1.  We have audited the attached Balance Sheet of LANCO INDUSTRIES
 LIMITED (the Company) as at 31st March, 2012 and also the Statement
 of Profit and Loss and the Cash Flow Statement for the year ended on
 that date and Summary of significant accounting policies and other
 explanatory information 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.
 
 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 (Auditor''s 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 specified 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 account 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 Statement of Profit and Loss 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 Statement of Profit and Loss
 and the 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, 2012 taken on record by the Board of
 Directors, none of the Directors 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;
 
 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
 Significant Accounting Policies and Other Notes (Note No. 1 to 43) 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, 2012;
 
 ii) in the case of the Statement of Profit and Loss, of the loss of the
 Company for the year ended on that date; and
 
 iii) in the case of the Cash Flow Statement, of the cash flows of the
 Company for the year ended on that date.
 
 i) a) The Company has maintained proper records showing full
 particulars, including quantitative details and situation of fixed
 assets.
 
 b) As explained to us, the fixed assets have been physically verified
 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 verification.
 
 c) The fixed assets disposed off during the year do not constitute a
 substantial part of the fixed assets, and therefore, there is no affect
 on the going concern status of the Company.
 
 ii) a) As explained to us, the management has conducted physical
 verification 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 verification is reasonable.
 
 b) The procedures of physical verification 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
 verification.
 
 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, firms 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, fixed 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 five 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 Company''s 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 its 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, 2012 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, 2012 are as follows:
 
 Name of the               Amount   Period to which    Forum where the
              Nature of 
              dues                  the amount         
 statute                  (Rs. In 
                           Lakhs)                      dispute is
                                                       pending
                                    relates
 
 APGST Act, 
 1957         Sales tax     67.52*   2002-03           Sales Tax 
                                                       Appellate 
                                                       Tribunal, A.P.
                            40.51*   1999-00             -do- 
 
                           259.59*   1999-00             -do-
 
 Central
 Sales Tax    Sales tax    158.70*   2000-01           Sales Tax
                                                       Appellate
                                                       Tribunal, A.P.
 Act, 1956
 
 Income tax 
 Act,         Income tax    10.87    2003-04           A.P. High Court
 1961                        1.85    2004-05              -do-
 
 Central 
 Excise       Central 
              Excise &       8.26    2007-08           CESTAT, Bangalore.
 Act,1944     Interest
 
 * Stay of collection granted for the demands.
 
 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. The Company did not have outstanding
 dues to 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
 benefit 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 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 flow 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 any 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
 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
 
                                             K.R. Bapuji
 
 Place: Chennai                                Partner
 
 Date: 27th April, 2012                   Membership No. 021169