1 I have audited the attached Balance Sheet of Katare Spinning Mills
 Limited, Solapur as at 31st March 2012, the statement of Profit 
 and Loss and Cash Flow statement of tbo Company for the year ended 
 on that date annexed thereto. These financial statements are the 
 responsibility of the company''s management. My responsibility  
 is to express an opinion on these financial statements based on 
 my audit.
 
 2.  I conducted my audit in accordance with the auditing standards
 generally accepted in India. Those Standards require that I 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 I believe that my audit provides a reasonable basis ijr my
 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, 1956,1 enclose in the Annexure a
 statement on the n, i iters specified in paragraphs 4 and 5 of the said
 Order.
 
 4 Further to my comments in the Annexure referred to above, 1 report
 that:
 
 (i) I have obtained all the information and explanations, which to the
 best of my knowledge and belief were necessary for the purposes of my
 audit; 
 
 (ii) In my opinion proper books of accounts as required by law have
 been kept by the company so far as appears from my examination of those
 books;
 
 (iii) The balance sheet, statement of profit and loss and cash flow
 statement dealt with by this report are in agreement with the 
 books of accounts; (iv) On the basis cf written representations 
 received from the directors, as on 31st  March 2012 and taken on 
 record by the Board of Directors, I report that none of the 
 directors is disqualified as on 31 st March 2012 from being 
 appointed as a  Director in terms of clause (g) of sub-section 
 (1) of section 2 74 of the Companies Act, 1956; (v) In my
 opinion, the balance sheet and 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, 19 56 to the extent applicable,
 subject to
 
 a) The Nil balance of loan from ICICI Bank which was assigned by it to
 Kotak Mahindra Bank Ltd., as referred to, in Note No. 27(c) & (d) in
 notes on Accounts, at the year end is subject to confirmation in
 respect of final dues including interest and therefore, the impact of
 reconciliation and adjustment in respect of the loan, the profit for
 the year and net assets position as at year end and also it''s impact on
 concept of ongoing concern due to losses, is presently not
 ascertainable.
 
 b) Receivables to the extent of Rs. 106,71,00 (Trade Receivables Rs.
 19,58,790 & other current assets Rs.87,12,21 7) are bad for which no
 provision was made in the accounts in the year ended 31st March, 2012
 as referred to, in Note No.l 7 & 20 in the notes on accounts and as
 such has resulted in overstatement of year end net Current Assets and
 Reserves & Surplus by Rs. 1,06,71,007 each.
 
 c) All the balances of Receivables and Payables are subject to
 confirmation and reconciliation   and   adjustments,   if   any,  
 required   on   reconciliation.   The consequential effect of such 
 possible adjustments and the extent thereof on the profit of the year, 
 the year end Net Current Assets and Reserve & Surplus cannot be 
 ascertained at this stage.  
 
 d) No provision for gratuity payment on actuarial basis as on 31st 
 March, 2012 was  made hence it''s effect  on profit could not be 
 ascertained as referred to in note no.  27(b) in the notes on accounts.  
 
 (vi) Subject to my comments under paras 
 
 (v) (a) to (d) above, in my opinion and to the best of my information 
 and according to the explanations given to me, 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 the balance sheet, of the state of affairs of the
 company as at 31st March, 2012;
 
 (b) in the case of the statement of profit and loss account, of the
 Loss for the year ended on that date.
 
 (c) in the case of the cash flow statement of the cash flows for the
 year ended on that date.
 
 ANNEXURE TO THE AUDITOR''S REPORT
 
 (Referred to in paragraph 3 of my report of even date)
 
 To,
 
 The Members,
 
 Katare Spinning Mills limited,
 
 Solapur
 
 (i) (a) The Company has maintained proper records showing full
 particulars including quantitative details and situation of 
 fixed assets.
 
 (b) During the year, the company has not carried out physical
 verification of assets. In my opinion, the frequency of verification is
 not reasonable, having regard to the size and nature of its business.
 
 (c) The company has not disposed off any substantial part of the fixed
 assets of the fixed assets during the year and the going concern status
 of the company is not affected.
 
 (ii) (a) As informed the physical verification of inventories was
 conducted by the management at reasonable intervals. In my opinion, 
 the frequency of verification is reasonable.
 
 (b) In my opinion, the procedure of physical verification of
 inventories followed by the management is reasonable and adequate in
 relation to the size of the company and the nature of its business.
 
 (c) I find from the records that no material discrepancies were noticed
 on physical verification of stocks referred above as compared to the
 book records and the same have been properly dealt with in the books of
 accounts.
 
 a) The company h 4s not granted any loans, secured or unsecured to
 companies, firms or other parties
 covered in the register maintained under section 301 of the Companies
 Act, 1956. Accordingly sub- clause (b) (c) and (d) are not applicable.
 
 b) 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 sub- clause
 (f) and (g) are not applicable.
 
 (iv) In my opinion, and according to the information and explanations
 given to me, there is an adequate internal control procedure 
 commensurate with the size of the company and the nature of its 
 business for the purchase of inventory and assets for the sale 
 of goods. During the course of my audit, I have not observed 
 any continuing failure to correct major weakness in internal
 control.
 
 (v) (a) According to the information and explanations given to me, 
 I am of the opinion that the transactions that need to be entered 
 into the register maintained under section 301 of the Companies 
 Act, 1956 have been so entered.
 
 (b) In respect of 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. 50,000/- in respect of each
 party during the year I am unable to express my opinion whether the
 said transactions have been m; le at prices which are reasonable or
 not, having regard to the prevailing market price at the relevant time
 since there are no similar transactions entered into with the other
 parties and no such information about the relevant market price is
 available with the Company.
 
 (vi) The Company has not accepted any deposits from the public, hence
 provisions of sections 58A and 58AA of the Companies Act, 1956 and the 
 Companies (Acceptance of Deposits) Rules, 1975 are notapplicable to 
 the Company.
 
 (vii) The company has a procedure for an internal audit system, which
 is commensurate with the size and the nature of its business.
 
 (vlii) I have broadly reviewed the records 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 I am of the opinion that prima facie, the 
 prescribed records have been made and maintained. I, however, have not 
 made a detailed examination of the records with a view to detenriining 
 whether they are accurate or complete.
 
 (ix) The company is regular in depositing statutory dues including
 Provident Fund, Income Tax, Wealth Tax, Customs Duty and Value 
 Added Tax.
 
 (x) a) As on 31 st March, 2012 there were no accumulated losses.
 
 b) During the financial year covered by my audit the company has
 incurred cash loss but has not incurred cash loss in the immediately
 preceding f financial year.
 
 (xi) The company has defaulted in repayment of dues of loan from ICICI
 Bank Ltd. which was subsequently assigned by ICICI to Kotak 
 Mahindra Bank Ltd. the details of which are covered in note no. 2 7(c),
 (d) & (e) of notes on accounts.
 
 (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) In my opinion, the company is not a chit fund or a nidhi/murual
 fund society. Therefore the provisions of the clause no. 4(xiii) of the
 Companies (Auditors Report) Order, 2003 are not applicable to the
 company.
 
 (xiv) In my opinion, 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.
 
 (xv) The company has not given any guarantee for the loans taken by
 others from banks or financial institutions.
 
 (xvi) The company has not taken any term loan during the year.  (xvii)
 On the basis of my overall examination of Balance Sheet, I report that
 the funds raised on short-term basis have not been used for long-term
 investments. The company has not raised long-term funds during the year
 and, hence, the question of use of such funds for short-term
 investments does not arise.
 
 (xviii) The company has not made any preferential allotment of shares
 to parties and companies covered in the register maintained under
 section 301 of the Companies Act, 1956 during the year.
 
 (xix) The company has not issued debentures during the year.
 
 (xx) The company has not raised any monies by puolic issue during the
 year.
 
 (xxi) On the basis of my examination and according to the information
 and explanations given to me, no fraud, on or by the company, has been
 noticed or reported during the course of my audit.
 
 Solapur                                          G.M.PAWLE
 
 31 st August, 2012                               Chartered Accountant
 
                                                     M. No. 32561