1.  We have audited the attached Balance Sheet of Kesoram Industries
 Limited (die Company) as at 31st March, 2011 and the related Profit
 and Loss Account and Cash Flow Statement for the year ended on that
 date annexed thereto, which we have signed under reference to this
 report. These financial statements are the responsibility of the
 Companys 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 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 as
 amended by the Companies (Auditors Report) (Amendment) Order, 2004
 (together the Order), issued by the Central Government of India in
 terms of sub- section (4A) of Section 227 of The Companies Act., 1956
 of India (the Act) and on the basis of such checks of the books and
 records of the Company as we considered appropriate and according to
 the information and explanations given to us, we give in the Annexure a
 statement on the matters specified in paragraphs 4 and 5 of the Order.
 
 4- Further to our comments in the Annexure referred to in paragraph 3
 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, Profit and Loss Account and Cash Flow Statement
 dealt with by this report are in agreement with the books of account;
 
 (d) 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 subsection (3C) of Section 211 of the Act;
 
 (e) On the basis of written representations received from the
 directors, as on 31st March, 2011 and taken on record by the Board of
 Directors, none of the directors is disqualified as on 31st March, 2011
 from being appointed as a director in terms of clause (g) of
 sub-section (1) of Section 274 of the Act;
 
 (f) In our opinion and to the best of our information and according to
 the explanations given to us, the said financial statements together
 with the notes thereon and attached thereto give, in the prescribed
 manner, the information required by the Act, 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, 2011;
 
 (ii) in the case of the Profit and Loss Account, of the loss for the
 year ended on that date; and
 
 (iii) in the case of the Cash Flow Statement, of the cash flows for the
 year ended on that date.
 
 ANNEXURE TO AUDITORS REPORT Referred to in paragraph 3 of the
 Auditors Report of even date to the members of Kesoram Industries
 Limited on the financial statements for the year ended 31st March, 2011
 
 1.  (a) The Company is maintaining proper records showing full
 particulars (other than details regarding revaluations made during
 1982-83) including quantitative details and situation of its fixed
 assets.
 
 (b) The fixed assets of the company are physically verified by the
 management according to phased programmes designed to cover all the
 items 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.
 Pursuant to such programmes [without any coverage for items of
 Companys Spun Pipes & Foundries Unit (which is under suspension of
 work effective 2nd May, 2008 having year-end book value of
 Rs.3,69,80,427)], a portion of the fixed assets has been physically
 verified by the Management during the year and no material
 discrepancies between the book records and the physical inventory have
 been noticed.
 
 (c) in our opinion and according to the information and explanations
 given to us, a substantial part of fixed assets has not been disposed
 off by the Company during the year.
 
 2.  (a) The inventories [excluding stocks with third parties and
 pertaining to the aforesaid Spun Pipes & Foundries Unit (Year-end book
 value Rs. 98,23,767)] have been physically verified by the Management
 during the year. In respect of inventory lying with third parties,
 these have substantially been confirmed by them. In our opinion, the
 frequency of physical verification is reasonable.
 
 (b) 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 nature of its business.
 
 (c) On the basis of our examination of the inventory records, in our
 opinion, the Company is maintaining proper records of inventories other
 than work-in-process. As in earlier years, work-in-process has been
 determined by the Management on the basis of physical verification as
 mentioned in paragraph 2 (a) above. The discrepancies noticed on
 physical verification of inventory as compared to book records were not
 material.
 
 3.  The Company has neither granted nor taken during the year any
 loans, secured or unsecured, to/from companies, firms or other parties
 covered in the register maintained under Section 301 of the Act.
 
 4.  In our opinion and according to the information and explanations
 given to us, there is an adequate internal control system commensurate
 with size of the Company and the nature of its business for the
 purchase of inventory, fixed assets. The Company needs to improve its
 internal control system for sale of its tyre and cement necessitated
 from certain deficiencies in relation to Information Technology General
 Control. The Company has not provided any service during the year.
 Further, on the basis of our examination of the books and records of
 the company and according to the information and explanations given to
 us, we have neither come across nor have we been informed of any
 continuing failure to correct major weaknesses in the aforesaid
 internal control system.
 
 5.  (a) In our opinion and according to the information and
 explanations given to us, 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.
 
 (b) In our opinion and according to the information and explanations
 given to us, the transactions made in pursuance of such contracts or
 arrangements and exceeding the value of Rupees Five Lakhs in respect of
 any party during the year, have been made at prices which are
 reasonable having regard to the prevailing market prices at the
 relevant time other than transactions of special nature for which
 competitive quotations are not available.
 
 6.  In our opinion and according to the information and explanations
 given to us, the Company has complied with the provisions of Sections
 58A and 58AA or any other relevant provisions of the Act and the
 Companies (Acceptance of Deposits) Rules, 1975 with regard to the
 deposits accepted from the public. According to the information and
 explanations given to us, no order has been passed by the Company Law
 Board or National Company Law Tribunal or Reserve Bank of India or any
 Court or any other Tribunal on the Company in respect of the aforesaid
 deposits.
 
 7.  In our opinion, the Company has an internal audit system
 commensurate with its size and nature of business.
 
 8.  We have broadly reviewed the books of account maintained by the
 Company in respect of products at its Cement, Tyre, Rayon and Chemicals
 Units where, pursuant to the Rules made by the Central Government of
 India, the maintenance of cost records has been prescribed under
 Section 209(1) (d) of the Act and are of the opinion that prima facie,
 the prescribed accounts and records have been made and maintained. We
 have not, however, made a detailed examination of the records with a
 view to determine whether they are accurate or complete.
 
 9.  (a) According to the information and explanations given to us and
 the records of the Company examined by us, in our opinion, the Company
 is generally regular in depositing the undisputed statutory dues
 including provident fund (other than arrears of Rs. 15,085 outstanding
 for a period of more than six months as on 31st March, 2011), investor
 education and protection fund, employees state insurance (other than
 arrears of Rs. 14,180 outstanding for a period of more than six months
 as on 31st March, 2011), income tax, sales tax (other than arrears of
 Rs. 23,48,352 outstanding for a period of more than six months as on
 31st March, 2011), wealth tax, service tax, customs duty, excise duty,
 cess and other material statutory dues as applicable with the
 appropriate authorities.
 
 (b) According to the information and explanations given to us and the
 records of the Company examined by us, the particulars of dues of
 income tax, sales tax, wealth tax, service tax, customs duty, excise
 duty and cess as at 31st March, 2011 which have not been deposited on
 account of a dispute (there being no such cases with regard to wealth
 tax, customs duty and cess), are as follows —
 
 Name of Statute          Nature of        Amount
                           Dues
 
 Income Tax Act,         Income Tax       15,87,74,831
 1961
 
 Central Sales Tax       Sales Tax        16,99,42,317
 Act, 1956                                 4,65,12,981
 
                                           2,85,22,915
 
                                           5,69,59,589
 
                                              7,17,763
                                                59,373
 
                                              5,14,233
 
                                             77,37,025
 
 
 Name of Statue     Period to which the         Forum where dispute
                    Amount relates                 is pending
 
 Income Tax Act,
 1961               2003-04,2005-06,             Commissioner
                    2008-09                       (Appeal)
 
 Central Sales Tax
 Act, 1956          2000-01 to 2002-03           Supreme Court
                    2003-04                      Karnataka High Court
 
                    2001-02, 2003-04,            Orissa High Court
 
                    2006-07
 
                    1995-96, 2004-05 to          West Bengal Commercial
                    2006-07                      Taxes Appellate and
                                                 Revision Board
 
                    2002-03                      Tribunal
 
                    2007-08                      Sr. Jt. Commissioner
                                                 (Appellate Authority)
 
                    2005-06                      Commissioner
 
                    1999-00,2003-04,             Additional
                    2007-08                      Commissioner
 
 
 
 
 Name of Statute          Nature of        Amount
                           Dues
 
                                           18,11,400
 
                                           57,90,166
 
 West Bengal Sales       Sales Tax       1,59,11,422
 Tax Act, 1994
 
                                            5,72,943
                                         2,77,38,852
 
 Andhra Pradesh          Sales Tax         38,44,646
 General Sales Tax
 Act, 1957
 
 Delhi Sales Tax         Sales Tax         41,70,263
 Act, 1975
 
 Jammu & Kashmir         Sales Tax          9,90,252
 Sales Tax Act, 1962
 
 Bombay Sales            Sales Tax         71,31,347
 Tax Act, 1959
 
 Tamil Nadu General      Sales Tax         18,07,934
 Sales Tax Act, 1959
 
 UP Trade Tax            Sales Tax          8,88,138
 Act, 1948
 
 Central Excise          Excise Duty        1,72,232
 Act 1944                               31,91,14,267
 
                                        35,92,13,921
 
                                           19,43,327
                                           27,56,665
 
 Finance Act,            Service Tax       46,31,961
 1944
 
 
 
 Name of Statue     Period to which the         Forum where dispute
                    Amount relates                 is pending
 
 
                    1997-98, 2001-02,           Deputy Commissioner
                    2004-05
 
                    1991 -92 to 1998-99,        Assistant
                    2001-02,2004-05             Commissioner
 
 West Bengal Sales
 Tax Act, 1994      1987-88, 1995-96,           West Bengal Commercial
                    2003-04, 2004-05            Taxes Appellate and
                                                Revision Board
 
                    1999-00                     Additional Commissioner
 
                    1995-96, 1997-98,           Deputy Commissioner
 
                    1998-99, 2001-02,
                    2004-05
 
 Andhra Pradesh
 General Sales Tax
 Act, 1957          2001-02                     Tribunal
 
 Delhi Sales Tax
 Act, 1975          1999-00                     Additional
                                                Commissioner
 
 Jammu & Kashmir
 Sales Tax Act, 
 1962               1999-00                    Deputy Commissioner
 
 Bombay Sales
 Tax Act, 1959      2002-03 to 2004-05         Deputy Commissioner
                                                (Appeal)
 
 Tamil Nadu General
 Sales Tax Act, 
 1959               1999-00                    Chennai High Court
 
 UP Trade Tax
 Act, 1948          2005-06,2006-07            Additional Commissioner
 
 Central Excise
 Act, 1944          1993-94, 1994-95           Calcutta High Court
 
                    2003-04 to 2008-09         Central Excise Service
                                               Tax Appellate Tribunal
 
                    1985-86 to 1989-90,        Commissioner
 
                    1994-95, 1995-96
 
                    1997-98,1999-00 to
                    2004-05,2009-10               
 
                    2003-04                    Deputy Commissioner
 
                    1979-80 to 1982-83,        Assistant Commissioner
                    1994-95 to 1996-97,
                    2002-03 to 2004-05,
                    2006-07, 2007-08
 
 Finance Act,
 1944               March 2008 to April        Commissioner (Appeal)
                    2009
 
 10.  The Company has no accumulated losses as at 31st March, 2011 and
 it has not incurred any cash losses in the financial year ended on that
 date and in the immediately preceding financial year.
 
 11.  According to the records of the Company examined by us and the
 information and explanations given to us, the Company has not defaulted
 in repayment of dues to any financial institution or bank or debenture
 holders as at the Balance Sheet date.
 
 12.  The Company has not granted any loans and advances on the basis of
 security by way of pledge of shares, debentures and other securities.
 
 13.  The provisions of special statute applicable to Chit
 fund/Nidhi/mutual benefit fund/societies are not applicable to the
 Company.
 
 14.  In our opinion, the Company is not a dealer or trader in shares,
 securities, debentures and other investments.
 
 15.  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 banks or financial institutions during the year.
 
 16.  In our opinion, and according to the information and explanations
 given to us, on an overall basis, the term loans have been applied for
 the purposes for which they were obtained.
 
 17.  On the basis of an overall examination of the Balance Sheet of the
 Company, in our opinion and according to the information and
 explanations given to us, there are no funds raised on a short-term
 basis which have been used for long-term investment.
 
 18.  The Company has not made any preferential allotment of shares
 during the year.
 
 19.  The Company has created security or charge in respect of
 debentures issued and outstanding at the year-end.
 
 20.  The Company has not raised any money by public issues during the
 year.
 
 21.  During the course of our examination of the books and records of
 the Company, carried out in accordance with the generally accepted
 auditing practices in India, and according to the information and
 explanations given to us, we have neither come across any instance of
 fraud on or by the Company, noticed or reported during the year, nor
 have we been informed of such case by the Management.
 
                                             For Price Waterhouse
 
                                Firm Registration Number: 301112E
                                            Chartered Accountants
 
                                                Prabal Kr. Sarkar
 Kolkata                                                  Partner
 
 28th April, 2011                         Membership Number 52340