Lanco Industries

1.  We have audited the attached Balance Sheet of Lanco Industries
 Limited as at 31st March, 2009, the Profit 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 issued
 by the Central Government of India in terms of Section 227(4 A) of the
 Companies Act, 1956 (hereinafter referred to as the said Order) 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 purposes 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, 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 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, 2009 and > taken on record by the
 Board of Directors, none of the Directors is disqualified as on 31st
 March, 2009 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 financial statements read
 together with the Significant Accounting Policies and other notes
 thereon, 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 Balance Sheet, of the state of affairs of the Company
 as at 31st March, 2009;
 
 ii) in the case of the Profit and Loss Account, of the Profit 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 AUDITORSREPORT
 
 Re: Lanco Industries Limited
 
 (Referred to in paragraph 3 of our report of even date)
 
 (i) (a) In our opinion, 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) No substantial part of the fixed assets of the Company has been
 disposed off during the year.
 
 (ii) (a) As explained to us, inventories were physically verified
 during the year by the management. In our opinion, the frequency of the
 said verification is reasonable.
 
 (b) In our opinion and according to the information and explanations
 given to us, 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 inventories.
 The discrepancies noticed on physical verification of inventories as
 compared to book records were not material.
 
 (iii) (a) According to the information and explanations given to us,
 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) In view of the above, reporting on items (b), (c) and (d) of clause
 (iii) of paragraph 4 of the Companies (Auditors Report) Order, 2003 is
 not applicable to the Company.
 
 (c) According to the information and explanations given to us, the
 Company has not taken any loans, secured or unsecured from companies,
 firms or other parties covered in the register maintained under section
 301 of the Companies Act, 1956.
 
 (d) In view of the above, reporting on items (f) and (g) of clause
 (iii) of paragraph 4 of the Companies (Auditors Report) Order, 2003 is
 not applicable to the Company.
 
 (iv) 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, 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 controls.
 
 (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, the transactions made in pursuance of contracts or
 arrangements referred to in v(a) above and exceeding the value of Rs. 5
 lakh with any party during the year have been made at the prices which
 are reasonable having regard to the prevailing market prices at the
 relevant time.
 
 (vi) The company has not accepted any deposits from public covered
 under Sections 58A, 58AA or any other relevant provision 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.
 
 (b) According to the information and explanations given to us, the
 disputed statutory dues that have not been deposited on account of
 disputed matters pending before appropriate authorities as at 31st
 March, 2009 are as follows:
 
 Name of the                    Nature of              Amount
 Statute                          dues               (Rs. in lakhs)
 
 Sales tax                                             97.61
 Central Sales Tax
                                  -do-                 75.53
 Act, 1956                        -do-                 60.61
   -do-                           -do-                 47.70
 APGST Act, 1957                  -do-                 67.52
 Central Excise Act,
 Central Excise Act,
 1944                                                  26.00
 Interest
 -do-                             -do-                 61.00
 -do-                             -do-                 17.00
 -do-                             -do-                 79.00
 
 Period to which                 Forum where the
 it relates                      dispute is pending
 
 1999-00
 2003-04                       Sales Tax Appellate Tribunal.
 2004-05
 2005-06                       Appellate Py. Commissioner (CT).,
 2002-03                       Sales Tax Appellate Tribunal.
 2005-06                       CESTAT, Bangalore.
 2004-05 &    
 2005-06                 
 2005-06                       Commissioner (Appeals).,
 2006-07 &
 2007-08
 
 (x) The Company does not have accumulated losses as at 31st March, 2009
 and has not incurred cash losses during the financial year ended on
 that date or in the 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 and according to the information and explanations
 given to us, the Company is not a chit fund or a nidhi / mutual benefit
 fund / society.
 
 (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.
 
 (xv) According to the information and explanations given to us, the
 Company has not given guarantees for loans taken by others from Banks
 and 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) According to the information and explanations given to us, the
 Company has created necessary securities in respect of secured
 debentures.
 
 (xx) The Company has not raised any money by way of public issue during
 the year.
 
 (xxi) According to the information and explanations given to us, during
 the year, no fraud on or by the Company has been noticed or reported.
 
                                                  For K.R. Bapuji & Co.
                                                  Chartered Accountants
                                                  K.R. Bapuji
 Place: Chennai                                   Partner
 Date : 27th April, 2009                          Membership No. 21169