We have audited the attached balance sheet of MALVIKA STEEL LIMITED as
 at 30th June, 2001 and also the Profit and Loss Account of the Company
 for the year ended on that date annexed thereto and report that:
 
 1. As required by the manufacturing and Other Companies (Auditor's
 Report) Order 1988, issued by the Company Law Board in terms of Section
 227(4A) of the Companies Act, 1956 and on the basis of such checks of
 books and records of the Company as were considered appropriate and the
 information and explanations given to us during the course of audit, we
 enclose in the Annexure, a statement on the matters specified in
 paragraph 4 and 5 of the said order.
 
 2. Further to our comments in the Annexure referred to in paragraph 1
 above: 
 
 a. Subject to non availability of books of account, and others records
 of Ghaziabad branch, investment scrips and non confirmation of balance
 of debtors, loans and advances as explained in Note No 14 & 6
 respectively of Schedule of P (Part-B) on notes on accounts, 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 appears from our examination of such
 books and proper returns adequate for the purpose of audit have been
 received from the branches, not visited by us except for as in para (a)
 above.
 
 c. In our opinion, the Profit and Loss Account and the Balance Sheet
 comply with the Accounting Standards referred to in sub-section (3C) of
 Section 211 of the Companies Act, 1956.
 
 d. The Balance Sheet and Profit and Loss Account dealt with by this
 report are in agreement with the books of account.
 
 e. On the basis of written representations received from the Directors
 as on 30th June, 2001 and taken on record by the Board of Directors, we
 report that none of the Directors is disqualified as on 30th June, 2001
 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, subject to (a)
 capitalization of expenses net of sales & other income and including
 interest on borrowing on blast furnaces as further explained in note
 no. 7(a) of Schedule P (Part-B) on Notes on Accounts and (b) non
 provision of rental charges Rs. 74592 thousand on equipment in bonded
 warehouse resulting decrease in Capital Work in Progress and current
 liabilities to that extent, gives the information required by the
 Companies Act, 1956 in the manner so required and give a true and fair
 view: 
 
 (i) in the case of Balance Sheet of the state of affairs of the Company
 as at 30th June, 2001 and
 
 (ii) in the case Profit and Loss Account, of the loss for the year
 ended on that date.
 
 ANNEXURE TO THE AUDITORS' REPORT
 
 (Annexure referred to in paragraph 1 of our Report of even date on the
 accounts of Malvika Steel Limited for the year ended on 30th June,
 2001. 
 
 1. The Company has maintained proper records showing full particulars,
 including quantitative details and situation of fixed assets. Physical
 verification of fixed assets was not carried out by the management
 during the year however, the physical verification was conducted in the
 previous year and after the date of balance sheet and having regard to
 the size of the company and nature of the assets non material
 discrepancy between the book records and the physical inventory was
 noticed. 
 
 2. None of the fixed assets of the Company has been revalued during the
 year.
 
 3. Physical verification of stocks have been conducted by the management
 during the year in respect of finished goods, stores, spare parts, and
 raw-materials and stock in transit.
 
 4. The discrepancies, if any between the physical stocks and book
 records were ascertained and have been properly dealt with in the books
 of account.
 
 5. The valuation of stocks of finished goods, stores and spare parts,
 raw materials is fair and proper and in accordance with normally
 accepted accounting principles and is on the same basis as in the
 previous year.
 
 6. The company has not taken any loans, secured or unsecured from
 companies, firms or other parties listed in the register maintained
 under section 301 of the Companies Act, 1956 and Companies under the
 same management as defined under sub section (1B) of Section 370 of the
 Companies Act, 1956.
 
 7. The Company has not granted any loans, secured or unsecured to the
 Companies, firms or other parties listed in the register maintained
 under section 301 and / or to the companies under the same management 
 as defined under sub section (1B) of Section 370 of the Companies Act,
 1956. 
 
 8. There is no Loans or Advances in the nature of Loans other than the
 staff advances given by the Company who are repaying the principal
 amounts as stipulated and are in general regular in payment of interest
 wherever applicable.
 
 9. There is an adequate Internal Control Procedure commensurate with
 the size of the Company and the nature of its business for the purchase
 of stores, raw materials including components, plant and machinery
 equipments and other assets and for the sale of goods.
 
 10. There is no transaction for purchase of goods and materials and
 sale of goods, material and services made in pursuant of contracts or
 arrangement entered in the register maintained under section 301 of the
 Companies Act, 1956 as aggregating during the year Rs. 50000 or more.
 
 11. On the basis of evaluation made by person responsible for custody of
 stocks, unserviceable and damaged stores, raw materials and finished
 goods have been determined by the company and necessary adjustments for
 loss have been made in accounts.
 
 12. The Company has not accepted any deposits during the year from
 public as per the provision of Section 58-A of the Companies Act, 1956
 read with the Companies (Acceptance of Deposits) Rules, 1975.
 
 13. In our opinion reasonable records have been maintained by the
 company for the sale and disposal of realisable scrap and by-products.
 
 14. In our opinion company has an internal audit system commensurate
 with the size and nature its business.
 
 15. Maintenance of Cost Records under Section 209(1)(d) of the
 Companies Act, 1956 has not been prescribed by the Central Government.
 
 16. The Company has been regular in depositing Provident Fund except
 for the months from April, 2001 to June, 2001 and Employees State
 Insurance dues with the appropriate authorities during the year.
 
 17. There were no undisputed amounts payable in respect of income tax
 wealth tax, sales tax, excise duty and customs duty outstanding as at
 the end of the financial year for a period of more than six months from
 the date they became payable.
 
 18. During the course of our examination of the books of accounts
 carried out in accordance with the generally accepted auditing
 practices and according to the information and explanations given to
 us, we have not come across any persona expense which have been charged
 to Profit and Loss Account other than those payable under contractual
 obligations or in accordance with prevailing business practices.
 
 19. The Company is not a sick industrial Company within the meaning of
 clause (O) of sub-section (1) of Section 3 of the Sick Industrial
 Companies (Special Provisions) Act, 1985.
 
 20. In case of trading activity, we were informed that there were no
 damaged goods.