1.  We have audited the attached Balance Sheet of MODERN INSULATORS
 LIMITED as at 31 st March'' 2012'' the Statement of Profit and Loss and
 Cash Flow Statement of the Company for the year ended on that date
 annexed hereto. 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 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 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 Companies (Auditor''s Report) Order'' 2003 as amended
 by Companies (Auditor''s Report) (Amendment) Order'' 2004'' issued by the
 Central Government of India in terms of Section 227 (4A) of the
 Companies Act'' 1956'' we give in the annexure 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:
 
 (i) 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.
 
 (ii) 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.
 
 (iii) The Balance Sheet'' Statement of Profit and Loss and Cash Flow
 Statement dealt with by this report are in agreement with the books of
 account.
 
 (iv) In our opinion'' the Balance Sheet'' Statement of Profit and Loss
 and Cash Flow Statement dealt with by this report'' comply with the
 applicable Accounting Standards referred to in sub-section (3C) of
 section 211 of the Companies Act'' 1956.
 
 (v) (a) Balances of Trade Receivables and Trade Payables are subject to
 reconciliations/confirmations. (NoteNos.  8&14)
 
 (b) The Company has not received information from vendors regarding
 their status under the Micro'' Small and Medium Enterprises Development
 Act 2006 and hence disclosure relating to amounts unpaid as at the year
 end together with interest paid/payable under this Act have not been
 given. (Note No.8)
 
 (c) Provisionfor taxation (including interest etc.)estimated at f
 680.16 lacs for current year (upto the year Rs. 4640.13 lacs) has not
 been made and Debenture Redemption Reserve amounting to f 5.80 lacs has
 not been created'' in view of proposed amalgamation proceedings awaiting
 approvals. Meanwhile Income Tax Department has completed assessment for
 Assessment Years 2008-09 & 2009-10 and demand of Rs. 1611.16 lacs has
 been raised in respect of disallowance of losses pertaining to proposed
 amalgamation pending approval from concerned authorities. However'' the
 Company filed appeals against the said demand and CIT (Appeals) has
 directed the Assessing Officer to make substantive assessment order
 (allowing losses pertaining to proposed amalgamation) as well as
 protective assessment order (presuming that no amalgamation had taken
 place) and further held that in case if the amalgamation scheme is not
 sanctioned then the protective assessment order shall prevail over the
 substantive order. Order of Assessing Officer giving appeal effect is
 awaited. (Note No.29)
 
 (vi) On the basis of written representations received from the
 directors as on 31st March'' 2012 and taken on record by the Board of
 Directors'' none of the directors is disqualified as on 31 st March''
 2012 from being appointed as a director in terms of clause (g) of
 sub-section (1) of section 274 of Companies Act'' 1956.
 
 (vii) 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 significant Accounting Policies'' notes thereon and subject to our
 comments in para (v) above'' 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 Balance Sheet'' of the state of affairs of the
 Company as at 31st March'' 2012.
 
 (b) In the case of Statement of Profit and Loss of the profit of the
 Company for the year ended on that date.
 
 (c) In the case of Cash Flow Statement'' of the cash flows for the year
 ended on that date.
 
 ANNEXURE FORMING PART OF THE AUDITORS'' REPORT
 
 Referred to in the report of even date of the Auditors to members of
 MODERN INSULATORS LIMITED.
 
 (i) (a) The company has maintained proper records showing full
 particulars including quantitative details and situation of fixed
 assets except furniture & fixtures for which detailed records are not
 maintained.
 
 (b) As per information and explanations given to us'' most of the fixed
 assets have been physically verified during the year by management in
 accordance with a phased programme of verification at reasonable
 intervals. According to the information and explanations given to us''
 no material discrepancies were noticed on such verification.
 
 (c) During the year'' the company has not disposed off substantial part
 of the fixed assets.
 
 (ii) (a) As explained to us'' the inventories have been physically
 verified during the year by the management. In our opinion'' the
 frequency of verification is reasonable.
 
 (b) According to the information and explanations given to us'' the
 procedures of physical verification of inventories followed by the
 management are reasonable and adequate in relation to the size of the
 company and the nature of its business.
 
 (c) On the basis of our examination of the records of inventory'' we are
 of the opinion that the company is maintaining proper records of
 inventories.  As explained to us'' the discrepancies noticed on physical
 verification between the physical stocks and the book records were not
 material.
 
 (iii) (a) The company had given loans to two subsidiaries. In respect
 of the said loans'' the maximum amount outstanding at any time during
 the year was Rs. 4500 lacs and the year end balance is Rs. 4200 lacs
 (Previous year Rs. 4750 lacs & Rs. 4500 lacs respectively). The said loans
 are without interest and principal amounts are repayable on demand.
 
 (b) The company has given interest-free loan/advance ofRs. 2245.15 lacs
 to a company covered under section 301 of Companies Act'' 1956 in view
 of proposed amalgamation awaiting approvals. Maximum amount outstanding
 during the year was Rs. 2245.15 lacs and the year end balance was X
 2245.15 lacs (previous period Rs. 1945.61 lacs & Rs. 1945.61 lacs
 respectively).
 
 (c) 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 Act. Accordingly'' the provisions of clauses
 4(iii)(f) and 4(iii)(g) of the Order are not applicable.
 
 (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 the nature of its
 business for purchases of inventory'' fixed assets and for the sale of
 goods. During the course of our audit'' we have not observed any major
 weakness in internal controls.
 
 (v) (a) Based on audit procedures applied by us and according to the
 information and explanations given to us'' the particulars of contracts
 or arrangements referred to in section 301 of the Act 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'' there are no transactions made in pursuance of such contracts or
 arrangements'' referred to in section 301 of Companies Act 1956''
 exceeding Rupees Five lacs in respect of each party during the year.
 
 (vi) The Company has not accepted any deposits from the public during
 the year.
 
 (vii) In our opinion'' the internal audit carried out during the year
 commensurates with the size of the company and the nature of its
 business.
 
 (viii) We have broadly reviewed the cost records maintained by the
 Company pursuant the Companies (Cost Accounting Records) Rules'' 2011
 prescribed by the Central Government .under Section 209(1 )(d) of the
 Companies Act'' 1956 and are of the opinion that prima facie the
 prescribed cost records have been maintained. We have'' however'' not
 made a detailed examination of the cost records with a view to
 determine whether they are accurate or complete.
 
 (ix) (a) According to the records of the company'' the company is
 regular in depositing with appropriate authorities undisputed statutory
 dues including provident fund'' investor education and protection fund''
 employees'' state insurance'' service tax'' sales tax'' wealth tax'' custom
 duty'' excise duty and other statutory dues applicable to it and no
 undisputed statutory dues as noted above is outstanding for a period of
 more than six months from the date it became payable. The company has
 not paid/provided income tax (refer clause 4(v)(c) of Auditors''
 Report).
 
 (b) According to the information and explanations given to us and the
 records of the Company examined by us'' the particulars of dues of
 Income tax'' sales tax'' excise duty and cess etc. as at 31 st March''
 2012 which have not been deposited on account of dispute'' are as
 follows
 
 Name of the 
 Statute                  Nature of
                          dues              Amount 
                                           (Rs.in lacs)
 
 Central Sales Tax Act    CSTand VAT          314.66
 1956 and RV Act 2003
 
                                              133.28
 
                                                9.42
 
 Income Tax Act 1961      Income Tax         1611.16
 
 Central Excise Act       Excise Duty &        72.34
 
 1944 Service Tax
 
                                               16.91
 
                                               69.47
 
 Name                   Period to            Forum where
                        which the            the dispute is
                        amount               pending
                        relates
 
 Central Sales 
 Tax Act                2007-08              Rajasthan Tax 
                                             Board'' Ajmer
 
                        2008-09              Deputy Commissioner
                                             Commercial Taxes
                                            (Appeals)'' Jodhpur
 
                        2009-10              Assistant Commissioner 
                                             Commercial Taxes. Pali
 
 Income Tax Act 1961    2007-08 &            Deputy Commissioner 
                        2008-09             (1. Tax)'' Jaipur
                                             Various Central 
                                             Excise and
                                             years from Service
                                             Tax Appellate
 
                        2003-04              Tribunal. Delhi
                        to 2010-11
 
 Central Excise Act     2009-10 &            Commissioner Central 
                        2010-11              Excise (Appeals)''
                                             Jaipur 
                        2009-10 &            Additional
 
                        2010-11              Commissioner''
 
                                             Central Excise'' Jaipur / 
                                             Deputy Commissioner
                                             Central Excise'' Jodhpur
 
 (x) The Company does not have accumulated losses as at the end of the
 financial year and it has not incurred any cash losses during the
 financial year covered by our audit and the immediately preceding
 financial year.
 
 (xi) Based on our audit and as per information and explanations given
 by the management'' there has been no default in repayment of dues to
 any financial institution or bank or debenture holders during the year.
 
 (xii) Basedonour examination of books of account and information and
 explanations given to us'' the company has not granted loans and
 advances on the basis of security by way of pledge of shares''
 debentures and other securities.
 
 (xiii) The provisions of any special statutes applicable to chit fund''
 nidhi or mutual benefit fund/society are not applicable to the company.
 
 (xiv) The Company is not dealing or trading in shares'' securities''
 debentures and other investments and hence requirement of para 4(xiv)
 is not applicable.
 
 (xv) As per information and explanations given to us'' the Company has
 not given any guarantee for loans taken by otiiers from bank or
 financial institutions.
 
 (xvi) On the basis of records examined by us'' we have to state that the
 company has prima facie'' applied the term loan for the purpose for
 which it was obtained .
 
 (xvii) According to the information and explanations given to us and on
 an overall examination of the balance sheet of the company'' we report
 that no funds raised on short-term basis have been used for long-term
 investment
 
 (xviii) No allotment of shares has been made by the company during the
 year.
 
 (xix) The company has not issued any debenture during the year covered
 by audit.
 
 (xx) During the year the company has not raised any money by way of
 public issue.
 
 (xxi) Based upon the audit procedures performed and information and
 explanations given by the management'' no fraud on or by the company has
 been noticed or reported during the year.
 
                                      For S.S. KOTHARI & CO.
  
                                      Chartered Accountants 
 
                                     (Firm Registration No. 001064C)
 
                                     (B.L.VERMA)
 
 Place : Jaipur                       PARTNER
 
 Date : 30th June'' 2012              (Membership No. 10900)