India Foils

1. We have audited the attached Balance Sheet of India Foils Limited,
 as at 31st March 2008, the related Profit and Loss Account and the Cash
 Flow Statement for the year ended on that date annexed thereto, which
 we have signed under reference to this report. 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.
 
 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 (Auditors Report) Order, 2003 as
 amended by the Companies (Auditors Report) (Amendment) Order, 2004
 (the Order) issued by the Central Government of India in terms of
 sub-section (4A) of Section 227 of The Companies Act, 1956 of India
 (the Act) 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 report that: -
 
 3.1 (a) The Company has maintained proper records to show full
 particulars including quantitative details and situation of its fixed
 assets.
 
 (b) The fixed assets of the Company are physically verified by the
 management according to a phased programme designed to cover all the
 items over a period of three years, which is considered to be
 reasonable having regard to the size of the Company and the nature of
 its assets. Pursuant to the programme, fixed assets located at Hoera
 and Taratala units have been physically verified by the management
 during the year and no material discrepancies between the book records
 and the physical inventory have been noticed.
 
 (c) In our opinion, and according to the information and explanations
 given to us, a substantial part of fixed assets has not been disposed
 off by the Company during the year.
 
 3.2 (a) The inventory of the Company at all its locations has been
 physically verified by the management during the year. In our opinion,
 the frequency of such verification is reasonable.
 
 (b) In our opinion, the procedures of physical verification of
 inventory followed by the management are reasonable and adequate in
 relation to the size of the Company and nature of its business.
 
 (c) On the basis of our examination of the inventory records, in our
 opinion, the Company has maintained proper records of inventory. The
 discrepancies noticed on physical verification of inventory as compared
 to book records, which were not material, have been properly dealt with
 in the books of account.
 
 3.3 (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 Act.
 
 (b) 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.
 
 3.4 In our opinion and according to the information and explanations
 given to us, 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. The
 Company does not provide any services. Further, on the basis of our
 examination of the books and records of the Company, and according to
 the information and explanations given to us, we have neither come
 across nor have been informed of any continuing failure to correct
 major weaknesses in the aforesaid internal control system.
 
 3.5 According to the information, and explanations given to us, there
 have been no contracts or arrangements referred to in Section 301 of
 the Act during the year to be entered in the register required to be
 maintained under that Section. Accordingly, commenting on transactions
 made in pursuance of such contracts or arrangements does not arise.
 
 3.6 The Company has not accepted any deposits from the public within
 the meaning of Sections 58A and 58AA of the Act and the rules framed
 thereunder.
 
 3.7 In our opinion, the Company has an internal audit system
 commensurate with size and nature of its business.
 
 3.8 / We have broadly reviewed the books of account maintained by the
 Company (other than those at Taratala and Hoera units, the operations
 of which are under suspension since April 2002 and September 2003
 respectively) in respect of products where, pursuant to the Rules made
 by the Central Government of India, the 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.
 
 3.9 (a) According to the information and explanations given to us and
 the records of the Company examined by us, in our opinion, the Company
 is generally regular in depositing during the year the undisputed
 statutory dues including provident fund, investor education and
 protection fund, employees state insurance, income-tax, sales tax,
 wealth tax, service tax, customs duty, excise duty, cess and other
 material statutory dues, as applicable, with the appropriate
 authorities except:
 
 (i) Dues in respect of provident fund and employees state insurance in
 respect of the Hoera unit, the operation of which is under suspension
 since September 2003, (extent of the arrears thereof as at 31st March
 2008 outstanding for a period of more than six months from the date
 they became payable not being readily ascertainable) as indicated in
 Note 9 on Schedule 25; and
 
 (ii) Other dues, aggregating Rs.27S.97 lacs, as set out below, which is
 outstanding as on 3lst March, 2008 for a period of more than six months
 from the date they became payable:
 
 Name of the         Nature of Dues                Amount
 Statute                                         (Rs. Lacs)
 
 Sales Tax           Deferred  Sales Tax           12.98
                     Liability
 
                                                   25.62
 
                                                   31.45
                                                   29.76
                                                   42.45
                                                   51.39
                                                   51.58
                                                   33.74
 Total                                            278.97
 
 Period to which the         Due Date
 amount relates
 
 01.07.96-30.09.96              31.10.05
 
 01.10.96-31.12.96              31.01.06
 
 01.01.97-31.03.97              30.04.06
 
 01.04.97-30.06.97              31.07.06
 
 01.07.97-30.09.97              31.10.06
 
 01.10.97-31.12.97              31.01.07
 
 01.01.98-31.03.98              30.04.07
 
 01.04.98-30.06.98              31.07.07
 
 Note: There have been no repayments in respect of the aforesaid dues
 subsequent to the year end together with interest of Rs. 46.42 lacs due
 thereon provided in the accounts.
 
 (b) According to the information and explanations given to us, and the
 records of the Company examined by us as at 31 st March, 2008, there
 were no dues in respect of income-tax, wealth tax, service tax, customs
 duty and cess which have not been deposited on account of a dispute
 other than certain disputed sales tax and excise duty dues as set out
 below:
 
 Name of the statute         Nature of dues        Amount
                                                 (Rs. lacs)
 
 West Bengal Sales Tax       Sales Tax            1549.57
 Act/Central Sales Tax Act
 
                                                  3501.79
                                                   444.32
 
                                                  5495.68
 
 Central Excise Act          Excise Duty          1030.71
 
                                                  1030.71
 
 Period to which        Forum where the dispute
 the amount relates                  is pending
 
 1982 to 1999                  Revisional Board
                                      (Tribunal)
 
 1995 to 2005               Deputy Commissioner
                                       (Appeals)
 
 2001-2003            Assistant Commissioner of
                               Commercial Taxes
 
 1986 to 2003           Commissioner of Central
                                         Excise
 
 3.10 The accumulated losses of the Company as at 31st March, 2008 are
 more than fifty percent of its net worth and it has also incurred cash
 losses during the financial year ended on that date and in the
 immediately preceding financial year.
 
 3.11 According to the books and 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 any financial institution or bank or
 debenture holders other than default in repayments of the following
 dues which were made good during the year ended 31st March, 2008:
 
 Particulars of Dues
 
 Term loan from a Financial
 Institution (Stressed Assets
 Stabilisation Fund)
 
 Term loan from a Bank
 Demand Loan from a Bank
 
 Amount of Dues, repaid during the
 year, for which there was default in        Period of Default
 repayment                                  (No. of days)
 (Rs. Lacs)
 
 (a)  280.80                                     274
 
 (b)  280.80                                     182
 
 (c)  280.80                                      90
 
 (a)   29.08                                      12
 
 (b)  589.67                                     103
 
 (c)  618.75                                      12
 
 (a)  228.66                                     966
 
 (b)  227.32                                     812
 
 (c)  247.13                                     671
 
 (d)  238.85                                     504
 
 3.12 The Company has not granted any loans and advances on the basis of
 security by way of pledge of shares, debentures and other securities.
 
 3.13 The provisions of any special statute applicable to chit fund/
 nidhi / mutual benefit fund / societies are not applicable to the
 Company.
 
 3.14 In our opinion, the Company is not a dealer or trader in shares,
 securities, debentures and other investments.
 
 3.15 In our opinion, and 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 during the year.
 
 3.16 In our opinion, and according to the information and explanations
 given to us, on an overall basis, the term loans have been applied for
 the purpose for which they were obtained.
 
 3.17 On the basis of an overall examination of the balance sheet of the
 Company, in our opinion and according to the information and
 explanations given to us, funds raised on a short-term basis amounting
 to Rs. 12675.23 lacs have been used for long- term investment.
 
 3.18 The Company has not made any preferential allotment of shares to
 parties and companies covered in the register maintained under Section
 301 of the Act during the year.
 
 3.19 The Company had neither any outstanding debenture at the beginning
 of the year nor has it issued any debenture during the year and
 accordingly, the question of creation of security or charge in this
 respect does not arise.
 
 3.20 The Company has not raised any money by public issues during the
 year.
 
 3.21 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, and according to the information and
 explanations given to us, we have neither come across any instance of
 fraud on or by the Company, noticed or reported during the year, nor
 have we been informed of such case by the management.
 
 4.  Further to our comments in paragraph 3 above we report that:
 
 4.1 As indicated in Note 7 on Schedule 25, the Company has neither
 ascertained nor provided for impairment loss, if any, in the carrying
 amount of certain fixed assets lying at its Taratala and Hoera units,
 the operations of which are under suspension since April 2002 and
 September 2003 respectively (year end net book value aggregating Rs.
 5668.17lacs) as may be required to comply with the Accounting Standard
 28 on Impairment of Assets;
 
 4.2 We are unable to comment on whether the preparation of these
 accounts on going concern basis, based on the assumption stated in Note
 8 on Schedule 25, is appropriate, in view of losses and erosion of net
 worth and the Company having been declared a sick industrial company by
 the Board for Industrial and Financial Reconstruction in terms of
 Section 3 (I) (o) of the Sick Industrial Companies (Special Provisions)
 Act, 1985;
 
 4.3 (a) As indicated in Note 9 on Schedule 25, in respect of the Hoera
 unit, the operation of which is under suspension since 15th September.
 2003
 
 (i) the Company has neither ascertained nor provided for liability
 towards salaries and wages, provident fund.  employees state insurance
 scheme and other employee benefits from the aforesaid date of
 suspension of operation to 31st March, 2008 and;
 
 (ii) gratuity and leave liability were actuarially ascertained and
 provided for based on the information available till the aforesaid date
 of suspension of operation.
 
 (b) In view of our remarks in paragraph 4.3(a) above in respect of the
 Hoera unit, regarding non ascertainment and nan provision of certain
 employee benefits and provision of gratuity and leave liability based
 on information available till the dale of suspension of operation, we
 are unable to comment on: (i) the extent of compliance of the
 recognition, measurement and disclosure requirements of Accounting
 Standard 15 on Employee Benefits  and;
 
 (ii) the correctness of the disclosure made in Note 10.2 on Schedule
 25, as is required to comply with the requirements of Accounting
 Standard 5 on Net Profit or Loss for the Period. Prior Period Items
 and Changes in Accounting Policies.
 
 4.4 The Company has been making (based on management estimate)
 provision for slow / non-moving stores and spares (accumulated balance
 as at 31st March, 2008 Rs.I43 lacs). However, in absence of any
 technical evaluation to assess the condition and usability of such
 stores and spares items, we are unable to comment on the adequacy of
 such provision:
 
 4.5 Except as indicated in paragraphs 4.1, 4.3 and 4.4 above, 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;
 
 4.6 In our opinion, except as indicated in paragraph 4.3 above, proper
 books of account, as required by law, have been kept by the Company so
 far as appears from our examination of those books;
 
 4.7 The Balance Sheet, the Profit and Loss Account and the Cash Flow
 Statement dealt with by this report are in agreement with the books
 of.account;
 
 4.8 Except as indicated in paragraphs 4.1 and 4.3 above, in our
 opinion, the Balance Sheet, the Profit and Loss Account and the Cash
 Flow Statement dealt with by this report comply with the applicable
 Accounting Standards referred to in sub-section (3C) of Section 211 of
 the Act;
 
 4.9 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 as on 31st March, 2008
 is disqualified from being appointed as a director in terms of clause
 (g) of sub-section (1) of Section 274 of the Act;
 
 4.10 In our opinion and to the best of our information and according to
 the explanations given to us, the said financial statements together
 with the notes thereon and attached thereto give, except as indicated
 in paragraph 4.3 above, in the prescribed manner the information
 required by the Act, and also give, subject to our remarks in
 paragraphs 4.1, 4.2, 4.3 and 4.4 above (the effect of which could not
 be ascertained), a true and fair view in conformity with the accounting
 principles generally accepted in India:
 
 (i) in the case of the Balance Sheet, of the state of affairs of the
 Company as at 31st March. 2008; (ii) in the case of the Profit and Loss
 Account, of the loss for the year ended on that date; and (iii) in the
 case of the Cash Flow Statement, of the cash flows for the year ended
 on that date.
 
 
                                              P. Law
 
 Partner                             (Membership No. F51790)
                                      For and on behalf of
 Place: Kolkata                       PRICE WATERHOUSE
 Date : 31 st May, 2008               Chartered Accountants