We have audited the attached Balance Sheet of KANISHK STEEL INDUSTRIES
 LIMITED (the Company) as at 31st March 2012 and also the Statement of
 Profit & 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.
 
 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.
 
 As required by the Companies (Auditor''s Report) Order, 2003, (as
 amended) issued by the Govt. of India in terms of sub-section (4A) of
 Sec.227 of the Companies Act, 1956, we report on the matters specified
 in paragraphs 4 and 5 of the said order to the extent applicable.
 
 (i) (a) The Company has maintained proper records showing full
 particulars, including quantitative
 
 details and situation of Fixed Assets.
 
 (b) The Fixed Assets have been physically verified by the management at
 reasonable intervals and no material discrepancies have been noticed on
 such verification.
 
 (c ) The Company has not disposed off substantial part of the Fixed
 Assets during the year which could affect the going concern status of
 the Company.
 
 (ii) (a) Inventories have been physically verified during the year by
 the management at reasonable
 
 intervals.
 
 (b) In our opinion and according to the information and explanation
 given to us, 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 ) The Company is maintaining proper records of inventory and the
 discrepancies noticed on physical verification between the physical
 stock and book records which were not material having regard to the
 size of the company and nature of its business have been properly dealt
 with in the books of account.
 
 (iii) As per the information and explanation given to us and as per the
 records produced to us, the company has not granted any unsecured loans
 to company covered in the register maintained under section 301 of the
 Companies Act, 1956.
 
 (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 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 weaknesses in the internal controls system.
 
 (v) (a) We are of the opinion that particulars of contracts or
 arrangements referred to in Section
 
 301 of the Companies Act, 1956 have been entered into the register
 maintained under the said section;
 
 (b) In our opinion and according to the information and explanations
 given to us, transactions made in pursuance of such contracts or
 arrangements 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 deposit from the public.
 
 (vii) In our opinion, the company''s in-house internal audit system is
 commensurate with the size and nature of its business.
 
 The Central Government under Section 209(1)(d) of the Companies Act,
 1956 has not prescribed the maintenance of cost records in respect of
 the activities of the company.
 
 (viii) (a) The Company is regular in depositing 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 statutory dues with the appropriate authorities,
 wherever applicable and no dues are pending for a period of more than
 six months from the date they become payable.
 
 (b) According to the information and explanations given to us and the
 records of the Company, there were no dues of sales tax, income tax,
 customs duty, wealth tax, service tax, excise duty and cess which have
 not been deposited on account of any dispute except as follows: (also
 refer Note: 28(iii)).
 
                                     Amount in         Forum where dispute
 Statute Name   Nature of dues          Rs.            is pending
 
 Central Excise 
 Law            Dispute relating
                to deemed               234,094/-       Commissioner of
 (SCN no. 
 2268/95        Credit                                  Central Excise
 dated 
 25.07.1995                                            (Appeals) Chennai.
 
 Central
 Excise Law     Dispute relating
                to refixation of      3,566,000        
                                      Plus              Honb''le High Court 
                                                        of 
                 Annual capacity 
                 of erstwhile OP      equal amount of   Madras.
                 Steels Limited       penalty
 
 Central Excise 
 Law             Dispute relating 
                 to differential      5,238,000/-       Honb''le High Court 
                                                        of
 (SCN No. 2/06 
 dt              duty on depot sales.                   Madras.
 17.1.2006)
 
 Central Excise 
 Law             Dispute relating 
                 to reification of     900,000/- Plus   Hon''ble High Court 
                                                        of 
                 Annual capacity       equal amount of  Madras
                                       penalty plus 
                                       Interest 
                                       thereon.
 
 (ix) The Company has no accumulated losses. The Company has also not
 incurred cash losses during this financial year and the immediately
 preceding financial year.
 
 (x) The company has not defaulted in repayment of loans availed from
 Banks. The company has no borrowings from financial institution and has
 not issued debentures.
 
 (xi) The Company has not granted any loans and advances on the basis of
 security by way of pledge of shares, debentures and other securities.
 
 (xii) The Company is not a chit fund, nidhi, mutual benefit fund or
 society and therefore the requirements pertaining to such class of
 companies is not applicable.
 
 (xiii) The Company is not dealing or trading in shares, securities,
 debentures and other invest- ments. The Investments in shares has been
 held by the company in its own name.
 
 (xiv) 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 Bank or Financial Institu- tions the terms and
 conditions whereof are prejudicial to the interest of the Company.
 
 (xv) On the basis of review of utilization of funds on an overall
 basis, in our opinion, the term loans taken by the company during the
 year were applied for the purposes for which the loans were obtained.
 
 (xvi) According to the information and explanations given to us and on
 an overall examination of the Balance Sheet and Cash Flow Statement of
 the Company, we are of the opinion that there are no funds raised on
 short-term basis which have been used for long term investment by the
 Company.
 
 (xvii) The Company has not made any preferential allotment of shares
 during the year.
 
 (xviii) The Company has not issued any debentures during the year.
 
 (xix) The company has not raised any money by way of public issue
 during the year.
 
 (xx) Based on the audit procedures performed and the information and
 explanations given to
 
 us, we report that no fraud on or by the company has been noticed or
 reported during the course of our audit.
 
 Further to our comments 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 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.
 
 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 and
 subject to 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 the Balance Sheet, of the state of affairs of the
 Company as at 31st March, 2012 and
 
 (ii) In the case of the Statement of Profit and Loss, of the Profit of
 the company for the year ended on that date.
 
 (iii) In the case of the Cash Flow Statement, of the Cash flows of the
 Company for the year ended on that date.
 
                                           For CHATURVEDI & COMPANY,
                                              Chartered Accountants,
 
                                                       (FRN 302137E )
 
                                                          S GANESAN
 
                                            Partner (Memb.No:217119)
 
 Place: Chennai
 Date: 28th May, 2012