1.  We have audited the attached Balance Sheet of HIMADRI CHEMICALS &
 INDUSTRIES LIMITED as at 31st March 2011 and also the Profit & 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.
 
 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 (Auditor''s Report) Order, 2003 (as
 amended) issued by the Central Government in terms of sub-section (4A)
 of Section 227 of the Companies Act, 1956 and on the basis of such
 checks of the books and records of the Company 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.
 
 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
 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 the written representations received from the
 directors and taken on record by the Board of Directors, none of the
 directors is 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;
 
 f) 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 accounting policies & notes thereon and attached
 thereto, 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 case of the Balance Sheet, of the state of affairs of the
 Company as at 31st March, 2011,
 
 ii.  in case of the Profit & Loss Account, of the profit of the Company
 for the year ended on that date, and
 
 iii. in case of the Cash Flow Statement, of the cash flows for the year
 ended on that date.
 
 ANNEXURE TO THE AUDITORS, REPORT
 
 (Referred to in Paragraph 3 of our Report of even date to the members
 of Himadri Chemicals and Industries Limited on the financial statements
 for the year ended 31st March 2011)
 
 i) a) The Company is in the process of compiling fixed assets records
 to show full particulars, including quantitative details and situation
 of fixed assets.
 
 b) We are informed that the management at reasonable intervals, in a
 phased programme, has physically verified fixed assets of significant
 value and no material discrepancies were noticed in respect of the
 assets verified.
 
 c) The Company has not made any substantial disposal of fixed assets
 during the year.
 
 ii) a) As explained to us, inventories have been physically verified by
 the management during the year at reasonable intervals.
 
 b) In our opinion, the procedures of physical verification of
 inventories followed by the management are reasonable and adequate in
 relation to the size of the Company and the nature of its business.
 
 c) On the basis of our examination of the inventory records of the
 Company, we are of the opinion that the Company is maintaining proper
 records of its inventory and no material discrepancies were noticed on
 physical verification of inventories, as compared to book records.
 
 iii) a) The Company has not granted any loan, secured or unsecured, to
 companies, firms or other parties covered in the register maintained
 under Section 301 of the Companies Act,1956. Accordingly, the clauses
 (iii) (b) to (iii) (d) of the Order are not applicable.
 
 b) The Company has not taken any loan during the year from companies,
 firms or other parties covered in the register maintained under section
 301 of the Companies Act, 1956. The maximum amount involved during the
 year and the year-end balance in respect of such loan taken from a
 Company in earlier year was Rs. 900 lacs & Rs. 750 lacs respectively.
 The Company has also issued Deep Discount Debentures of Face value of
 Rs. 123 crores in the earlier years to a Company covered in the
 register maintained under Section 301 of the Act, and the balance as on
 31st March 2011 net of discount, to be written off over the period of
 Debentures was Rs. 3679.84 lacs.
 
 c) In our opinion, the rate of interest and other terms and conditions
 of the aforesaid loans taken by the Company are prima facie not
 prejudicial to the interest of the Company.
 
 d) In respect of the aforesaid loan, the Company was regular in
 repaying the principal amount and was also regular in payment of
 interest as stipulated.
 
 iv) In our opinion and according to the information and explanations
 given to us, there are generally adequate internal control procedures
 commensurate with the size of the Company and 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 of the
 books and records of the Company, we have neither come across nor have
 we been informed of any continuing failure to correct major weaknesses
 in the aforesaid internal control system.
 
 v) a) To the best of our knowledge and belief and according to the
 information and explanations given to us, we are of the opinion that
 the particulars of the contracts or arrangements that need 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 Company has not entered into any transactions during
 the year exceeding Rs. 500,000/- in pursuance of contracts or
 arrangements entered in the register maintained under section 301 of
 the Companies Act, 1956. As the Company has not entered into any
 transaction as aforesaid, Clause (v)(b) of the Order is not applicable.
 
 vi) The Company has not accepted any deposit during the year from the
 public within the meaning of the provisions of Sections 58A and 58AA of
 the Companies Act, 1956, and the rules framed there under.
 
 vii) In our opinion, the Company has an internal audit system
 commensurate with the size and nature of its business.
 
 viii) We have broadly reviewed the books of accounts maintained by the
 Company in respect of products where, pursuant to the Rules made by the
 Central Government of India maintenance of cost records has been
 prescribed 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 have not, however made a
 detailed examination of the records with a view to determine whether
 they are accurate or complete.
 
 ix) a) According to the records of the Company examined by us, the
 Company is generally regular in depositing 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 any other statutory dues with
 the appropriate authorities.  According to the information and
 explanations given to us, no undisputed amounts were in arrears, as at
 31st March, 2011, for a period of more than six months from the date
 they became payable.
 
 b) According to the records of the Company and the information and
 explanations given to us & upon our enquiries in this regard, disputed
 dues in respect of Sales Tax, Service Tax, Customs Duty, Excise Duty
 and Cess unpaid as at the last day of the financial year, are as
 follows:
 
 Nature of Dues              Amount      Forum where dispute 
                        (Rs in lacs)     is pending
 
 Sales Tax                   257.91      Senior Jt Commissioner
 
                                         (Special Cell)
 
 Custom Duty                  28.83      CESTAT, Kolkata
 
 Service Tax                  67.21      Commissioner (Appeal), Kolkata
 
 Excise duty                  10.23      Commissioner (Appeal), Kolkata
 
 x) The Company has neither accumulated losses at the end of the
 financial year nor has it incurred cash losses in the financial year
 under report or in the immediately preceding financial year.
 
 xi) According to the records of the Company examined by us and the
 information and explanations given to us, the Company has not defaulted
 in repayment of dues to financial institutions, banks or debenture
 holders.
 
 xii) As explained 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.
 
 xiii) The provisions of any special statute applicable to chit fund/
 nidhi/ mutual benefit fund/ societies are not applicable to the
 Company.
 
 xiv) In respect of shares, securities, debentures and mutual fund units
 dealt or traded by the Company and held as investments, proper records
 have been maintained of the transactions and contracts and timely
 entries have been made therein. All the investments have been held by
 the Company in its own name.
 
 xv) According to the information and explanations given to us, the
 Company has not given any guarantee for loans taken by others from
 banks or financial institutions.
 
 xvi) On the basis of the records examined by us, in our opinion, on an
 overall basis, the term loans have been applied for the purposes for
 which they were obtained.
 
 xvii) Based on the information and explanations given to us and on an
 overall examination of the financial statements of the Company, prima
 facie, short term funds have not been used for long term purposes.
 
 xviii) To the best of our knowledge and according to the information
 and explanations given to us, the Company has not made any preferential
 allotment of shares to companies, firms or other parties covered in the
 register maintained under Section 301 of the Companies Act, 1956.
 
 xix) The Company has issued Non – Convertible Secured Debentures and
 created the Security as per the terms of Issue thereof.
 
 xx) The Company has not raised any money by way of public issue during
 the year.
 
 xxi) According to the information and explanations given to us, no
 fraud on or by the Company has been noticed or reported during the
 year.
 
 
                                                      For S. Jaykishan
 
                                                 Chartered Accountants,
 
                                         Firm Registration No. 309005E
 
                                                                  Sd/-
 
                                                     CA. B. K. Newatia
 
 Place: Kolkata                                                Partner
 
 Dated: The 23rd day of May, 2011                        M. No. 050251