal control procedures
 commensurate with the size of the company and the nature of its
 business, with regard to purchase of inventory, fixed assets and for
 the sale of goods. During the course of audit, we have neither come
 across nor have been informed of any instance of major weaknesses in
 aforesaid internal control procedure, which would require corrective
 action.
 
 4.  a. In our opinion and according to the information and explanations
 given to us, there are no transactions that need to be entered in the
 Register maintained under Section 301 of the Companies Act, 1956.
 
 b. As there are no transactions that need to be entered into the
 register maintained under section301 of the Companies Act, paragraph
 4(b) of the order is not applicable.
 
 5.  According to the information and explanation given to us, the
 Company has not accepted any deposits attracting the provisions of
 Section 58A and 58AA of the Companies Act, 1956 and rules framed there
 under.
 
 6.  The company did not have any formal internal audit system during
 the year under review. In the opinion of the management, the existing
 internal control procedures are adequate and hence separate internal
 audit is not called for.
 
 7.  According to the information given to us by the Management, the
 Central Government has not prescribed the maintenance of cost records
 under Section 209(1)(d) of the Companies Act, 1956 for the activities
 of the Company.
 
 8.  (a) The company is regular in depositing with appropriate
 authorities undisputed statutory dues including provident fund,
 investor education and protection fund, employees state insurance,
 income-tax, VAT, wealth tax, custom duty, Service tax, excise duty,
 cess and any other statutory dues applicable to it.
 
 (b) According to the information and explanations given to us, no
 undisputed amounts payable in respect of income-tax, VAT, wealth tax,
 custom duty, service tax, excise duty, cess were in arrears, as at 31st
 March, 2012 for a period of more than six months from the date they
 became payable.
 
 9.  The Company has accumulated losses of Rs. 28.03 lacs at the end of
 the year, which is less than 50% of Net worth of the Company. Further,
 the company has incurred cash loss of Rs. 32.01 lacs during the
 financial year covered under audit. However the company has not
 incurred any cash loss during the immediately preceding financial year.
 
 10.  According to the records of the company and the information and
 explanations given to us, the company has not defaulted in repayment of
 dues to a financial institution or bank during the financia year.
 
 11.  In our opinion, the company has not granted any loans and advances
 on the basis of security by way of pledge of shares and other
 securities.
 
 12.  In our opinion, the provisions of any special statute applicable
 to chit fund or nidhi mutual fund or mutual benefit fund/ societies are
 not applicable to the company.
 
 13.  In our opinion, the company is not a dealer or trader in shares,
 securities, debentures and other investments.
 
 14.  As per the information and explanations given to us, the company
 has not given guarantees for loans taken by others form bank during the
 year.
 
 15.  The company has not availed any term loan facility during the
 year.
 
 16.  According to the information and explanations given to us and on
 an overall examination of the balance sheet and cash flow statement of
 the company for the year under audit, prima faces no funds raised on
 short-term basis have been used for long term investment.
 
 17.  The Company has not made any preferential allotment of shares
 during the year to any parties and companies covered in the register
 maintained under Section 301 of the Companies Act 1956.
 
 18.  The Company has not issued any debenture during the year.
 
 19.  The company has not raised any money by way of public issues
 during year.
 
 20.  Based upon the audit procedures performed for the purpose of
 reporting the true and fair view of the financial statements and as per
 the information and explanations given by the management, we report
 that no fraud on or by the company has been noticed or reported during
 the course of our audit.
 
 21.  Clause (ii) of the aforesaid order is not applicable to the
 company.
 
                              FOR PANKAJ K. SHAH ASSOCIATES
 
                              Firm Registration No. 107352W 
 
                              CHARTERED ACCOUNTANTS
 
                             (PANKAJ K. SHAH)
 
 Place : Ahmedabad            PROPRIETOR
 
 Date : 04.09.2012            M. No. 34603