We have audited the attached Balance Sheet of M/s. Indore Wire Company
 Ltd. as at 31st March, 2005 and the annexed the Profit and Loss Account
 and also cash flow statement of the Company for the year then ended on
 that date and report that these financial statements are the
 responsibility of the companys management. Our responsibility is to an
 express an opinion on this financial state- ment 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
 examine, on a test basis, evidence supporting the amount and
 disclosures in the financial statement. 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 pro- vides a reasonable basis
 for our opinion.
 
 1) As required by the Companies (Auditors Report) order, 2003 issued
 by the Companies Law Board in terms of Section 227 (4A) of the
 Companies Act, 1956, we enclosed in the annex- ure a statement on the
 matters specified in paragraphs 4 and 5 of the said order.
 
 2) 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 knowl- edge and belief were necessary for the purpose of
 our audit;
 
 ii. In our opinion, proper books of accounts as required by law have
 been kept by the company, so far as appears from our examination of
 such books.
 
 iii. The Balance Sheet, Profit and Loss Account and Cash Flow dealt
 with by this report are in agreement with the books of account.
 
 iv. In our opinion and based on Information & explanations given to us,
 none of the Direc- tors are disqualified as on 31st March, 2005 from
 being appointed as Direcotrs in terms of clause (g) of Sub-Section (1)
 of Section 274 of the Companies Act, 1956.
 
 v. In our opinion, balance sheet and profit and loss account dealt with
 by this report com- ply with, the accounting standards referred to in
 sub-section (3C) of section 211 of the Company Act, 1956;
 
 vi.  Attention is invited to the following notes in schedule No. 15 :-
 
 i. Note No. 7 regarding non provision of interest liability Rs. 2171.94
 Lacs. This is contrary to the accounting practice recommended by the
 Institute of Chartered Accountants of India. Consequently loss for the
 year is under stated by Rs. 2171.94 Lacs.
 
 ii. Note No. 8 regarding diminution in the value of investment of RS.
 79.26 Lacs & 43.75 Lacs and the consequential affect there of in the
 Profit & Loss Account and Balance Sheet.
 
 iii.  Note No. 10 regarding non provision of doubtful debts RS. 890.82
 Lacs.
 
 iv. Note No. 4 regarding non provision of Gratuity liability amounting
 to Rs. 33.99 Lacs
 
 vii In our opinion and to the best of our information and according to
 explanation give to us. The said Balance Sheet and Profit & Loss
 Account read with the signifi- cant accounting policies and notes
 thereon give the information required by the Companies Act, 1956 in the
 manner so required and give a true & fair view :
 
 a) in case of Balance Sheet of the state of affairs of the Company as
 at 31st March, 2005 and
 
 b) in case of Profit and Loss Account of the Loss for the year ended on
 that date.
 
 ANNEXURE TO AUDITORS REPORT
 
 This is the Annexure referred to in our report on the Balance Sheet as
 at 31st March,2005
 
 1.  a) The Company has maintained proper records showing full
 particulars including quantitative details and situation of the Fixed
 Assets.
 
 b) As explained to us, the Assets have been physically verified by the
 management in accordance with a phased programme of verification, which
 in our opinion, is reasonable, considering the size and the nature of
 its business. The frequency of verification is reasonable and no
 material discrepancies have been noticed on such physical verification.
 Substantial part of Fixed Assets have not been disposed off during the
 year, which will effect its status as going concern.
 
 2.  a) The inventories have been physically verified by the management
 during the year at reasonable intervals.
 
 b) In our opinion, the procedures of physical verification of the
 inventories followed by the management are reasonable and adequate in
 relation to the size of the Company and nature of its business.
 
 c) The Company has maintained proper records of inventories and
 discrepancies noticed on physical verification of inventories as
 compared to book records were not material.  However, the same have
 been properly dealt with, in the Books of Accounts.
 
 3.  a) The Company has granted / taken unsecured loan from the
 companies, firms or other parties listed in the register, maintained
 u/s. 301 of the Companies Act, 1956 The maximum amount involved during
 the year was RS. 27,01,886 and the year end balance of loans taken from
 such parties was RS. 27,01,886. However no loan was raised from such
 parties during the year.
 
 b) The rate of interest and other terms and conditions in respect of
 these loans taken from / granted to the company, firm & Other parties
 are in our opinion, prima facie not prejudicial to the interest of the
 company.
 
 c) In respect of loans given by the Company, where stipulations have
 been made, they have generally repaid the principal amounts as
 stipulated and have been regular in payment of interest, where
 applicable.
 
 d) There are no overdue amounts of loan taken / granted.
 
 4.  In our opinion and according to the information and explanation
 given to us, there are adequate internal control procedures
 commensurate with the size of the company and the nature of its
 business with regard to purchase of inventories, fixed assets and for
 the sale of goods. During the course of Audit, no major weakness has
 been noticed in the Internal controls regarding purchase of inventory
 and fixed assets and sale of goods.
 
 5.  a.  In our opinion and according to the information and explanation
 given to us, and as confirmed by the company secretary of the company
 and based on the audit procedures applied by us and according to the
 information and explanations provided by the management, we are of the
 opinion that the transactions that need to be entered into the register
 maintained under section 301 have been so entered.
 
 b. The transactions of purchase and sale of goods, materials and
 services made in pursuance of contracts or arrangements entered in the
 register maintained u/s. 301 of the Companies Act, 1956 aggregating
 during the year RS. 5,00,000/- or more in respect of each party have
 been made at price which are reasonable having regard to prevailing
 market price.
 
 6.  As per the information and explanation given to us the Company has
 not accepted any depos- its from the public during the year from the
 public covered by the directors issued by the Reserve bank of India and
 section 58A and 58AA of the companies Act 1956.
 
 7.  As per information and explanation provided to us the Company has
 an adequate internal audit system commensurate with the size of the
 company and nature of its business.
 
 8.  The Central Government has not prescribed the maintenance of cost
 records u/s. 209 (1) (d) of the companies Act, 1956 as such this clause
 is not applicable.
 
 9.  According to the records of the company, the company is regular in
 depositing undisputed statutory dues including Provident Fund,
 Employees State Insurance , Income-Tax, Sales Tax, Wealth Tax, Customs
 Duty, Excise Duty, Cess and other statutory dues with appropriate
 authorities except the following :
 
 Payments outstanding for more then Six Months as on 31.03.05
 
 Statutory Laws              Amount
 
 Entry Tax                   7,10,389
 
 Payments outstanding on account of Legal disputes
 
 S.NO   Name of the          Nature of
        Statute              Statutory Dues
 
 1      Central Excise       Central Excise Duty
        Act, 1944           * (For demand of
                             Rs 25574106/-
                             Notification issued
                             by CBEC with
                             retrospective effect.
                             Therefore the
                             demand is NIL)
 2      Income Tax           Income Tax for
        Act 1961             AY 1997-98
 3      Central Sales tax    Central Sales Tax
        Act
 4      MPCT                 Commercial Tax
 5      Entry Tax Act        Entry Tax
 
 Forum where dispute is      Amount
 pending
 
 Supreme Court                 23,66,863
 CESTAT                         1,40,877
 Comm. C. E. (Appeals)         13,17,500
 First Appellate Authority   2,75,97,949*
 
 Commissioner of Income Tax    54,17,379/-
 Appeals-Range 3 Mumbai
 Assessing Officer             13,06,727
 (Reassessment)
 Addl. Commissioner of        12,13,3774
 CT (Revision)
 Appellate Forum (Bhopal)      68,03,433
 Addl Comm of CT             1,55,13,575
 (Revision)
 Appellate Forum
 (Bhopal)                         43,167
 Addl Comm of CT               35,83,693
 (Revision)
 Dy Comm of CT                  8,55,765
 (Appeal)
 
 10.  The company is a Sick Industrial unit within the meaning of Clause
 (o) of subsection (1) of Section 3 of the Sick Industrial companies
 (Special Provisions) Act, 1985. The accumulated losses at the end of
 the financial year are Rs.84.66 Crores which is far in excess of its
 net worth. However the company has not incurred cash losses during the
 year and in the preced- ing financial year.
 
 11.  According to the information and explanation given by the
 management the company has defaulted in repayment of its dues to the
 financial institutions and banks. The detail is men- tioned hereunder :
 
 Overdue status as on 31 March 2005
 
 Financial Institutions      Principal   Balance as    Overdue Amount
                                         Per Books  
 
 SIDBI(WC)                        300      224.99          224.99
 SB of lndore(WC)                1103     1208.77         1208.77
 Bank of Bahrain(WC)             1112     1099.90         1099.90
 State Bank of Mauritius (WC)  709.45      748.74          748.74
 IDBI Bank(WC)                    762      642.60          642.60
 Janta Sahakari Bank (WC)         300      287.35          287.35
 Indian Overseas Bank (WC)        390      339.57          339.57
 GE Capital (WC)                  600      579.00          579.00
 IDBI(TL)                        2800     3810.91         3810.91
 IDBI(WCTL)                      1000     1218.65         1218.65
 EXIM Bank(TL)                    400      548.63          548.63
 
 12.  Based on our examination of the records and the information and
 explanation given to us the company has not granted any loans or
 advances on the basis of security by way of pledge of shares,
 debentures or other securities.
 
 13.  The provisions of any special statute applicable of Chit Fund,
 Nidhi or Mutual Benefit Fund/ Societies are not applicable to the
 company.
 
 14.  The Company is not dealing or trading in shares, securities,
 debentures or other investments and hence, the requirements of Para
 4(xiv) are not applicable to the Company.
 
 15.  According to the information and explanations given to us, the
 Company has not given any guarantee for loans taken by others from
 banks and financial institutions.
 
 16.  According to the records of the company and the information and
 explanation given to us the company has not raised term loans during
 the year.
 
 17.  On the basis of our examination of the cash flow statement, no
 funds have been raised during the year.
 
 18.  As per the information provided to us the company has not made any
 preferential allotment of shares to parties and companies covered in
 the register maintained u/s. 301 of the Companies Act, 1956 during the
 year.
 
 19.  The company has not issued any debentures and hence creation of
 security does not arise.
 
 20.  The Company has not raised any money by way of public issues
 during the year.
 
 21.  On the basis of our examination and 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 R.D. JOSHI & COMPANY
                                                  CHARTERED ACCOUNTANTS
 
 Place: INDORE                                               H.L. Joshi
 Date : 5th September, 2005                                     Partner