We have audited the attached Balance Sheet of KSE LIMITED as at 31st
 March 2012, Statement of Profit and Loss and 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.
 
 I.  As required by the Companies (Auditor''s 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 Para 4 and 5 of the said Order.
 
 II.  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 purpose of our
 audit.
 
 (ii) 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.
 
 (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
 account.
 
 (iv) 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.
 
 (v) On the basis of written representations received from directors and
 taken on record by the Board of Directors, we report that none of the
 directors of the Company 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.
 
 (vi) In our opinion and to the best of our information and according to
 the explanations given to us, the said accounts, read together with the
 accounting policies and other notes attached thereto, 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, of the profit for
 the year ended on that date; and
 
 (c) in the case of the Cash Flow Statement, of the cash flows for the
 year ended on that date.
 
 1.  In respect of fixed assets-
 
 (a) The Company is maintaining proper records showing full particulars,
 including quantitative details and situation of fixed assets.
 
 (b) We are informed that most of the fixed assets of the Company have
 been physically verified by the management during the year, which, in
 our opinion, is reasonable having regard to the size of the company and
 the nature of its assets and that no material discrepancy has been
 noticed on such verification.
 
 (c) The Company has not disposed off substantial part of fixed assets
 during the year.
 
 2.  In respect of inventories-
 
 (a) We are informed that the inventory has been physically verified by
 the management at the year end, which, in our opinion, is reasonable
 having regard to the size of the company and the nature of its
 business.
 
 (b) In our opinion and according to the explanations given to us, the
 procedures for physical verification of inventory followed by the
 management are reasonable and adequate in relation to the size of the
 company and the nature of its business.
 
 (c) The Company is maintaining proper records of inventory, and as
 informed to us, discrepancies of material nature were not noticed on
 physical verification by the management.
 
 3.  (a) The Company has 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.
 
 (b) The Company has accepted deposits under the provisions of Section
 58 A of the Companies Act, 1956 from 28 parties covered in the Register
 maintained under Section 301 of the Companies Act, 1956 and the
 aggregate amount outstanding as on 31.03.2012 is Rs 1,07,47,000 (Maximum
 amount outstanding during the year Rs 1,07,47,000). The Company has not
 taken any other loan, secured or unsecured, from Companies, firms or
 other parties covered in the register maintained under Section 301 of
 the Companies Act, 1956.
 
 (c) In our opinion, the rate of interest and other terms and conditions
 of the deposits accepted by the Company from the Parties listed in the
 Register maintained under Section 301 of the Companies Act, 1956, are
 as applicable to other depositors and are in accordance with the
 Companies (Acceptance of Deposits) Rules, 1975 and are prima facie not
 prejudicial to the interest of the Company.
 
 (d) In respect of the above deposits, the payments of principal amounts
 and interest there on are regular.
 
 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 nature of its business
 for the purchase of inventory and fixed assets and for the sale of
 goods. The Company, being primarily a manufacturing Company, is not
 rendering any services. During the course of our audit, we have not
 observed any continuing failure to correct major weakness in the
 internal controls.
 
 5.  In respect of transactions covered under Section 301 of the
 Companies Act, 1956-
 
 (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 Companies Act, 1956 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 entered in the register maintained under Section 301 of
 the Companies Act, 1956, have been made at prices which are reasonable
 having regard to the quality and prevailing market prices at the
 relevant time.
 
 6.  In respect of deposits accepted by the Company from the public, the
 directives issued by the Reserve Bank of India and the provisions of
 Section 58A and 58AA or any other relevant provisions of the Companies
 Act, 1956 and the Rules framed there under, wherever applicable, have
 been complied with.
 
 7.  In our opinion, the Company has an internal audit system, the scope
 and coverage of which is commensurate with the size of the Company and
 nature of its business.
 
 8.  We have broadly reviewed the cost records maintained by the Company
 pursuant to the Companies (Cost Accounting Records) Rules, 2011
 prescribed by the Central Government under Section 209 (1) (d) of the
 Companies Act, 1956 and are of the opinion that prima facie the
 prescribed cost records have been maintained. We have, however, not
 made a detailed examination of the cost records with a view to
 determine whether they are accurate or complete.
 
 9.  In respect of statutory dues-
 
 (a) As per the information and explanations furnished to us and
 according to our examination of the records of the Company, except for
 certain minor delays in remittance of undisputed Income tax deducted at
 source, the Company has been generally regular in depositing undisputed
 provident fund and employees'' state insurance dues, investor
 education and protection fund, sales tax, wealth tax, service tax,
 income tax, customs duty, excise duty, cess and other statutory dues
 during the year. There are no arrears of undisputed statutory dues of
 material nature outstanding for a period of more than six months from
 the date on which they became payable.
 
 (b) According to the information and explanations given to us and as
 per the records of the Company examined by us, the following disputed
 amount of statutory dues have not been deposited with the relevant
 authorities as at 31st March 2012:
 
 Name of the 
 statute           Nature of
                   the dues     Amount       Period to 
                                             which         Forum where 
                                Rs in lakhs  the amount 
                                             relates       dispute is 
                                                           pending
 
 KGST Act, 1963    Amount 
                   disputed 
                   on 
                   allowability    25.40     F.Y 2000-01   Asst.
                                                           Commissioner
                   of ST 
                   Exemption 
                   for refining
                   plant                                  (Assessment)
 
 Customs Act, 1962 Dispute on 
                   applicable 
                   Tariff head     45.07     F.Y. 2008-09  CESTAT, 
                                                           Bangalore
 
 Customs Act, 1962 Dispute on
                   applicable 
                   Tariff head      1.98     F.Y. 2009-10  CESTAT,
                                                           Bangalore
 
 10.  There are no accumulated losses at the end of the financial year
 and the company has not incurred cash losses during the financial year
 and in the immediately preceding financial year.
 
 11.  According to the information and explanations given to us and as
 per the records of the Company verified by us, the Company has not
 defaulted in repayment of dues to banks.
 
 12.  The Company has not given any loans or advances in the nature of
 loans on the basis of security by way of pledge of shares, debentures
 and other securities.
 
 13.  Since the Company is not a chit fund/nidhi/mutual benefit
 fund/society, the relative reporting requirements in this regard are
 not applicable.
 
 14.  Since the Company is not dealing or trading in shares, securities,
 debentures and other investments, the relative reporting requirements
 in this regard are not applicable.
 
 15.  According to the information and explanations given to us and as
 per the records of the company verified by us, the Company has not
 given any guarantee for loans taken by others from banks or financial
 institutions.
 
 16.  According to the information and explanations given to us and the
 records of the Company examined by us, the term loans availed by the
 Company were applied for the purpose for which the loans were obtained.
 
 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 by the Company on short-term basis have not been used
 for long-term investment.
 
 18.  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.
 
 19.  The Company has not issued any debentures during the year.
 
 20.  The Company has not raised any money by public issues during the
 year.
 
 21.  According to the information and explanations given to us and as
 per the verification of the records of the Company, no fraud, either on
 or by the Company has been noticed or reported during the year.
 
 
 
                                              For VARMA & VARMA
 
                                             (Firm No. 004532 S)
 
 Thrissur                                              Sd/
 
                                      (C. Pankajakshan, M. No. 12948)
 
 May 30, 2012                                      Partner
 
                                            Chartered Accountants