We have audited the attached Balance Sheet of M/s. Gwalior Polypipes
 Limited as at 31st March 2011 and also the Profit and Loss Account and
 the 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.
 
 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.
 
 As required by the Companies (Auditors'' Report) Order, 2003 issued by
 the Central Government of India in terms of sub-section (4A) of section
 227 of the Companies Act, 1956, we enclose in the Annexure a statement
 on the matters specified in the said order.
 
 Further to our comments in the Annexure referred to 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) Proper books of account as required by law have been kept by the
 company so far as appears from our examination of those books;
 
 (iii) The Balance Sheet, Profit and Loss Account and Cash Flow
 Statement dealt with by this report are in agreement with the books of
 account;
 
 (iv) In ourtipinion, 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 3(C) of section 211 of
 the Companies Act, 1956;
 
 (v) On the basis of written representations received from all the six
 directors, as on 31st March 2011, and taken on record by the Board of
 Directors, we report that they are not disqualified as on 31st March
 2011 from being appointed as a director in terms of clause (g) of
 sub-section (1) of 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 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;
 
 (a) in the case of the Balance Sheet, of the state of affairs of the
 Company as at 31st March 2011
 
 (b) in the case of the Profit and Loss Account, of the Profit for the
 year ended on that date; and
 
 (c) in the case of the cash flow statement, of the cash flows for the
 year ended on that date.
 
 As required by the Companies (Auditors'' Report) Order, 2003 issued by
 the Company Law Board in terms of Section 227 (4A) of the Companies
 Act, 1956, in our opinion and on the basis of such checks of the books
 and records as we considered appropriate and according to the best of
 our knowledge and belief, we report that :
 
 (i)(a) We have been informed that the Company has maintained proper
 records showing full particulars, including quantitative details and
 situations of fixed assets. However, the said records were not made
 available for our verification during the audit as the same are being
 updated pursuant to ICAI Statement in Para 4(i)(a) of the CARO, 2003.
 
 (b) As per the information and explanations given to us, physical
 verification of fixed assets has been carried out by the management
 during the year and no material discrepancies were noticed on such
 verification.
 
 (c) During the year, the Company has not disposed of any
 substantial/major part of fixed assets.
 
 (ii)(a) As per the information furnished, the inventories have been
 physically verified during the year by the management.
 
 (b) In our opinion and according to the information and explanations
 given to us 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.
 
 (c) The Company is maintaining proper records of inventory. In our
 opinion, discrepancies noticed on physical verification of stocks were
 not material in relation to the operations of the Company and the same
 have been properly dealt with in the books of account.
 
 (iii)(a)As per the information furnished, the Company has not granted
 any loans, secured or unsecured, to companies, firms or other parties
 covered in the register maintained u/s.301 of the Companies Act, 1956.
 The balances in current account due from Companies, firms or other
 parties covered in the register maintained u/s 301 of the Companies
 Act, 1956 are not in the nature of loans and are without any
 stipulation or condition attached thereto.
 
 (b) As the Company has not granted any loans, secured or unsecured to
 companies, firms or other parties covered in the register maintained
 u/s 301 of the Companies Act, 1956, the Clause (iii)(b) to (d) of the
 Order is not applicable.
 
 (c) As per the information furnished, the Company has taken unsecured
 loan, from two Directors and the maximum amount involved in such
 transactions during the year and the balance at the end were Rs.28.29
 Lacs and Rs 18.85 Lacs respectively. The balances in current account
 due to Companies, firms or other parties covered in the register
 maintained u/s 301 of the Companies Act, 1956 are not in the nature of
 loans and are without any stipulation or condition attached thereto.
 
 (d) There are no conditions attached with respect to the rate of
 interest and repayment of the loan taken from the Directors.
 
 (e) In case of loans from Directors the amounts have not become overdue
 and are repayable on demand.
 
 (iv) In our opinion and according to the information and explanations
 given to us, there is adequate internal control system commensurate
 with the size of the Company and the nature of its business with regard
 to purchase of inventory and fixed assets and for the sale of goods and
 services.
 
 (v) In our opinion and according to the information and explanations
 provided by the management, we are of the opinion that the particulars
 of contracts or arrangement referred to in Section 301 of the Act have
 been entered in the register required to be maintained under that
 section.
 
 (vi) The Company has not accepted any deposits during the year from the
 public within the meaning of the provisions of Section 58A and 58AA or
 any other relevant provisions of the Companies Act, 1956 and rules made
 there under. Hence, the Clause (vi) of the order is not applicable.
 
 (vii) In our opinion, the Company has an internal audit system
 commensurate with the size of the Company and the nature of its
 business.
 
 (viii) We are informed that the Central Government has not prescribed
 maintenance of the cost records u/s 209(1 )(d) of the Companies Act,
 1956 in respect of the Company''s products.
 
 (ix)(a) According to the information and explanations given to us and
 the records examined by us, there have been delays in depositing with
 appropriate authorities undisputed statutory dues including provident
 fund, employees'' state insurance, sales tax, and other material
 statutory dues applicable to it.
 
 (b) According to the information and explanations given to us, the
 details of undisputed statutory dues in arrears, as at 31.03.2011 for a
 period of more than 6 months from the date they became payable, is as
 follows :
 
 Name of the statute            Nature of the dues       Amount (Rs.)
 
 1. MP Sales Tax Act            Entry Tax                Rs. 4,28,908/-
 
 2. Central Sales Tax Act (MP)  Central Sales Tax        Rs. 4,41,610/-
 
 3. Central Sales Tax Act (Raj) Central Sales Tax        Rs. 2,84,588/-
 
 4. MP Sales Tax Act            Sales Tax                Rs. 8,18,543/-
 
 5. Rajasthan Sales Tax Act     Sales Tax                Rs. 3,77,225/-
 
 (c) According to the information and explanations given to us, the
 details of disputed statutory dues in arrears, as at 31.03.2011 is as
 follows :
 
 Name of the statute  Nature of 
                      the dues     Amount (Rs.)     Forum where dispute
                                                    is pending
 
 1.MP Sales Tax Act   Sales Tax    Rs. 29,00,394/-  Under Appeal before
                                                    High Court, Gwalior
 
 2. MP Sales Tax Act  Deferred                      Under Appeal before 
                                                    High Court,
                      Sales Tax    Rs. 61,54,725/-  Gwalior
 
 (x) Accumulated losses of the Company as on 31.03.2011 are Rs.
 8,71,88,615/-. The Company has earned cash profits during the current
 financial year amounting to 53,71,559/- as against Cash Profit of Rs.
 48,98,072/- during the last year. The company has been declared as a
 sick industrial company in terms of Section 3(1)(0) of Sick Industrial
 Companies (Special Provisions) Act, 1985 vide BIFR order dated 9th
 September, 2009 and IFCI has been appointed as the operating agency for
 formulating the scheme of rehabilitation.
 
 (xi) Based on our examination of the records and the information and
 explanations given to us, the Company has not granted any loans and/or
 advances on the basis of security by way of pledge of shares,
 debentures and other securities.
 
 (xii) Clause (xiii) of the Order is not applicable to the Company as
 the Company is not a chit fund Company or nidhi/mutual benefit
 fund/society.
 
 (xiii) The Company is not dealing and trading in shares, securities,,
 debentures and other investments.
 
 (xiv) According to the information and explanations given to us, the
 Company has not given guarantee for loans taken by other from banks or
 financial institutions.
 
 (xv) According to the information and explanations given to us, no term
 loans have been raised by the Company during the year.
 
 (xvi) According to our information and explanations given to us the
 funds raised on short term basis have not been used for long term
 investment.
 
 (xvii) The Company has not made any preferential allotment of shares
 during the year.
 
 (xviii) The Company has not issued any debentures during the current
 year or previous year.
 
 (xix) The Company has not raised any money by public issues during the
 year covered by our report.
 
 (xx)'' As per the information and explanations given to us, no fraud on
 or by the company has been noticed or reported during the year.
 
                                                          For SNMG & Co.
 
                                                   Chartered Accountants
                                                        Reg. No. 004921N
 
 Place : New Delhi
 
 Dated:  6th August, 2011                                  (Rakesh Kumar)
 
                                                                 Partner
                                                            M.No. 083911