We have audited the attached Balance Sheet of MARDIA STEEL LIMITED, as
 at 31st March, 2002 and also the Profit and Loss Account for the year
 ended on that date annexed thereto which are in agreement with the
 books of account 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.
 
 We 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 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.
 
 As required by the Manufacturing and Other Companies (Auditors
 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 as we considered appropriate and in terms
 of the information and explanations given to us during the course of
 our audit, we enclose in the Annexure a statement on the matters
 specified in paragraphs 4 and 5 of the said Order Further to our
 comments in the Annexure referred to above, we report that
 
 1 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;
 
 2 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 such
 books;
 
 3 In our opinion, the Balance Sheet and Profit and Loss Account dealt
 with by this report comply with the accounting standards referred to
 in sub-section (3C) of section 211 of the Companies Act, 1956 to the
 extent applicable ;
 
 4 All the Directors (other than nominee Directors) are disqualified
 from being appointed as a director in terms of clause (g) of
 sub-section (1) of Section 274 of the Companies Act, 1956;
 
 5 In our opinion and to the best of our information and according to
 the explanations given to us and subject to
 
 a) the Company has prepared its accounts on the basis of going concern
 but in the reference made by the Company under the Sick Industrial
 Companies (Special Provisions) Act, 1985 (the Act) the Board for
 Industrial and Financial Reconstruction vide their proceedings dated
 23/4/2002 has expressed their opinion that the Company should be wound
 up u/s. 20(1) of the Act;
 
 b) the Company has neither made provision nor has ascertained
 diminution in value of stagnant and unpersuied capital work in
 progress since last 5 years, having balance at Rs. 11,163.29 lacs on
 balance sheet date, as a result of which the Capital Work- In-
 Progress is overstated and losses are understated to the extent of
 such diminution the precise amount of which couldnt be ascertained;
 
 c) the Note No.3 in Schedule 14 for not providing depreciation for
 the year at Rs. 515.17 lacs, and total till the date of balance sheet
 at Rs. 2,376.35 lacs, as a result of which loss for the year are
 understated and fixed, assets have been overstated by the respective
 amount Similarly total depreciation and balance of profit & loss
 account representing losses are also understated by Rs. 2,376.35 lacs;
 
 d) the Note No 4 in Schedule 14 for not providing the interest for
 the year at Rs. 8,564.06 lacs and total till the date of balance sheet
 at Rs. 26,180.85 lacs, as result of which loss for year are
 understated and also loans shown in the balance sheet are understated
 by the respective amount,
 
 e) the Company has not provided for doubtful debts at Rs 83.25 lacs,
 advances to suppliers at Rs. 63.92 lacs, unabsorbed excise MODVAT /
 cenvat claim at Rs. 277.09 lacs, and income tax payments at Rs. 99.42
 lacs where either the claim of the Company is old or because of
 suspension of production operations it is not likely to be realised,
 as a result of which losses for the year are understated and these
 current assets are overstated by the respective amount, the said
 accounts read together with the Note No. 7, 13 & 14 in Schedule 14
 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 the Balance Sheet, of the state of affairs of the
 Company as at 31st March, 2002, and
 
 (ii) in the case of the Profit and Loss Account, of the loss for the
 year ended on that date
 
 Annexure referred to in the Auditors Report of even date on the
 accounts for the year ended March 31st, 2002 of MARDIA STEEL LIMITED.
 
 (i) The company has maintained proper records showing full
 particulars, including quantitative details and situation of its fixed
 assets. As explained to us the assets have been physically verified by
 the Management in a phased programme at reasonable intervals According
 to the information and explanations given to us, no material
 discrepancies have been noticed on such verification as compared to
 book records.
 
 (ii) The fixed assets of the company have not been revalued during the
 year.
 
 (iii) As explained to us, the stock of finished goods, stores, spare
 parts and raw materials of the company have been physically verified
 by the management during the year.
 
 (iv) the procedures which are followed by the management for physical
 verification of the stocks as explained to us, are, in our opinion,
 reasonable and adequate in relation to the size of the company and the
 nature of its business
 
 (v) Discrepancies between physical stock and book stock, as noticed by
 the management and informed to us were not material and the same have
 been properly dealt within the books of account
 
 (vi) On the basis of the examination of the stock records, we are of
 the opinion that the valuation of the stocks is fair and proper in
 accordance with the normally accepted accounting principles and is on
 the same basis as in the preceding year
 
 (Vii) In our opinion, the rate of interest and other terms and
 conditions on which loans have been taken from companies firm or other
 parities listed in the register maintained under section 301 of the
 Companies Act, 1956 wherever so agreed, are not, prima facie,
 prejudicial to the interest of the company. In terms of Section 370(6)
 of the Companies Act, 1956 provisions of the said section are not
 applicable to a company on or after 31st October, 1998
 
 (viii) As informed to us. company has not granted any loans to
 companies, firms or other parties listed in the register maintained
 under section 301 of the Companies Act, 1956
 
 (ix) As informed to us. the parties to whom loans and/or advances in
 the nature of loan have been given by the company, are repaying the
 principal amount as stipulated and are also regular in payment of
 interest wherever so stipulated, except doubtful and stagnant advances
 amounting to Rs. 63.92 lacs is stagnant in nature
 
 (x) In our opinion and according to the information and explanations
 given to us, the internal control procedures are generally
 commensurate with the size of the company and the nature of its
 business for purchases of raw materials including components,
 equipments and other assets and for the safe of goods, however it
 should be further strengthened
 
 (xi) In our opinion and according to the information and explanations
 given to us, there are no transaction of purchases of goods and
 materials and sale of goods, materials and services made in pursuance
 of contracts or arrangements entered in the register maintained under
 section 301 of the Companies Act, 1956. as aggregating during the year
 to Rs. 50,000/- and more in respect of each party.
 
 (xii) As explained to us, unserviceable or damaged stores, raw
 materials and finished goods are determined by the company and
 adequate amounts have been written off of such stocks in the books of
 account
 
 (xiii) As informed to us, the company has not accepted any deposits
 from public within the meaning of section 58A of the Companies Act,
 1956.
 
 (xiv) As informed to us, there are no realisable by-products in the
 line of manufacturing done by the company and scrap arising in the
 process is reused as raw material of the product however, in case of
 sale of scrap reasonable records have been maintained
 
 (xv) According to the information and explanation given to us, the
 company has an internal audit system, however, the scope of it has to
 be enlarged commensurate with the size of the company and nature of
 its business.
 
 (xvi) As informed to us the Central Government has prescribed the
 maintenance of cost records under section 209(1)(d) of Companies Act,
 1956 for the product line of the company and the company has made and
 maintained the relevant cost records, however the same are not in full
 conformity with the prescribed records.
 
 (xvii) According to the information and explanations given to us, the
 company is regular in depositing Provident Fund and Employees State
 Insurance dues with the appropriate authorities.
 
 (xviii) According to the information and explanations given to us,
 there was no amount outstanding on March 31st 2002 in respect of
 undisputed Income tax, wealth tax, sales tax, custom duty and excise
 duty which were due for more than six months from the date they became
 payable, except sales tax payable Rs. 20.19 lacs
 
 (xix) During the course of our examination of the books of account,
 neither we have come across any personal expenses of directors or
 employees which have been charged to the profit & loss account, other
 than, those payable under contractual obligations, or in accordance
 with generally accepted business practices, nor we have been informed
 of such expenses by the management.
 
 (xx) In our opinion, the company is a sick industrial company within
 the meaning of section. 3(1)(O) of the Sick Industrial Companies
 (Special Provisions) Act, 1985, and reference in this regard to the
 Board of Industrial and Financial Reconstruction have been made.
 
 (xxi) As informed to us in respect of trading activities no damaged
 goods were found.
 
                                               For D.C. BOTHRA & COMPANY
                                                 CHARTERED ACCOUNTANTS
 
 Place: MUMBAI                                       (PAWAN BOTHRA)
 Date : 29 / 06 /2002.                                  Partner