Madras Cements

1.  We have audited the attached Balance Sheet of Madras Cements
 Ltd., Rajapalayam as at 31st March, 2009, the Profit and Loss
 account 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.
 
 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 (Auditor’s Report) Order, 2003,
 as amended by the Companies (Auditor’s Report) (Amendment) Order
 2004, issued by the Central Government of India in terms of
 sub-section (4A) of section 227 of the Companies Act, 1956, we
 have annexed hereto a statement on the matters specified in
 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 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 sub-section (3C) of
 section 211 of the Companies Act, 1956;
 
 e) As per representations made by the Company and its Directors,
 no Director is disqualified 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
 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, 2009;
 
 ii.  in the case of the Profit and Loss Account, of the profit
 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.
 
 ANNEXURE TO THE AUDITORS’ REPORT
 
 With reference to paragraph 3 of our report to the shareholders
 of Madras Cements Ltd. of even date, in our opinion and to the
 best of our knowledge and belief and as per the information and
 explanations given to us and on the basis of the books and
 records examined by us in the normal course of audit, we report
 that:
 
 i a The Company has maintained proper records showing full
 particulars including quantitative details and situation of
 fixed assets.  b The management at reasonable intervals has
 physically verified the fixed assets of the company and no
 
 material discrepancies were noticed on such verification.  c The
 fixed assets disposed during the year were not substantial and
 therefore the going concern status of the company has not been
 affected.  ii a The management has conducted physical
 verification at reasonable intervals in respect of its
 inventory.
 
 b The procedure of physical verification of inventory followed
 by the management is 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. The discrepancies noticed on verification between the
 physical stocks and the book records were not material.
 
 iii a The company has granted loans aggregating to Rs.40 crores
 (maximum outstanding at any time during the year Rs.40 crores,
 outstanding as on 31-Mar-2009 – Rs.30 crores) to 4 parties
 listed in the register maintained under section 301 of the
 Companies Act, 1956.
 
 b The rate of interest and other terms and conditions of loans
 given by the company are not, prima facie,
 
 prejudicial to the interest of the company.  c The payment of
 the principal amounts and the interest wherever applicable are
 regular.  d There is no overdue amount with respect to above
 loans.  e The company has taken loans aggregating to Rs. 5.69
 crores (maximum outstanding at any time during the
 
 year Rs. 5.69 crores, outstanding as on 31-Mar-2009 - Rs 0.11
 crores) from 1 party listed in the register
 
 maintained under section 301 of the Companies Act, 1956.  f The
 rate of interest and other terms and conditions of the loans
 taken by the company are not, prima facie,
 
 prejudicial to the interest of the company.
 
 g The loans given/taken by the company are repayable on demand
 and have been received/paid on demand.
 
 iv The company has an internal control system which is adequate
 and is 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
 
 and services. There are no major weaknesses in internal control
 system.  v a Particulars of contracts or arrangements referred
 to in Section 301 of the Companies Act, 1956 have been so
 
 entered in the register required to be maintained under that
 section.  b These transactions have been made at prices which
 are reasonable having regard to the prevailing market
 
 prices at the relevant time.
 
 vi The company has accepted deposits from the public and the
 directives issued by the Reserve Bank of India
 
 and the provisions of section 58A and 58AA or any other relevant
 provisions of the Act and the rules framed there under where
 applicable have been complied with.
 
 vii The company has an internal audit system commensurate with
 its size and nature of its business.
 
 viii The cost accounts and the records prescribed by the Central
 Government under clause (d) of sub-section (1)
 
 of section 209 of the Companies Act, 1956 have been made and
 maintained.
 
 ix a The company is regular in depositing 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
 statutory dues with the appropriate authorities.
 
 b The disputed statutory dues aggregating to Rs 106 crores that
 have not been deposited on account of matters pending before
 appropriate authorities are as under :
 
  Sl.  Name of the statute   where dispute is pending   Amount
  No.                Forum                           (Rs. in crores)
 
 1        Sales Tax Act       Assessing Authority             0.12
                              Assistant Commissioner, Appeals 5.09
                              Appellate Tribunal              2.53
                              High Court                      0.89
 
 2        VAT Act             Appellate Tribunal              1.32
                              High Court                      0.21
 
 3        Central Excise Act 
     and CENVAT Credit Rules  Assistant/Additional 
                                      Commissioner            3.54
                              Commissioner Appeals            4.48
                                Appellate Tribunal           79.31
                                        High Court            0.19
                                     Supreme Court            0.02
 
 4            Service Tax   Assistant Commissioner, 
                                      Adjudication            0.20
                             Commissioner, Appeals            1.46
                                Appellate Tribunal            6.64
                                             Total          106.00
 
 x The Company has no accumulated losses and has not incurred any
 cash losses during the financial year covered by our audit or in
 the immediately preceding financial year.  
 
 xiThe Company has not defaulted in repayment of dues to financial
 institutions, banks or debenture holders.  xii TheCompany has not
 granted any loans or advances on the basis of security by way of pledge
 of shares, debentures and other securities.  xiii The company is not a
 chit fund or a nidhi/mutual benefit fund/society. Therefore, the
 provisions of clause 4 (xiii) ofthe Companies (Auditor’s Report) Order,
 2003 are not applicable to the company.  xiv The company is not dealing
 or trading in shares, securities, debentures and other investments.
 Therefore, the provisions of clause 4(xiv) of the Companies (Auditor’s
 Report) Order, 2003 are not applicable to the company.  xv The terms
 and conditions of the guarantee given by the Company for loans taken by
 others from banks or financial institutions are not prima facie
 prejudicial to the interests of the company.  xvi The Company has
 raised new term loans during the year and these have been applied for
 the purposes for which they were raised.  xvii The funds raised on
 short-term basis have not been used for long-term investment.  xviii
 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.  xix The company has no outstanding
 amount under Debentures that require creation of security/charge.  xx
 The company has not raised any money by way of public issues during the
 year.
 
 xxi No fraud on or by the company has been noticed or reported
 during the year.
 
     For M.S.JAGANNATHAN & N. KRISHNASWAMI       For CNGSN & ASSOCIATES
                     Chartered Accountants        Chartered Accountants
                           
                               P.SANTHANAM               C.N.GANGADARAN
                                   Partner                      Partner
                      Membership No. 18697         Membership No. 11205
 
 Chennai 29-5-2009