1.  We have audited the attached Balance Sheet of Lanco Industries
 Limited (the Company”) as at 31st March, 2011 and also the Proft and
 Loss Account and the Cash Flow Statement for the year ended on that
 date annexed thereto.  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 have 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 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 the 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 (CARO)
 (as amended) issued by the Central Government of India in terms of
 sub-section (4A) of Section 227 of the Companies Act, 1956 and on the
 basis of such examination of the books and records of the Company as we
 considered appropriate and the information and explanations given to us
 during the course of the audit, we enclose in the Annexure a statement
 on the matters specifed in the paragraphs 4 and 5 of the said 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 purpose of our
 audit;
 
 b) in our opinion, proper books of accounts as required by law have
 been kept by the Company so far as it appears from our examination of
 those books;
 
 c) the Balance Sheet, the Proft and Loss Account and the Cash Flow
 Statement dealt with by this report are in agreement with the books of
 account;
 
 d) in our opinion, the Balance Sheet, the Proft and Loss Account and
 Cash Flow Statement dealt with by this report comply with the
 Accounting Standards referred in sub-section (3C) of Section 211 of the
 Companies Act, 1956;
 
 e) on the basis of written representations received from the Directors
 of the Company as on 31st March, 2011 taken on record by the Board of
 Directors, none of the Directors is disqualifed 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 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 the
 Notes as per Schedule 17, 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, 2011;
 
 ii) in the case of the Proft and Loss Account, of the proft of the
 Company for the year ended on that date;
 
 and iii) in the case of the Cash Flow Statement, of the cash fows of
 the Company for the year ended on that date.
 
 annexure to auditors report re: Lanco industries Limited
 (Referred to in paragraph 3 of our report of even date)
 
 i) a) The Company has maintained proper records showing full
 particulars, including quantitative details and situation of fxed
 assets.
 
 b) As explained to us, the fxed assets have been physically verifed by
 the management during the year as per a detailed program drawn for the
 said purpose, which in our opinion is reasonable having regard to the
 size of the Company and nature of its assets. No material discrepancies
 were noticed on such physical verifcation.
 
 c) The fxed assets disposed off during the year, in our opinion, do not
 constitute as substantial part of the fxed assets of the Company and
 such disposal, in our opinion, has not affected the going concern
 status of the Company.
 
 ii) a) As explained to us, the management has conducted physical
 verifcation of inventories during the year, except the materials in
 transit and the materials lying with third parties. In our opinion, the
 frequency of the said verifcation is reasonable.
 
 b) The procedures of physical verifcation of inventories followed by
 the management were reasonable and adequate in relation to the size of
 the Company and nature of its business.
 
 c) In our opinion and according to the information and explanations
 given to us, the Company has maintained proper records of its
 inventories and no material discrepancies were noticed on physical
 verifcation.
 
 iii) According to the information and explanations given to us, the
 company has neither granted nor taken any loans, secured or unsecured
 to / from companies, frms or other parties covered in the register
 maintained under section 301 of the Companies Act, 1956. Accordingly,
 clauses (iii)(a) to (iii)(g) of paragraph 4 of CARO are not applicable.
 
 iv) In our opinion and according to the information and explanations
 given to us, there is an adequate internal control system commensurate
 with the size of the Company and nature of its business, for the
 purchase of inventory, fxed assets and for the sale of goods and
 services. During the course of our audit, no major weakness has been
 noticed in the internal control system in respect of the said areas.
 
 v) 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 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, there were no transactions made in pursuance of contracts
 or arrangements referred to in v(a) above and exceeding the value of
 Rupees fve lakhs with any such party.
 
 vi) The company has not accepted any deposits from public covered under
 Sections 58A, 58AA or any other relevant provisions of the Companies
 Act, 1956 and Rules framed there under.
 
 vii) In our opinion, the Companys internal audit system is
 commensurate with its size and nature of its business.
 
 viii) We have broadly reviewed the books of account maintained by the
 Company relating to the products, 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 Companies Act, 1956 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 determining whether
 they are accurate or complete.
 
 ix) a) According to the information and explanations given to us and
 the records of the Company examined by us, the Company is generally
 regular in depositing the 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 material statutory dues as applicable
 with the appropriate authorities and there were no undisputed dues
 outstanding as at 31st March, 2011 for a period exceeding six months
 from the date they became payable.
 
 b) According to the information and explanations given to us, the
 disputed dues of sales tax, income-tax, customs duty, wealth-tax,
 excise duty, service-tax and cess, if any, that have not been deposited
 on account of disputed matters pending before appropriate authorities
 as at 31st March, 2011 are as follows:
 
                             amount 
 Sl.              nature of            period to which it   forum where 
                                                            the
      name of the 
      Statute                (rs. in
 no.               dues                   relates            dispute is 
                                                             pending
                              lakhs)
 
 1.  Central Sales 
     Tax           Sales tax  308.85      2000-01         A.P. Sales Tax
                                                      Appellate Tribunal
     Act, 1956                 47.70      2005-06
 
 2.  APGST Act, 
     1957            -do-      67.52     2002-03     Sales Tax Appellate
                                                      Tribunal
 
 3.  Income tax 
     Act 1961      Income-tax   56.11     2003-04     A.P. High Court
 
                                 3.65     2004-05          -do- 
 
                                 0.14     2006-07      Commissioner of 
                                                        Income tax 
                                                         (Appeals)
 
 4.  Central 
 Excise Act,        Central 
                    Excise      17.38     2005-06      Commissioner
                                                       (Appeals) 1944 
                    Duty/
                    Interest
                                 8.26     2007-08      CESTAT
 
 x) The Company has no accumulated losses as at the end of the financial
 year and it has not incurred cash losses in the current and immediately
 preceding financial year.
 
 xi) In our opinion and according to the information and explanations
 given to us, the Company has not defaulted in repayment of dues to
 financial institutions and banks or debenture holders.
 
 xii) According to the information and explanations given to us, 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 our opinion, the Company is not a chit fund or a nidhi/mutual
 beneft fund/society. Therefore, the provisions of clause (xiii) of
 paragraph 4 of CARO are not applicable.
 
 xiv) In our opinion and according to the information and explanations
 given to us, the Company is not a dealer or trader in shares,
 securities, debentures and other investments. Therefore, the provisions
 of clause (xiv) of paragraph 4 of the CARO are not applicable.
 
 xv) According to the information and explanations given to us, the
 Company has not given guarantees for loans taken by others from Banks
 or Financial Institutions.
 
 xvi) In our opinion and according to the information and explanations
 given to us, on overall basis, the term loans have been applied for the
 purposes for which they were obtained.
 
 xvii) Based on the information and explanations given to us and on an
 overall examination of the cash fow statement and the Balance Sheet of
 the Company, in our opinion, the funds raised by the Company on short
 term basis have prima facie not been used for long term investment.
 
 xviii) The Company has not made any preferential allotment of shares
 during the year.
 
 xix) During the year, the Company has not made fresh issue of
 debentures. Accordingly, clause (xix) of paragraph 4 of CARO is not
 applicable.
 
 xx) The Company has not raised any money through a public issue during
 the year. Accordingly, the provisions of clause (xx) of paragraph 4 of
 the CARO are not applicable.
 
 xxi) To the best of our knowledge and according to the information and
 explanations given to us, no fraud by the Company and no fraud on the
 Company has been noticed or reported during the year.
 
                                                 For K.r. Bapuji & co.
                                                 Chartered Accountants
                                         Firm Registration No. 000395S
 
                                                       Dheeraj agarwal
 
 Place: Chennai                                        Partner
 Date: 7th May, 2011                               Membership No. 219788