1.  We have audited the attached Balance Sheet of KABSONS INDUSTRIES
 LIMITED, HYDERABAD (A.P) as at 31st March, 2012 and also the Statement
 of Profit and Loss for the year ended on that date annexed thereto and
 the cash flow statement for the period ended on that date. These
 financial statements are the responsibility of the Company''s
 Management. Our responsibility is to express an opinion dn 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,
 issued by the Central Government of India in terms of Section 227(4A)
 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 appeal''s from our examination of
 those books.
 
 iii) The Balance Sheet, Statement of Profit and Loss and cashflow
 statement,dealt with by this report are in agreement with the books of
 account.
 
 iv) In our opinion, the Balance Sheet, Statement of Profit & Loss and
 Cashflow 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, excepting AS-15''''Employee Benefits.  ,
 
 v) On the basis of the written representations received from the
 Directors as on 31st March, 2012 and taken on record by the Board of
 Directors, we report that, none of the Directors is disqualified as on
 31st 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. -
 
 5.  a)lnterest for the year and for earlier years Rs.6,41,221/- and
 Rs.65,24,034/- respectively
 
 against Trade Deposits received from Dealers/Distributors are not
 providied resulting in overstating the profit for the year by
 Rs.6,41,221/- and understating the current labilities by Rs.71,65,255/-
 (Refer Note No.25.3 of financial statements).
 
 b)We draw attention to note No.25.1 of financial statements. The
 Company''s current liabilities exceeded its current assets by Rs.497.07
 Lakhs as on 31.03.2012. This factor along with the other matters as
 setforth in the note referred to, raise substantial doubt that whether
 the Company will be able to continue as a Going concern. .
 
 c)The Company has not complied with the requirements of AS-15
 ‘Employee Benefits'' in respect of gratuity. In view of this, the
 liability of the Company could not be ascertained.  Consequently, we
 are unable to comment about the impact of this on the profit for the
 year.
 
 d)There are no confirmation of balances in respect of sundry debtors,
 loans and advances and sundry creditors other than due from/to related
 parties.
 
 6.  In our opinion and to the best of our information and according to
 the explanations given to us, the said accounts read with the notes
 thereon and subject to our comments in para 5 above, give the
 information as 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 the Balance Sheet, of the state of affairs of the
 Company as at 31st March, 2012;
 
 ii) In the case of the Statement of Profit and Loss Account, of the
 profit of the Company for the year ended on that date; and
 
 iii)In the case of Cashflow Statement of the cash flows for the year
 ended on that date.
                                     
 Statement on the Companies- (Auditor''s Report) Order 2003 Re: KABSONS
 INDUSTRIES LIMITED
 
 i) a)The Company has maintained proper records showing full particulars
 including quantitative details and situation of fixed assets.
 
 b) AH the assets have not been physically verified by the management
 during the year but there is a regular programme of verification 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) During the year, the company had disposed off fixed assets which
 does not affect the going concern basis.
 
 ii) a)The inventory has been physically verified during.the year by the
 management. In our opinion, the frequency of verification is
 reasonable.
 
 b)The procedures of physical verification of inventories followed by
 the management are reasonable and adequate in relation to the size of
 the cdmpany and the nature of its business.
 
 c)The company is maintaining proper records of inventory. The
 discrepancies noticed on verification between the physical stocks and
 the book records have been properly dealt with in the.books of account.
 
 iii) a) The company has not granted any loans, secured or unsecured to
 companies, firms or other parties covered in the register maintained
 u/s.301 of the Act. ''
 
 b)The company had. taken interest free loans from two Companies and
 from a party covered in the register maintained under section 301 of
 the Companies Act, 1956. The maximum amount involved during the year
 was Rs 72.00 Lakhs and the year-end balance of loans taken from such
 parties was Rs.53.0Q Lakhs.  ''
 
 c)ln our opinion, the terms and conditions on which loans have been
 taken from companies, and parties listed in the register maintained
 under section 301 of the Companies Act, 1956 are not, prima facie,
 prejudicial to the interest of the company. ;
 
 d)Aceording to explanations given to us, the lenders have not specified
 repayment terms. In view of this we cannot comment upon whether the
 payment of principal is regular.  .
 
 iv) In our opinion and according to the information and explanations
 given to us, there are adequate internal control systems commensurate
 with the size of the Company and the nature of its business with regard
 to purchases of inventory, fixed assets and with regard to the sale of
 goods and gas. During the course of our audit, we have not observed any
 continuing failure to correct major weaknesses in internal control
 systems.
 
 v) a) According to the information and explanations given to us, we are
 of the opinion that the particulars of
 
 contracts or arrangements referred to in section 301 of the Act have
 been entered in the register required to be maintained under that
 section and
 
 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 have been made at prices which are reasonable
 having regard to prevailing market prices at the relevant time.  ''
 
 vi) The company has not accepted the deposits from the public within
 the meaning of Section 58Aand 58AA of the Companies Act, 1956 and the
 Rules framed thereunder.
 
 vii) The company has no internal audit system.
 
 viii) Central Government has not prescribed maintenance of cost records
 under clause (d) of sub-section (1) of Section 209 (1)(d) of the
 Companies Act, 1956 for the products/items dealt with by the company.
 
 ix) a)The company is not regular in depositing with appropriate
 authorities undisputed statutory dues including investor education
 protection fund, employee''s state insurance, sales tax. The extent of
 the arrears of outstanding statutory dues as at the last day of the
 financial year for a period of more than six months from the date they
 became payable and the payments tnade during the year are as given
 below.
 
 The extent of the arrears of outstanding statutory dues as at the last
 day of the financial year for a period of more than six months from the
 date they become payable and the payments made during the year are as
 given below.
 
 Name 
 of            Nature of
               the dues      Amount   Period  
                                      to which    Due         Date of
 statue                      Rs.      the amount
                                       relates    date        payment
 
 1.Companies
   Act         Investor 
               Education    22,550     1994-95   19.10.2001}
               and 
               Protection
               Fund 
 
 2.Karnataka   
   Sales Tax 
   Act         Sales Tax     3,467     1999-00    15.05,1999}  Unpaid
 
 3.Karnataka  
   Sales Tax 
   Act         Sales Tax     1,209     2004-05    15.03.2005}
 
 4.Maharashtra 
   Sales Tax 
   Act         Sales Tax       190      2000-01   15.05.2000}
 
 5.Jharkand 
  Sales Tax 
  Act          Sales Tax     3,271      2001-02   15.03.2002}
 
 6.AP Sales 
   Tax Act     Sales Tax     7,525      2000-01   15.04.2001}
 
 7.Maharashtra  
   Sales Tax 
   Act         Sales Tax     5,817      2005-06   15.05.2005}
 
 8.Maharashtra 
   Sales Tax 
   Act         Sales Tax     9,538      2004-05   15.04.2005}
 
 9.Maharashtra 
   Sales Tax 
   Act         Sales Tax       800      2003-04   15.01.2004}
 
 10.Maharashtra  
    Sales Tax 
    Act        Sales Tax     5,535      2004-05   05.11.2004}
 
 11.West 
    Bengal 
    Sales Tax 
    Act        Sales Tax       547      2004-05   15.01.2005}
 
 12.West 
    Bengal 
    Sales Tax  
    Act        Sales Tax        23      2005-06   15.09.2005}
 
 13.Gujarat  
    Sales Tax 
    Act        Sales Tax       669      2005-06   15.10.2005}  Unpaid
 
 14.BST Act    Sales Tax 
               & Penalty    73,735      1997-98   15.08.2004}
 
 15.BST Act    Sales Tax &
               Penalty    1,34,780      1998-99   15.08.2004}
 
 16.CST Act    Sales Tax 
               & Penalty  1,31,000      1997-98   15.08.2004}
 
 17.CST Act    Sales Tax
               & Penalty  5,17,000      1998-99   15.08.2004}
 
 18.CST Act    Sales Tax 
               & Penalty     2,040      1998-99   21.02.2002}
 
 19.ESI Act    Employees 
               State 
               Insurance       104      2006-07   21.06.2006)
 
 20.ESI Act    Employees 
               State 
               Insurance        14      2006-07   21.11.2006}
 
 21.ESIAct     Employees 
               State 
               Insurance       265      1999-00   21.04.2000}
 
 b) According to the information and explanations given to us, there are
 no dues of sales fax, income tax, customs duty, wealth tax, excise
 duty, service tax and cess which have not been deposited on account of
 any dispute.
 
 x) In our opinion, the accumulated losses of the company are more than
 fifty percent of its networth. The Company has not incurred cash losses
 during the financial year covered by our audit and as well as in the
 immediately proceeding financial year.
 
 xi) During the financial year covered by our audit the Company had not
 borrowed from financial institutions.  Hence, clause (xi) of the above
 referred order is not applicable.
 
 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.
 
 xiii) The Company is neither a chit fund nor a nidhi mutual benefit
 fund / society. Therefore, the provisions of clause 4 (xiii) of the
 above referred Order are not applicable to the company.
 
 xiv), The company is not dealing in or trading in shares, securities,
 debentures and other investments.  Accordingly, the provisions of
 clause 4(xiv) of the above referred order are not applicable to the
 company.
 
 xv) The company has not given any guarantee for loans taken by others
 from banks or financial stitutions.
 
 xvi).  During the year the company has not availed any term loans from
 banks or financial institutions.  Accordingly, the provisions of clause
 4(xvi) of the above referred Order are not applicable to the company.
 
 xvii) According to the information and explanations given to us and on
 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 preferential allotment of shares to
 parties and companies covered in the register maintained under section
 301 of the Act during the year.  '' .
 
 xix) The Company has not issued any debentures. Accordingly, the
 provisions of Clause 4(xix);of the above referred Order are not
 applicable to the company.
 
 xx) During the year the company has not raised money by public issue.
 Accordingly, the provisions of clause 4(xx) of the above referred Order
 are not applicable to the company.  .
 
 xxi) According to the information and explanations given to us, no
 fraud on or
 \ by the company has been noted or reported during the
 course of our audit.
 
                                       For BRAHMAYYA & CO.,
                                      Chartered Accountants
                                       Firm Regn. No.000513S
 
                                               Sd/-
 
 Place : Hyderabad                      (D.SEETHARAMAIAH)
 
 Date : 01-06-2012               Partner, Membership No 2907