HEG

We have audited the attached Balance Sheet of HEG Limited as at 31st
 March,2008 and also the Profit & 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 Companys
 management. Our responsibility is to express an opinion on these
 financial statements based on our audit.
 
 We have 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 the 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 as amended
 by Companies (Auditors Report) (Amendment) Order,2004 (Collectively
 the Order) issued by the Central Government of India in terms of
 Section 227 (4A) of the Companies Act, 1956 and on the basis of such
 checks as we considered appropriate and according to the information
 and explanations given to us, we enclose in the Annexure a statement on
 the matters specified in paragraphs 4 and 5 of the said Order.
 
 Further to our comments in the Annexure referred to 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
 those books;
 
 c) The Balance Sheet, Profit & 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 & 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) On the basis of written representations received from the directors
 as on 31st March, 2008 and taken on record by the Board of Directors,
 we report that none of the directors is disqualified as on 31st March,
 2008 from being appointed as a director in terms of clause (g) of sub
 section (1) of section 274 of the Companies Act, 1956.
 
 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 Accounting
 policies and 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 Balance Sheet, of the state of affairs of the Company
 as at 31st March,2008;
 
 ii) In the case of 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.
 
 ANNEXURE TO AUDITORS REPORT
 
 (Annexure referred to in our report of even date)
 
 1.  (a) The Company has maintained proper records showing full
 particulars including quantitative details and situation of fixed
 assets.
 
 (b) The Company has a phased programme of physical verification of its
 fixed assets which, in our opinion, is reasonable having regard to the
 size of the Company and the nature of its assets. Management has
 physically verified certain fixed assets during the year. Discrepancies
 noticed on such verification as compared to book records were not
 material and have been properly adjusted in the books of accounts.
 
 (c) Substantial part of the fixed assets were not disposed off during
 the year and, therefore, does not affect the going concern assumption.
 
 2.  (a) The management during the year has physically verified the
 inventory, except material lying with third parties and in transit.  In
 our opinion, the frequency of such verification is reasonable.
 
 (b) The procedures for the physical verification of inventory followed
 by the management are, in our opinion, 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
 inventory as compared to book records were not material and 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 Companies Act, 1956. Accordingly clauses 4
 (iii) (b) to (d) of the Order are not applicable.
 
 (b) The company has not taken any loan,secured or unsecured,from
 companies,firms or other parties covered in the register maintained
 under section 301 of the Companies Act, 1956. Accordingly clauses 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 during the course of audit, there are adequate internal
 control systems commensurate with 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. Further, on the basis of our
 examination of the books & records of the company, carried out in
 accordance with the generally accepted auditing practices in India, we
 have neither come across nor have we been informed of any instance of
 major weaknesses in the aforesaid internal control systems.
 
 5.  (a) Based upon the audit procedures applied by us and according to
 the information and explanations given to us, we are of the opinion
 that the particulars of contracts and 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 contracts or
 arrangements entered in the register maintained under Section 301 of
 the Act and aggregating during the year to Rupees five lakhs or more in
 respect of each party have been made at prices which are reasonable
 having regard to market prices for such transactions, prevailing at the
 relevant time, where such market prices are available.
 
 6.  The Company has not accepted any deposits from the public within
 the meaning of sections 58A and 58AA or any other relevant provisions
 of the Companies Act, 1956 including the Companies (Acceptance of
 Deposit) Rules, 1975.
 
 7.  In our opinion, the Company has an internal audit system
 commensurate with the size & nature of its business.
 
 8.  We have broadly reviewed the Cost Accounting records, maintained by
 the Company pursuant to the Rules prescribed by the Central Government
 for the maintenance of cost records under clause (d) of sub-section (1)
 of section 209 of the Act,and are of the opinion that, prima facie, the
 prescribed accounts and records have been made and maintained.We are,
 however, not required to make a detailed examination of such books and
 records.
 
 9.  (a) According to the records of the Company, undisputed statutory
 dues including Provident Fund, Investor Education and Protection Fund,
 Employees State Insurance, Income-tax, Sales-tax,Wealth-tax,Service
 tax, Custom Duty, Excise Duty, Cess and other material statutory dues
 have been generally regularly deposited with the appropriate
 authorities during the year.There are no such dues outstanding for more
 than six months as on the date of balance sheet.
 
 (b) According to the information and explanations given to us and as
 per the books and records examined by us,there are no dues of custom
 duty, wealth tax, and cess that have not been deposited on account of
 any dispute except the following dues of income tax, sales tax, service
 tax and excise duty along with the forum where the dispute is pending :
 
 Name of the                       Nature of
 Statute                           Dues
 
 Income Tax Act, 1961              Income Tax
 Central Excise Act,1944           Excise Duty
 Central Sales Tax Act,            Central Sales
 1956                              Tax
 M.P. Parvesh Kar                  Entry Tax
 Adhiniyam,1976
 M.P.C.T.                          Local Sales Tax
 
 
 Departmental Appellate authorities/Jurisdictional High Court
 
 Commissioner          Tribunal           High Court     Supreme Court
 Amount                Amount              Amount        Amount
 
 -                      57.00                -             -
 12.78                  13.64                -             -
 126.83                 18.48                -             -
 157.15                 14.41             5.41             -
 -                       -                0.77             -
 
 10.  There are no accumulated losses of the Company as at the end of
 the financial year. There are no cash losses during the financial year
 and in the immediately preceding financial year.
 
 11.  According to the information and explanations given to us and as
 per the books and records examined by us, the Company has not defaulted
 in repayment of dues to any financial institution or bank or
 debentureholders.
 
 12.  According to the information and explanations 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 securities.
 
 13.  The Company does not fall within the category of Chit fund / Nidhi
 / Mutual Benefit fund / Society and hence the related reporting
 requirements are not applicable.
 
 14.  According to the information and explanations given to us, the
 Company is not dealing or trading in shares, securities, debentures and
 other investments and hence the related reporting requirements are not
 applicable.
 
 15.  The company has not given any guarantees for loans taken by others
 from banks or financial institutions.
 
 16.  In our opinion, and according to the information and explanations
 given to us, the term loans raised during the year by the Company have
 been applied for the purpose for which the said loans were obtained,
 where such end use has been stipulated by the lender.
 
 17.  According to the information and explanations given to us and as
 per the books and records examined by us, as on the date of balance
 sheet, the funds raised by the Company on short term basis have not
 been applied for long term investments.
 
 18.  During the year, the Company has made Preferential issue of share
 warrant to parties covered in the register maintained under Section 301
 of the Act. In our opinion and according to the information and
 explanations given to us the price at which such share warrant had been
 issued is not prejudicial to the interest of the company.
 
 19.  According to the information and explanations given by the
 management funds raised through issue of FCCB has been utilized for the
 purpose the same were raised and has been verified.
 
 20.  The Company has created necessary securities and other charges for
 the debentures issued.
 
 21.  The Company has raised money through FCCB issue in the year
 2005-06 and out of sum of Rs. 9,757.52 lac lying in foreign currency a
 sum of Rs. 7,535.98 lac is used for the purpose for which it had been
 issued this year. An amount of Rs. 2,005.75 lac, which is lying in
 Short Term Fixed deposit in Foreign Currency and pending final
 utilization.
 
 22.  During the course of our examination of the books and records of
 the Company carried out in accordance with the generally accepted
 auditing practices in India, we have neither come across any instance
 of fraud on or by the Company, noticed and reported during the year,
 nor have we been informed of such case by the management.
 
 For Doogar & Associates                   For S. S. Kothari Mehta & Co.
 Chartered Accountants                             Chartered Accountants
 
 Mukesh Goyal                                             Arun K.Tulsian
 Partner                                                         Partner
 Membership No. 81810                               Membership No. 89907
 
 Place: Noida (U.P.)
 Dated: 13th June, 2008