We have audited the attached Balance Sheet of GULSHAN SUGARS &
 CHEMICALS LIMITED as at 31st March 2007 and Profit & Loss Account for
 the year ended on that date annexed thereto and Cash Flow Statement for
 the year ended on that date. 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 auditing standards generally
 accepted in India. These standards require that we plan and perform the
 audit to obtain reasonable assurance about whether the financial
 statements are free of any material mis-statement, 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 the Management, as well as evaluating the overall presentation of
 the financial statement. We believe that our audit provides a
 reasonable basis for our opinion.
 
 As required by the Companies (Auditors Report) (Amendment) Order 2004,
 issued by the Central Government of India in terms of Section 227 (4A)
 of the Companies Act, 1956, we enclose in the annexure hereto a
 statement on the matters specified in Paragraphs 4 and 5 of the said
 Order.
 
 Further to our comments in the Annexure referred to in paragraph 3
 above, we report that:-
 
 (i) 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.
 
 (ii) In our opinion, proper books of accounts as required by law have
 been kept by the Company so far as appears from our examination of the
 books of the Company.
 
 (iii) The Balance Sheet, Profit & Loss Account and Cash Flow Statement
 dealt with by this report are in agreement with the books of accounts
 of the Company.
 
 (iv) In our opinion, the Balance Sheet, Profit & Loss Account and Cash
 Flow Statement dealt with by this report comply with the mandatory
 Accounting Standards referred to in Sub-section (3C) of Section 211 of
 the Companies Act, 1956.
 
 (v) In our opinion and to the best of our information and according to
 the explanations given to us, none of the Directors are, as at 31 st
 March, 2007, prima-facie disqualified from being appointed as a
 Director in terms of Clause (g) of Sub-section (1) of the Section 274
 of the Companies Act, 1956.
 
 (vi) In our opinion and to the best of our information and according to
 the explanations given to us, the said financial statements read
 together with the significant Accounting Policies and the other notes
 thereon, give the information required by the Companies Act, 1956 in
 the manner so required and present a true and fair view in conformity
 with the accounting principles generally accepted in India.
 
 (a) In the case of Balance Sheet, of the state of affairs of the
 Company as at 31 st March, 2007 and;
 
 (b) In the case of the Profit & Loss Account, of the Profit for the
 year ended on that date.
 
 (c) In the case of Cash Flow Statement, of the cash flows of the
 company for the year ended on that date.
 
 ANNEXURE TO AUDITORS REPORT
 
 (Referred in Paragraph 3 of our Report of even date)
 
 1.  In respect of Fixed Assets :
 
 (a) The Company is maintaining proper records showing full particulars,
 including quantitative details and situation of Fixed Assets.
 
 (b) As explained to us, these Assets have been physically verified by
 the Management at reasonable intervals, having regard to the size of
 the company and nature of its assets, no material discrepancies were
 noticed on such verification.
 
 (c) In our opinion, company has not disposed off substantial part of
 its fixed assets during the year and the going concern status of the
 company is not affected.
 
 2.  In respect of Inventories:
 
 (a) As explained to us, physical verification of inventory has been
 conducted by the Management at reasonable intervals.
 
 (b) In our opinion and according to the information and explanations
 given to us, the procedure 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.
 
 (c) The Company is maintaining proper records of inventory and no
 material discrepancies were notified on physical verification of
 inventories as compared to book records.
 
 3.  In respect of Loans, secured or unsecured granted or taken by the
 company to/from companies, firms and other parties covered in the
 register maintained u/s 301 of Companies Act 1956 :
 
 (a)& (b) According to the records of the company and information given
 to us the Company has not granted loan to any party.
 
 (c)&(d) According to the records of the company and information given
 to us, company has not granted loan to any party during the year.
 
 (e) According to the records of the company and information given to
 us, the Company has taken loans aggregating to Rs. 281 lacs from two
 parties during the year.
 
 (f) In our opinion and according to the information and explanation
 given to us, the rate of interest wherever applicable and other terms
 and conditions of the loans taken by the company secured or unsecured
 are not prima facie prejudicial to the interest of the company.
 
 (g) According to the records of the company and information given to
 us, in respect of loans taken by the Company, the interest payments are
 regular and the principal amount is repayable on demand.
 
 4.  In our opinion, and according to the information and explanations
 given to us, there are adequate internal control systems commensurate
 with the size of the Company and the nature of its business for the
 Purchase of Inventory and fixed Assets and Sale of Goods and services.
 During the course of audit, we have not observed any major weaknesses
 in the Internal controls.
 
 5.  In respect of Transactions covered under section 301 of the
 Companies Act, 1956:
 
 (a) In our opinion and according to the information and explanations
 given to us, the transactions made in pursuance of contracts or
 arrangements that needed to be entered in the register maintained under
 section 301 of the Companies Act, 1956, have been so entered.
 
 (b) In our opinion and according to the information and explanations
 given to us, the transactions 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 prevailing market prices at the relevant time.
 
 6.  The Company has accepted Fixed Deposits from the public within the
 meaning of Section 58-A of the Companies Act, 1956 and the rules framed
 there under and have complied with all the rules thereof.
 
 7.  In our opinion, the Company has an adequate Internal Audit System
 commensurate with its size.
 
 8.  The Central Government has not prescribed the maintenance of Cost
 Records under section 209(1 )(d) of the Companies Act, 1956 for the
 current year.
 
 9.  (a) According to the records of the company and explanations given
 to us, the company is regular in depositing undisputed statutory dues
 including Provident Fund, Investor Education & Protection Fund,
 Employees State Insurance, Income Tax, Sales Tax, Custom Duty, Wealth
 Tax, Service Tax, Excise Duty, cess and any other statutory dues with
 the appropriate authorities. According to the information and
 explanations given to us, no undisputed amount payable in respect of
 the aforesaid dues were outstanding as at 31st March, 2007 for a period
 of more than 6 months from the date of becoming payable.
 
 (b) As explained to us and information given to us, there are no
 dispute in case of dues of Sales Tax/ Income Tax/ Custom Duty /Wealth
 Tax/Service Tax/ Excise Duty/ Cess.
 
 10.  The Company has no accumulated losses and it has not incurred cash
 losses during the financial year covered by our audit and in the
 immediately preceding financial year also.
 
 11.  According to the records and information given to us, the company
 has not defaulted in repayment of dues to a financial Institution or
 bank.
 
 12.  In our opinion and according to the information and explanation
 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
 security.
 
 13.  In our opinion and According to the information and explanations
 given to us, the company is not a chit fund or Nidhi or mutual benefit
 fund/society. Therefore, clause 4(xiii) of the Companies (Auditors
 Report), (Amendment) Order 2004 is not applicable to the company.
 
 14.  In our opinion and According to the information and explanations
 given to us, the company is not dealing or trading in shares,
 securities, debentures and other investments.
 
 15.  The Company has given corporate guarantee for loans taken by other
 from Bank, in our opinion the terms and conditions of guarantee are not
 prejudicial to the interest of the company.
 
 16.  According to the records of the company and according to the
 information and explanations given to us, the term loans taken by the
 company were applied for the purpose for which the loans were taken.
 
 17.  According to the records of the company and according to the
 information and explanations given to us and on overall examination of
 the balance sheet, we opine that the funds raised on short-term basis
 have not been used for long term investment during the year covered
 under audit.
 
 18.  During the year, the company has not made any preferential
 allotment of shares to the parties and the companies covered in the
 register maintained under section 301 of the Companies Act 1956.
 
 19.  No debentures have been issued by the Company during the period
 covered by our Audit.
 
 20.  We have verified the end use of money raised by the public issue
 as declared by the management in the prospectus filed with The
 Securities and Exchange Board of India and as appearing in Note No. 19
 of Schedule 21 under the heading Notes to Account forming part of
 financial statements.
 
 21.  As explained to us and information given to us, no fraud on or by
 the company has been noticed by or reported during the year.
 
                                        For SHAHID & ASSOCIATES
                                         Chartered Accountants
 
                                           (MOHD. SHAHID)
 DATE   : June 16,2007                          FCA
 PLACE: DELHI                            Membership No.: 70408