We have audited the attached Balance Sheet of The KCP Limited, as at
 31st March 2011, its Profit and Loss Account for the year ended on
 that date annexed thereto, and its cash-fl ow statement for the year
 ended on that date. These financial state- ments are the
 responsibility of the Companys management. Our responsibility is to
 express an opinion on these financial statements based on our audit.
 
 We conducted our audit in accordance with audit- ing standards
 generally accepted in India. Those Standards require that we plan and
 perform the audit to obtain reasonable assurance about whether the fi
 nancial statements are free of material misstate- ment. 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 sig- nifi cant estimates
 made by management, as well as evaluating the overall financial
 statement presenta- tion. We believe that our audit provides a
 reasonable basis for our opinion.
 
 As required by the Companies (Auditors Report) Order, 2003 issued by
 the 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 specifi ed in paragraphs 4 and 5 of the said Order.
 
 Further to our comments in the Annexure referred to 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 such
 books;
 
 c.  The Balance Sheet and Profit and Loss Account and Cash-fl ow
 Statement dealt with by this report are in agreement with the books of
 account;
 
 d.  In our opinion, the Balance Sheet and Profit and Loss account and
 the Cash-fl ow 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 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 disqualifi ed 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;
 
 f.  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;
 
 i. In the case of the Balance Sheet, of the state of affairs of the
 Company as at March 31, 2011,
 
 ii. In the case of the Profit and Loss Account, of the Profit for the
 year ended on that date,
 
 iii. In the case of the cash-fl ow statement, of the cash-fl ows of the
 company for the year ended on that date
 
 ANNEXURE REFERRED TO IN PARAGRAPH 3 OF OUR REPORT OF EVEN DATE
 
 1.1 According to the information and explanations furnished to us, the
 company has maintained proper records showing full particulars
 including quantitative details and situation of its fi xed assets.
 
 1.2 According to the information and explanations furnished to us, the
 company has physically verifi ed some of its fi xed assets during the
 year, in accordance with a phased programme of verification, which, in
 our opinion, is reasonable, having regard to the size of the company
 and the nature of the assets. As per the said information and
 explanations, no material discrepancies were noticed on such verifi
 cation carried out during the year.
 
 1.3 According to the information and explanations furnished to us, the
 company has not disposed of a substantial part of its fi xed assets
 during the year.
 
 2.1 According to the information and explanations furnished to us, the
 company has physically verifi ed its inventories during the year. In
 our opinion, the frequency of such verification is reasonable.
 
 2.2 In our opinion, the procedures of physical verification of
 inventories followed by the management are reasonable and adequate in
 relation to the size of the company and the nature of its business.
 
 2.3 According to the information furnished to us, the company is
 maintaining proper records of its inventory and the discrepancies if
 any noticed on verification between the physical stocks and the book
 records were not material, and have been properly dealt with in the
 books of account.
 
 3.1 According to the information and explanations furnished to us, the
 company has not granted any loans to companies, firms or other parties
 covered by the register maintained under Section 301 of the Companies
 Act 1956, at the beginning of the year or during the year, and
 consequently reporting under sub-clauses b, c and d of clause 4(iii) of
 the Order does not arise during the year.
 
 3.2 According to the information and explanations furnished to us, the
 company has, at the date of the Balance Sheet under report, taken loans
 
 aggregating to Rs.18.06 crores from three directors, Rs.1.09 crores
 from a relative of the director and Rs. 7.00 crores from a company,
 covered by the register maintained under Section 301 of the Companies
 Act 1956.
 
 3.3 In our opinion, the rate of interest and other terms and conditions
 on which loans have been taken by the company from companies, firms or
 other parties covered by the register maintained under section 301 of
 the Companies Act, 1956 are not, prima facie, prejudicial to the
 interest of the company.
 
 3.4 According to the information and explanations furnished to us, the
 company has been regular in repaying the principal and interest amounts
 as stipulated on the loans taken by it from the parties listed in the
 registers maintained under Section 301 of the Companies Act 1956.
 
 4. In our opinion and according to the information and explanations
 given to us, there are adequate internal control procedures
 commensurate with the size of the company and the nature of its
 business with regard to purchases of inventory, fi xed assets and with
 regard to the sale of goods and services. Further, during the course of
 our audit, we have not come across any instances of major weaknesses in
 internal control that require correction and have so continued without
 correction.
 
 5.1 Based on the information and explanations given to us, we are of
 the opinion that the transactions that are required to be entered in
 the register maintained under section 301 of the Companies Act, 1956
 have been so entered.
 
 5.2 In our opinion and according to the information and explanations
 given to us, the transactions which have been entered into, pursuant to
 contracts that have been 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.
 
 6. In our opinion and according to the information and explanations
 given to us, the company
 
 has complied with the provisions of section 58A and 58AA and other
 applicable provisions of the Companies Act, 1956 and Companies
 (Acceptance of Deposits) Rules, 1975 with regard to the deposits
 accepted from the public.  According to the information furnished to
 us, no Order has been passed on the company by the Company Law Board or
 National Company Law Tribunal or Reserve Bank of India or any Court or
 any other Tribunal for non-compliance with the provisions of Sections
 58A and 58AA of the Companies Act 1956.
 
 7.  In our opinion, the company has an internal audit system
 commensurate with the size and nature of its business.
 
 8.  We have broadly reviewed the books of account and records
 maintained by the company at its cement and electric power generation
 units 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 are not
 required to and have not carried out a detailed audit of the same.
 
 9.1 According to the information furnished to us, the company has
 generally been regular in depositing with the appropriate authorities,
 the undisputed statutory dues including Provident Fund, Investor
 Education Protection Fund, Employees State Insurance, Income Tax,
 Sales Tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, Cess and
 other material statutory dues applicable to it.
 
 9.2 There were no undisputed statutory dues mentioned in the preceding
 paragraph in arrears, as at the date of the Balance Sheet under report,
 for a period of more than six months from the date they became payable.
 
 9.3 According to the information furnished to us, there were no amounts
 of Sales Tax, Customs Duty, Excise Duty, Cess, Income Tax, Wealth Tax,
 Service Tax that have been disputed by the company, and hence, were not
 remitted to the concerned authorities at the date of the Balance Sheet
 under report, except
 
 S.   Nature of Dues         Applicable        Amount        Pending
 No                            Statute         (in Rs.)      Before
 
      Excise duty and      Central Excise                  Commissioner
 1.                                           97,10,577 
      related demands       Act 1944                       of Appeals
 
                            Sales tax Acts                   Various
      Sales tax and
 2.                         of various
                            state          11,03,86,239     appellate 
     related demands        Govts.                         authorities
 
 10. According to the information and explanations furnished to us by
 the company, it had no accumulated losses at the end of the financial
 year, and it did not incur cash losses during the financial year
 covered by our audit and in the immediately preceding financial year.
 
 11.  In our opinion and according to the information and explanations
 furnished to us by the company, there were no defaults in repayment of
 dues to financial institutions, banks or debenture holders at the date
 of the Balance Sheet.
 
 12. According to the information furnished to us, the company has not
 granted any loans or advances on the basis of security by way of pledge
 of shares, debentures, and other securities.
 
 13. In our opinion and according to the information and explanations
 furnished to us, the company is not a chit fund or a nidhi / mutual
 benefit fund/ society and hence, the requirements of clause 4(xiii) of
 the Companies (Auditors Report) Order, 2003 are not applicable to the
 company during the year under report.
 
 14. According to the information furnished to us, the company is not
 dealing in or trading in shares, securities, debentures and other
 investments.  Accordingly, the requirements of clause 4(xiv) of the
 Companies (Auditors Report) Order, 2003 are not applicable to the
 company.
 
 15. In our opinion, and according to the information furnished to us,
 there are no guarantees outstanding as at the year end that are given
 by the company for loans taken by subsidiary company from banks.
 
 16. In our opinion, and according to the information and explanations
 furnished to us, the term loans taken by the company have been applied
 for the purpose for which they were raised.
 
 17. According to the information and explanations given to us and on an
 overall examination of the Balance Sheet of the company, we report that
 funds raised on short-term basis have not been used for long-term
 investment.
 
 18. According to the information and explanations furnished to us, 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 Act.
 
 19. According to the information and explanations given to us, the
 company has not issued any debentures during the year under report.
 
 20. The company has not raised any moneys through public issue of its
 securities during the year, and the question of end use of such moneys
 does not arise during the year.
 
 21. According to the information and explanations furnished to us, and
 based on the audit procedures generally adopted by us, we report that,
 during the year, no fraud on or by the company has been noticed or
 reported that is either significant or could have caused a material
 misstatement in the financial statements.
 
 
                                                      For BRAHMAYYA & CO
                                                   Chartered Accountants
                                                    Firm Regd No 000513S
 
                                                             Sd/-
                                                        T.V. RAMANA
                                                             Partner
 Place: Chennai                                    (ICAI Memb.No.200523)
 Date: 27th May, 2011