1.  We have audited the attached Balance Sheet of MERCATOR LINES
 LIMITED as at March 31, 2011, the related profit and Loss Account and
 the Cash Flow Statement of the Company 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 auditing standards
 generally accepted in India. These Standards require that we plan and
 perform the audit to obtain reasonable assurance about whether the
 financial statements are free of material misstatements. An audit
 includes examining, on a test basis, evidence supporting the amounts
 and disclosures in financial statements. An audit also includes
 assessing the accounting principles used and signifcant 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, issued
 by the Central Government in terms of Section 227(4A) of the Companies
 Act, 1956, and on the basis of such checks as considered appropriate
 and according to the information and explanations given to us during
 the course of the audit, we enclose in the Annexure 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 above
 paragraph, 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 the
 books of the Company;
 
 c) The Balance Sheet, profit and Loss Account and the Cash Flow
 Statement dealt with by the report are in agreement with the books of
 account of the Company;
 
 d) In our opinion, the Balance Sheet, profit and Loss Account and the
 Cash Flow Statement comply with the mandatory Accounting Standards
 referred to in Section 211 (3C) of the Companies Act, 1956.
 
 e) On the basis of written representations received from the directors
 of the Company as on March 31, 2011, and taken on record by the Board
 of Directors, we report that none of the directors is disqualified as on
 March 31, 2011, from being appointed as a director in terms of Section
 274(1) (g) 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
 Notes to Accounts in Schedule ''I'', 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:
 
 a.  In the case of the Balance Sheet, of the state of affairs of the
 Company as at March 31, 2011;
 
 b.  In the case of the profit and Loss Account, of the loss for the year
 ended on that date,
 
 c.  In the case of the Cash Flow Statement, of the cash fows of the
 Company for the year ended on that date.
 
 Statement referred to in paragraph 3 of the Auditors'' Report of even
 date to the Members of MERCATOR LINES LIMITED on the accounts for the
 year ended March 31, 2011.
 
 On the basis of such checks as considered appropriate and in terms of
 the information and explanations given to us, we state as under:
 
 1(a) The company has maintained proper records showing full particulars
 including quantitative details and situation of the fxed assets.
 
 1(b) As explained to us, the management at reasonable intervals carries
 out the physical verification of the fxed assets.  The discrepancies
 noticed on such verification, which were not material, have been
 appropriately dealt with in the accounts.
 
 1(c) According to the information and explanations given by the
 management and on the basis of audit procedures performed by us, we are
 of the opinion that the disposal of fxed assets has not affected the
 going concern of the company.
 
 2(a) As explained to us, the inventories of bunker and lube have been
 physically verified during the year by the management.  In our opinion,
 having regard to the nature and location of stocks, the frequency of
 the physical verification is reasonable.
 
 2(b) In our opinion and according to the information and explanations
 given to us, the procedures of physical verification of the above
 mentioned inventory followed by the management are reasonable and
 adequate in relation to the size of the Company and the nature of its
 business.
 
 2(c) In our opinion, the Company is maintaining proper records of
 inventory and no material discrepancies were noticed on physical
 verification.
 
 3(a) As per the information and explanations given to us, the Company
 has not granted any loans, secured or unsecured, to companies, frms or
 other parties covered in the register maintained under section 301 of
 the Companies Act, 1956.  Hence, provisions of clauses 3(b), 3(c), 3(d)
 are not applicable to the company.
 
 3(e) As per the information and explanations given to us, the Company
 has not taken any loans, secured or unsecured, from Companies, frms or
 other parties covered in the register maintained under section 301 of
 the Companies Act, 1956. Hence, provisions of Clauses 3(f) and 3(g) are
 not applicable to the company.
 
 4. In our opinion and as explained to us, there are adequate internal
 control procedures commensurate with the size of the Company and the
 nature of its business with regard to purchase of inventory and fxed
 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 and there is no continuing failure for the same.
 
 5(a) As per information and explanations given by the management and
 based on the audit procedures applied by us, during the year the
 company has not entered into any contracts or arrangements referred to
 in section 301 of the Act.  Hence, clauses 5(a) and 5(b) are not
 applicable to the company
 
 6.  The Company has not accepted any deposits from public during the
 year.
 
 7.  In our opinion, the Company has an internal audit system
 commensurate with the size of the Company and the nature of its
 business.
 
 8.  The maintenance of cost records has not been prescribed by the
 Central Government under section 209 (1) (d) of the Companies act,
 1956.
 
 9(a) According to the information and explanations given to us and the
 records examined by us, the Company is regular in depositing with
 appropriate authorities undisputed statutory dues including provident
 fund, investor education and protection fund, employees'' state
 insurance, income-tax, sales-tax, wealth-tax, service tax, custom duty,
 excise-duty, cess and other statutory dues and there are no undisputed
 statutory dues outstanding as at March 31, 2011, for a period of more
 than six months from the date they became payable.
 
 9(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 are as under:
 
 Name of the Statute Nature of the dues     Amounth  Year/s to which the
                                            (Rs. In 
                                              lakhs)      amount relates
 
 Service Tax under   Service Tax           6,809.00   2006-07 to 2009-10
 Finance Act, 1994
 
 Income Tax          Income Tax              597.47         2006-07
 
                                              47.67         2002-03
 
 Name of the Statute         Forum where dispute is pending
 
 Service Tax under
 Finance Act, 1994            Commissioner of Service tax
 
 Income Tax                   Commissioner of
                              Income tax(Appeals)
 
 (Also refer Notes 3 and 4 of Schedule I)
 
 10.  The company does not have any accumulated losses as on March 31,
 2011 and has not incurred any cash losses during the financial year and
 in the immediately preceding financial year.
 
 11.  Based on the information and explanations given to us, the Company
 has not defaulted in repayment of any dues to financial institutions,
 banks or debenture holders.
 
 12.  Based on our examination of the records and as explained to us,
 the Company has not granted any loans and/or advances on the basis of
 security byway of pledge of shares, debentures and other securities.
 
 13.  In our opinion, the company is not a chit fund, nidhi/mutual
 beneft fund/society The provisions of clause 4(xiii) are therefore not
 applicable to the company.
 
 14.  According to the information and explanations given to us, the
 Company has during the year not dealing or trading in shares,
 securities, debentures and other investments. All shares, debentures
 and other investments are held by the company in its own name
 
 15.  According to the information and explanations given to us, the
 terms and conditions on which the Company has given guarantees for
 loans taken by subsidiaries from banks and financial institutions are,
 considering the long term involvement of the company in these entities,
 not prejudicial to the interests of the company.
 
 16.  According to the information and explanation given to us, term
 loans raised during the year were applied for the purpose for which the
 loans were obtained.
 
 17.  As explained to us and on an overall examination of the balance
 sheet of the Company, in our opinion there are no funds raised on
 short-term basis which have been used for long-term investment by the
 Company.
 
 18.  According to the information and explanation given to us, the
 Company has made preferential allotment of shares/ warrants to parties
 covered in the register maintained under section 301 of the Companies
 Act, 1956 at prices not prejudicial to the interests of the company.
 
 19.  During the period covered by our audit, the company has not issued
 any Secured Debentures.
 
 20.  The Company has not raised any money by public issues during the
 period covered by our report.
 
 21.  Based upon the audit procedures performed for the purpose of
 reporting the true and fair view of the financial statements and as per
 the information and explanations given by the management, we report
 that no fraud on or by the company has been noticed or reported during
 the course of our audit.
 
 For and on behalf of 
 
 Contractor Nayak & Kishnadwala
 
 Chartered Accountants
 
 Firm Registration No 101961W
 
 Himanshu Kishnadwala
 
 Partner,
 
 Membership No 37391
 
 Mumbai
 
 May 28, 2011