1.  We have audited the attached Balance Sheet of Jai Balaji Industries
 Limited (''the Company'') as at March 31, 2011 and also the Profit and
 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 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 the 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) (the order) 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
 paragraphs 4 and 5 of the said Order.
 
 4. 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 knowledge and belief were necessary for the purposes of our
 audit;
 
 ii. 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;
 
 iii. The Balance Sheet, Profit and Loss Account and Cash Flow Statement
 dealt with by this report are in agreement with the books of account;
 
 iv. In our opinion, the Balance Sheet, Profit and 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;
 
 v. On the basis of the written representations received from the
 directors, as on March 31, 2011, and taken on record by the Board of
 Directors, we report that none of the directors is disqualified as on
 March 31, 2011 from being appointed as a director in terms of clause
 (g) of sub-section (1) of Section 274 of the Companies Act, 1956.
 
 vi. In our opinion and to the best of our information and according to
 the explanations given to us, the said accounts 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;
 
 a) in the case of Balance Sheet, of the state of affairs of the Company
 as at March 31, 2011;
 
 b) in the case of Profit and Loss Account, of the profit for the year
 ended on that date; and
 
 c) 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 OUR REPORT OF EVEN DATE TO THE MEMBERS OF JAI BALAJI
 INDUSTRIES LTD AS AT AND FOR THE YEAR ENDED 31ST MARCH, 2011)
 
 (i) (a) The Company has maintained proper records showing full
 particulars, including quantitative details and situation of fixed
 assets.
 
 (b) All fixed assets have not been physically verified by the
 management during the year but there is a regular programme of
 verification in a phased manner to cover all the items of fixed assets
 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) There was no disposal of substantial part of fixed assets during
 the year.
 
 (ii) (a) The Management has conducted physical verification of
 inventory at reasonable intervals during the year, except for bulk raw
 materials which has been physically verified by an independent
 chartered engineer whose report has been relied upon by us.
 
 (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 in an earlier year had granted loan to a Company
 covered in the register maintained under Section 301 of the Companies
 Act, 1956. The maximum amount involved during the year was Rs. 6,407.16
 lacs and the year-end balance in respect of such loan is Rs. 3,500
 lacs.
 
 (b) In our opinion and according to the information and explanations
 given to us, the rate of interest and other terms and conditions for
 such loan are not prima facie prejudicial to the interest of the
 Company.
 
 (c) The above loan is stated to be re-payable on demand. We are
 informed that the Company has received back the amount of loan to the
 extent demanded by it and there has been no default on the part of such
 party to whom the money has been lent.  The payment of interest has
 been regular.
 
 (d) As the party has repaid the amount of loan whenever demanded,
 therefore there is no overdue amount for the above loan granted to a
 Company listed in the register maintained under Section 301 of the
 Companies Act, 1956.
 
 (e) According to the information and explanation given to us, 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 Companies Act, 1956.  Accordingly, the provisions of clause
 4 (iii)(e) to (g) of the Order are not applicable to the Company and
 hence not commented upon.
 
 (iv) In our opinion and according to the information and explanations
 given to us, and having regard to the explanation that some of the
 items purchased are of a special nature and alternative sources do not
 exist for obtaining quotations thereof, 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, we have
 not observed any major weakness or any continuing failure to correct
 any major weakness in internal control system of the Company in respect
 of these areas.
 
 (v) (a) According to the information and explanations provided by the
 management, we are of the opinion that the particulars of contracts or
 arrangements referred to in Section 301 of the Companies Act, 1956,
 that need to be entered into the register maintained under Section 301
 have been so entered.
 
 (b) In our opinion and according to the information and explanations
 given to us, the transactions made in pursuance of such contracts or
 arrangements exceeding the value of Rupees five lakhs, entered into
 during the financial year, have been made at prices which are
 reasonable having regard to the prevailing market prices at the
 relevant time.
 
 (vi) The Company has not accepted any deposits from the public within
 the meaning of Sections 58A, 58AA or any other relevant provisions of
 the Companies Act, 1956.
 
 (vii)The Company has an internal audit system, the scope and coverage
 of which, has improved as compared to previous year. However, in our
 opinion the same requires to be enlarged to be commensurate with the
 size and nature of its business.
 
 (viii)We have broadly reviewed the books of account 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, related to the manufacture of its products and are of the
 opinion that prima facie, the prescribed accounts and records have been
 made and maintained.
 
 (ix) (a) 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 have generally been regularly deposited
 with the appropriate authorities, except that there have been slight
 delays in deposit of dues in certain cases of sales tax, provident fund
 and employees'' state insurance.
 
 Further, since the Central Government has till date not prescribed the
 amount of cess payable under section 441 A of the Companies Act, 1956,
 we are not in a position to comment upon the regularity or otherwise of
 the company in depositing the same.
 
 (b) According to the information and explanations given to us, no
 undisputed amounts payable in respect of 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 were outstanding, at the year-end, for a
 period of more than six months from the date they became payable.
 
 (c) According to the records of the Company, the dues outstanding of
 income-tax, sales-tax, weatth- tax, service tax, customs duty, excise
 duty and cess on account of any dispute, are as follows :
 
 Name of the      Nature of dues      Amount     Period to  Forum where
 statute                             (Rs. in 
                                        lacs)    which the  dispute is
                                                    amount 
                                                   relates  pending
 
 Central          CENVAT Credit     2,565.03       2005-06, Central 
                                                            Excise
 Excise Act,      disallowed                   2006-07 and  Service Tax
 1944                                              2007-08  Appellate 
                                                            Tribunal/
                                                            Commissioner
                                                           (Appeals)
 
 Central          CENVAT on            44.07       2006-07  Commissioner
 Excise Act,      Service Tax                              (Appeals)
 1944             disallowed
 
 The West         Pending Forms         3.59       2004-05  West Bengal
 Bengal Value                                               Appellate and
 Added Tax Act, 
 2003                                                       Revision 
                                                            Board
 
 The Central      Pending Forms         8.37       2004-05  West Bengal
 Sales Tax                                                  Appellate and
 Act, 1956                                                  Revision 
                                                            Board
 
 (x) The Company has no accumulated losses at the end of the financial
 year and it has not incurred cash losses in the current and immediately
 preceding financial year.
 
 (xi) Based on our audit procedures and as per the information and
 explanations given by the management, we are of the opinion that the
 Company has delayed in repayment of dues to banks during the year as
 given below.
 
 Period of delay                     Rs. in lacs
 
 Up to 30 days                          44
 
 31-90 days                            588
 
 90 days and above                      15
 
 The Company has not defaulted in repayment of dues to a financial
 institution and has no outstanding dues in respect of debentures.
 
 (xii) According to the information and explanations given to us and
 based on the documents and records produced before us, the Company has
 not granted loans and advances on the basis of security by way of
 pledge of shares, debentures and other securities.
 
 (xiii) In our opinion, the Company is not a chit fund or a nidhi/mutual
 benefit fund/society. Therefore, 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) According to the information and explanations given to us, the
 Company has given guarantee for loans taken by its wholly owned
 Subsidiary from banks, the terms and conditions whereof in our opinion
 are not prima-facie prejudicial to the interest of the Company.
 
 (xvi) Based on the information and explanations given to us by the
 management, term loans were applied for the purpose for which the loans
 were obtained.
 
 (xvii) According to the information and explanations given to us and on
 an overall examination of the balance sheet of the Company, we report
 that no funds raised on short-term basis have been used for long-term
 investment.
 
 (xviii) The Company has not made any preferential allotment of shares
 during the year to parties and companies covered in the register
 maintained under Section 301 of the Companies Act, 1956.
 
 (xix) The Company did not have outstanding debentures during the year.
 
 (xx) The Company has not raised any money through public issue during
 the year.
 
 (xxi) Based upon the audit procedures performed for the purpose of
 reporting the true and fair view of the financial statements and as per
 the information and explanations given by the management, we report
 that no fraud on or by the Company has been noticed or reported during
 the year.
 
 
                                           For S. R. Batliboi & Co.
 
                                            Firm Regn. No. 301003E
 
                                             Chartered Accountants
 
                                               per Sanjoy K. Gupta
 
 Place : Kolkata                                           Partner
 
 Date : May 27, 2011                        Membership No. : 54968