1.  We have audited the attached Balance sheet of M/s IOL Chemicals and
 Pharmaceuticals Ltd. 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. 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. These 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 issued
 by the Central Government of India in terms of sub-section (4A) of
 section 227 of the Companies Act, 1956, we enclose in the annexure a
 statement on the matters specified in paragraph 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, statement of profit and loss and cash flow
 statement dealt with by this report are in agreement with the books of
 account;
 
 d) In our opinion, the balance sheet, statement of profit and loss 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 as on 31 March 2012 and taken on record by the Board of
 Directors, we report that none of the directors are 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 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 together with the
 significant accounting policies and other 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, 2012;
 
 ii) in the case of statement of profit and loss, 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 THE AUDITORS'' REPORT
 
 (Referred to in paragraph 3)
 
 (1) a) The Company has maintained proper records showing full
 particulars including quantitative details and situation of fixed
 assets.
 
 b) According to the information and explanations given to us, the fixed
 assets have been physically verified by the management during the year.
 No discrepancies were noticed on such physical verification. In our
 opinion the frequency of physical verification of fixed assets is
 reasonable having regard to the size of the Company and nature of its
 business.
 
 c) According to information and explanations given to us, the Company
 has not disposed off substantial part of its fixed assets during the
 year.
 
 (2) a) According to the information and explanations given to us, the
 inventories have been physically verified by the management at the
 close of the year. In our opinion the frequency of verification is
 reasonable.
 
 b) In our opinion and according to the information and explanations
 given to us, the procedures of physical verification of inventories
 followed by the management as evidenced by the written procedures and
 instructions are 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. As explained to us, no discrepancies were noticed on
 physical verification of inventory as compared to the book records.
 
 (3) a) According to the information and explanations given to us, the
 
 Company has not granted loans secured or unsecured to companies, firm
 or other parties covered in the register maintained under Section 301
 of the Companies Act, 1956.  Accordingly the provisions of Clause 4
 (iii) (b) (c) and (d) of the above said order are not applicable to the
 Company.
 
 b) According to the information and explanations given to us, the
 Company has taken interest free unsecured loans from four companies and
 one party covered in the register maintained under Section 301 of the
 Companies Act, 1956. The amount involved in the transaction and payable
 as at the close of the year is Rs. 3581.82 lacs.
 
 c) According to the information and explanations given to us and in our
 opinion, terms and conditions in respect of unsecured loans taken by
 the Company are not prima-facie prejudicial to the interest of the
 Company.
 
 d) According to the information and explanations given to us, these
 unsecured loans are not repayable during the currency of the credit
 facilities availed by the Company from various banks.
 
 (4) 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 sale of goods and services. During the course of
 our audit, we have not observed any continuing failure to correct major
 weaknesses in internal control system.
 
 (5) (a) According to the information and explanations given to us, the
 particulars of contracts or arrangements referred to in Section 301 of
 the Companies Act, 1956 have been entered in the register 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 Companies Act, 1956 and exceeding Rs. 5 lacs or more in respect of
 each party during the year, have been made at prices at the relevant
 time.
 
 (6) According to the information and explanations given to us, the
 
 Company has not accepted any deposits from public.  Therefore, the
 provisions of Section 58A and 58AA of the Companies Act, 1956 and the
 Companies (Acceptance of Deposits) Rules, 1975 are not applicable to
 the Company. No order has been passed by the Company Law Board or
 National Company Law Tribunal or Reserve Bank of India or any court or
 any other Tribunal.
 
 (7) In our opinion, the Company has an internal audit system
 commensurate with its size and nature of its business.
 
 (8) We have broadly reviewed the books of account relating to
 materials, labour and other items of cost maintained by the Company
 pursuant to the rules made by the Central Government for the
 maintenance of cost records under Section 209(1)(d) of the Companies
 Act, 1956 and we are of the opinion that prima facie the prescribed
 accounts and records have been made and maintained. However, we have
 not made a detailed examination of the records with a view to determine
 whether they are accurate or complete.
 
 (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 statutory dues applicable
 to the Company, if any, have been regularly deposited with appropriate
 authorities. According to the information and explanations given to us,
 no undisputed amounts payable in respect of the aforesaid dues were
 outstanding as at 31 March 2012, for a period of more than six months
 from the date they became payable.
 
 (b) According to information and explanations given to us, there are no
 disputed statutory dues in respect of income tax, sales tax, service
 tax, custom duty, wealth tax, excise duty and cess.
 
 (10) The Company does not have accumulated losses as at 31 March 2012.
 The latter part of the question regarding net worth is not applicable.
 Further, the Company has not incurred cash losses during the financial
 year covered under audit and in the immediately preceding financial
 year.
 
 (11) According to the information and explanations given to us, the
 Company has defaulted in repayment of dues to bank. The details of the
 defaults are as under:
 
 Sr. Particulars      Amount        Nature         Period of default of
 No.                 (in Lacs)      of Dues             repayment
 
 1. Punjab 
    National          314.42*       Principal 
                                    repayment      Jan 2012 - March 2012
 Bank
                      163.02**      Interest            Feb 2012
 
 * Out of which Rs. 50 lacs is pending.
 
 ** Since cleared.
 
 (12) In our opinion and 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. Therefore, the provisions of Clause
 4(xii) of the above said order are not applicable to the Company.
 
 (13) According to the information and explanations given to us, the
 Company is not a chit fund, or a nidhi/mutual benefit fund/ society.
 Accordingly, the provisions of Clause 4 (xiii) of the above said order
 are not applicable to the Company.
 
 (14) According to the information and explanations given to us, the
 Company is not dealing or trading in shares, securities, debentures and
 other investments. Therefore, the provisions of Clause 4(xiv) of the
 above said order are not applicable to the Company.
 
 (15) According to the information and explanations given to us, the
 Company has not given guarantee for loans taken by others from banks
 and financial institutions. Therefore, the provisions of Clause 4(xv)
 of the above said order are not applicable to the Company.
 
 (16) According to the information and explanations given to us, the
 Company has applied the term loans for the purpose for which the loans
 were taken.
 
 (17) In our opinion and according to information and explanations given
 to us and on an overall examination of the balance sheet of the
 Company, we report that short term funds of Rs. 5.41 Crores have
 temporarily been utilised for long term purpose.
 
 (18) According to the information and explanation given to us, the
 Company has not made preferential allotment to companies, firms or
 other parties covered in the register maintained under Section 301 of
 the Companies Act, 1956. Accordingly, the provisions of Clause 4(xviii)
 of the above said order are not applicable to the Company.
 
 (19) According to the information and explanations given to us, the
 Company has not issued debentures during the year.  Accordingly, the
 provisions of Clause 4(xix) of the above said order are not applicable
 to the Company.
 
 (20) According to the information and explanations given to us, the
 Company has not raised money by way of public issue during the year.
 Accordingly, the provisions of Clause 4(xx) of the above said order are
 not applicable to the Company.
 
 (21) According to the information and explanations given to us, no
 fraud on or by the Company has been noticed or reported during the
 period covered by our audit.
 
                                          for S. C. VASUDEVA & CO.
 
                                            Chartered Accountants
                                              Firm Reg. No.00235N
 
                                                             Sd/-
 
                                                    (Sanjiv Mohan)
 
 Place : Ludhiana                                         Partner
 
 Dated : 30 May 2012                                 M. No. 86066