1.  We have audited the attached Balance Sheet of HSIL Limited (''the
 Company''), as at 31 March 2012, and also the Statement of Profit and
 Loss and the Cash Flow Statement for the year ended on that date
 annexed thereto (collectively referred as the ''financial statements'').
 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 the 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 (''the
 order'') (as amended) issued by the Central Government of India in terms
 of sub-section (4A) of Section 227 of the Companies Act, 1956 (''the
 Act'') , we enclose in the Annexure a statement on the matters specified
 in paragraphs 4 and 5 of the Order.
 
 4.  Without qualifying our opinion, we draw attention to Note 49 to the
 financial statements regarding the scheme of arrangement (''the
 scheme''), approved by Hon''ble Calcutta High Court. In terms of the
 scheme, the Company has revalued only a portion of its freehold land by
 crediting the resulting gain of Rs. 22,500 lacs to the Business
 Reconstruction Reserve Account (the BRR account). The applicable
 accounting standards and generally accepted accounting principles do
 not provide for revaluation of part of a class of asset. However, the
 Company has followed the accounting treatment as prescribed under the
 scheme approved by the Hon''ble High Court. Had the Company followed the
 generally accepted accounting principles, freehold land and reserves as
 on 31 March 2012 would have been lower by Rs. 22,500 lacs.
 
 5.  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 financial statements dealt with by this report are in agreement
 with the books of account;
 
 (d) On the basis of written representations received from the
 directors, as on 31 March 2012 and taken on record by the Board of
 Directors, none of the directors is disqualified as on 31 March 2012
 from being appointed as a director in terms of clause (g) of
 sub-section (1) of Section 274 of the Act;
 
 (e) In our opinion and to the best of our information and according to
 the explanations given to us, the financial statements dealt with by
 this report comply with the accounting standards referred to in sub-
 section (3C) of Section 211 of the Act and give the information
 required by the Act, in the manner so required and give a true and fair
 view in conformity with the accounting principles generally accepted in
 India, in the case of:
 
 (i) The Balance Sheet, of the state of affairs of the Company as at 31
 March 2012;
 
 (ii) The Statement of Profit and Loss, of the profit for the year ended
 on that date; and
 
 (iii) The Cash Flow Statement, of the cash flows for the year ended on
 that date.
 
 Based on the audit procedures performed for the purpose of reporting a
 true and fair view on the financial statements of the Company and
 taking into consideration the information and explanations given to us
 and the books of account and other records examined by us in the normal
 course of audit, we report that:
 
 (i) (a) The Company has maintained proper records showing full
 particulars, including quantitative details and situation of fixed
 assets.
 
 (b) The Company has a regular program of physical verification of its
 fixed assets under which fixed assets are verified in a phased manner
 over a period of three years 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 verification.
 
 (c) In our opinion, a substantial part of fixed assets has not been
 disposed off during the year.
 
 (ii) (a) The management has conducted physical verification of
 inventory at reasonable intervals during the year.
 
 (b) The 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 and no
 material discrepancies were noticed on physical verification.
 
 (iii) (a) The Company has granted unsecured loans to two parties
 covered in the register maintained under Section 301 of the Act. the
 maximum amount outstanding during the year is Rs. 1,500 lacs and the
 year-end balance is Rs. 900 lacs.
 
 (b) In our opinion, the rate of interest and other terms and conditions
 of such loans are not, prima facie, prejudicial to the interest of the
 Company.
 
 (c) In respect of loans granted, the interest and principal amounts are
 repayable on demand and since the repayment of such loans has not been
 demanded, in our opinion, repayment of the interest and principal
 amount is regular.
 
 (d) There is no overdue amount in respect of loans granted to such
 companies, firms or other parties.
 
 (e) The Company has not taken any loans, secured or unsecured from
 companies, firms or other parties covered in the register maintained
 under Section 301 of the Act. Accordingly, the provisions of clauses
 4(iii)(f) and 4(iii)(g) of the Order are not applicable.
 
 (iv) In our opinion, there is an adequate internal control system
 commensurate with the size of the Company and the nature of its
 business for the purchase of inventory and fixed assets and for the
 sale of goods and services.  During the course of our audit, no major
 weakness has been noticed in the internal control system in respect of
 these areas.
 
 (v) (a) In our opinion, the particulars of all contracts or
 arrangements that need to be entered into the register maintained under
 Section 301 of the Act have been so entered.
 
 (b) In our opinion, the transactions made in pursuance of such
 contracts or arrangements and exceeding the value of rupees five lakhs
 in respect of any party during the year have been made at prices which
 are reasonable having regard to prevailing market prices at the
 relevant time.
 
 (vi) The Company has not accepted any deposits from the public within
 the meaning of Sections 58a and 58AA of the Act and the Companies
 (Acceptance of Deposits) Rules, 1975. Accordingly, the provisions of
 clause 4(vi) of the order are not applicable.
 
 (vii) In our opinion, the Company has an internal audit system
 commensurate with its size and the nature of its business.
 
 (viii) We have broadly reviewed the cost records maintained by the
 Company pursuant to the Companies (Cost Accounting Records) Rules, 2011
 prescribed by the Central Government under Section 209(1 )(d) of the
 Companies Act, 1956 and are of the opinion that prima facie the
 prescribed cost records have been maintained.  We have, however, not
 made a detailed examination of the cost records with a view to
 determine whether they are accurate or complete.
 
 (ix) (a) The Company is regular in depositing the 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,
 as applicable, with the appropriate authorities. Further, no undisputed
 amounts payable in respect thereof were outstanding at the year-end for
 a period of more than six months from the date they become payable.
 
 (b) The dues outstanding in respect of sales-tax, income-tax, custom
 duty, wealth-tax, excise duty, cess on account of any dispute, are as
 follows:
 
 Name of the                Nature of dues                 Amount
 statute                                                  (Rs. in lacs)
 
 The Central                Duty on captive                    5.00
 Excise Act,1944            consumption of plaster 
                            of paris 
 
 The Central                Duty on cisterns                  27.80
 Excise Act,1944            cleared with fittings
 
 The Central                Duty on C.I boring/              103.98
 Excise Act,1944            brass / copper boring / 
                            capital goods scrap / waste
                            paper / waste shrink / 
                            stretch film
 
 The Central                Duty on Structural               166.12
 Excise Act,1944            steel
 
 Delhi Sales                Sales tax demand                 189.99
                            due to non
 Tax Act,                   submission of 
 1975                       statutory forms
 
 APVAT Act                  Duty on interunit                 33.72
                            transfer of bottles
 
 Finance Act,               Availment of                       3.33
 1994                       cenvat credit on
                            Service Tax for
                            outward freight 
 
 APVAT Act                  Demand raised for                 20.88
                            VAT
 
 Name of the Statute    Period to which       Forum where dispute is 
                                              pending
                        the amount
                        relates
 
 The Central Excise
 Act, 1944              FY 1990 - 1991        Customs, Excise and 
                                              Service tax Appellate 
                                              Tribunal. Out of this, 
                                              Rs. 2.50 lacs has been 
                                              paid under protest 
 
 The Central Excise 
 Act, 1944              FY 1987 - FY 1989     Commissioner of Central 
                                              Excise, Rohtak
 
 The Central Excise
 Act, 1944              FY 2005-06            Commissioner of Customs & 
                                              Central Excise (Appeals). 
                                              Out of this demand, 
                                              Rs. 10.74 lacs has been 
                                              deposited by the Company 
                                              under protest.
 
 The Central Excise 
 Act, 1944              FY 2009-10            Commissioner of Customs &
                                              Central Excise (Appeals). 
                                              Out of this demand, 
                                              Rs. 40.00 lacs have been
                                              deposited by the Company 
                                              under protest.
 
 Delhi Sales Tax
 Act, 1975              FY 1998-99 to         Commissioner (Appeals), 
                                              sales tax.
                        2009-10               Out of this demand, 
                                              Rs. 32.28 lacs has been
                                              deposited by the Company
                                              and assessment for the 
                                              year 1998-99 to 2004-05 
                                              involving disputed tax of
                                              Rs. 106.76 lacs has been
                                              remanded back to the
                                              Assessing Officer.
 
 APVAT Act              FY 2009-10 and        Additional Commissioner of
                        2010-11               Commercial taxes - Legal. 
                                              Out of this demand, 
                                              Rs. 16.86 lacs have been 
                                              deposited by the Company 
                                              under protest.
 
 Finance Act 1994       FY 2004-05 to FY      Customs, Excise and
                                              Service tax
                        2006-07               Appellate Tribunal.
 
 APVAT Act              FY 2004-05 and        Deputy Commissioner 
                        2006-07
 
 (x) In our opinion, the Company has no accumulated losses at the end of
 the financial year and it has not incurred cash losses in the current
 and the immediately preceding financial year.
 
 (xi) The Company has not defaulted in repayment of dues to any bank or
 financial institution during the year. the Company did not have any
 outstanding debentures during the year.
 
 (xii) The Company has not granted any loans and advances on the basis
 of security by way of pledge of shares, debentures and other
 securities. Accordingly, the provisions of clause 4(xii) of the Order
 are not applicable.
 
 (xiii) In our opinion, the Company is not a chit fund or a nidhi/
 mutual benefit fund / society. Accordingly, the provisions of clause
 4(xiii) of the Order are not applicable.
 
 (xiv) In our opinion, the Company is not dealing or trading in shares,
 securities, debentures and other investments.  Accordingly, the
 provisions of clause 4(xiv) of the Order are not applicable.
 
 (xv) In our opinion, the terms and conditions on which the Company has
 given guarantee for loans taken by others from banks or financial
 institutions are not, prima facie, prejudicial to the interest of the
 Company.
 
 (xvi) In our opinion, the Company has applied the term loans for the
 purpose for which these loans were obtained.
 
 (xvii) In our opinion, no funds raised on short-term basis have been
 used for long-term investment.
 
 (xviii) During the year, the Company has not made any preferential
 allotment of shares to parties or companies covered in the register
 maintained under Section 301 of the Act. Accordingly, the provisions of
 clause 4(xviii) of the Order are not applicable.
 
 (xix) The Company has neither issued nor had any outstanding debentures
 during the year. Accordingly, the provisions of clause 4(xix) of the
 Order are not applicable.
 
 (xx) The Company has not raised any money by public issues during the
 year. Accordingly, the provisions of clause 4(xx) of the Order are not
 applicable.
 
 (xxi) According to the information and explanations given to us, except
 for fraudulent withdrawal of funds at one of the unit of the Company,
 described in note 44 to the financial statements, no fraud on or by the
 Company has been noticed or reported during the period covered by our
 audit. As further informed to us, the Company has taken adequate follow
 up action, including strengthening of systems.
 
                                          For Walker, Chandiok & Co
 
                                              Chartered Accountants
 
                                     Firm Registration No.: 001076N
 
                                                    per B. P. Singh
 
 Place : Gurgaon                                            Partner
 
 Date : 29 May 2012                           Membership No.: 70116