We have audited the attached balance sheet of Morganite Crucible
 (India) Limited (''the Company'') as at 31 March 2011 and 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.
 
 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.
 
 1 As required by the Companies (Auditor''s Report) Order, 2003 (''the
 Order'') issued by the Central Government of India in terms of
 sub-section (4A) of Section 227 of the Companies Act, 1956 (''the Act''),
 we enclose in the Annexure a statement on the matters specified in
 paragraphs 4 and 5 of the said Order.
 
 2 Further to our comments in the Annexure referred to 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, the profit and loss account and the cash flow
 statement dealt with by this report are in agreement with the books of
 account;
 
 d) in our opinion, the balance sheet, the profit and loss account and
 the cash flow statement dealt with by this report comply with the
 Accounting Standards referred to in sub-section (3C) of Section 211 of
 the Act;
 
 e) on the basis of written representations received from the directors
 of the Company as on 31 March 2011, and taken on record by the Board of
 Directors, we report that none of the directors is disqualified as at
 31 March 2011 from being appointed as a director in terms of clause (g)
 of sub-section (1) of Section 274 of the Act; and
 
 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 Act 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 31 March 2011;
 
 (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 – 31 MARCH 2011
 
 REFERRED TO IN PARAGRAPH 3 OF AUDITORS'' REPORT OF EVEN DATE TO THE
 MEMBERS OF MORGANITE CRUCIBLE (INDIA) LIMITED ON THE FINANCIAL
 STATEMENTS FOR THE YEAR ENDED MARCH 31, 2011
 
 (i) (a) The Company has maintained proper records showing full
 particulars, including quantitative details and situation of fixed
 assets.
 
 (b) The Company has a regular programme of physical verification of its
 fixed assets by which all fixed assets are verified every year. In our
 opinion, this periodicity of physical verification is reasonable having
 regard to the size of the Company and the nature of its assets. No
 material discrepancies were noticed on such verification.
 
 (c) Fixed assets disposed off during the year were not substantial, and
 therefore, do not affect the going concern assumption.
 
 (ii) (a) The inventory, except goods in transit, has been physically
 verified by the management during the year. In our opinion, the
 frequency of such verification is reasonable.
 
 (b) The procedures for the 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) 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 not granted any loans, secured or unsecured,
 to companies, firms or other parties covered in the register maintained
 under Section 301 of the Act. Consequently, clauses 4(iii)(a) to
 4(iii)(d) of the Order are not applicable to the Company.
 
 (b) The Company has taken loan from a company covered in the register
 maintained under Section 301 of the Act. The maximum amount outstanding
 during the year was Rs.150,835,726 and the year-end balance of such
 loan was Rs.105,050,334.
 
 (c) In our opinion, the rate of interest and other terms and conditions
 on which loan has been taken from the company listed in the register
 maintained under Section 301 of the Act, are not, prima facie,
 prejudicial to the interest of the company.
 
 (d) In the case of loan taken from company listed in the register
 maintained under Section 301 of the Act, the company has been regular
 in repaying the principal amount as stipulated and in the payment of
 interest.
 
 (iv) In our opinion and according to the information and explanations
 given to us, and having regard to the explanation that purchases of
 certain items of inventories are for the Company''s specialised
 requirements and, similarly sale of certain goods, are for the buyer''s
 specialised requirements, and suitable alternative sources are not
 available to obtain comparable quotations, there is an adequate
 internal control system commensurate with the size of the Company and
 the nature of its business with regard to purchase of inventories and
 fixed assets and with regard to the sale of goods and services. We have
 not observed any major weakness in the internal control system during
 the course of the audit.
 
 (v) (a) In our opinion 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, except for purchases of certain items of inventories which
 are for the Company''s specialized requirements and sale of certain
 goods which are for the buyer''s specialised requirements, for which
 suitable alternative sources are not available, the transactions made
 in pursuance of contracts and arrangements referred to in (a) above and
 exceeding the value of Rs.5 lakh with any party during the year have
 been made at prices which are reasonable having regard to the
 prevailing prices at the relevant time. However, on the basis of
 information and explanation provided, the same appear to be reasonable.
 
 (vi) The Company has not accepted any deposits from the public.
 
 (vii) In our opinion, the Company has an internal audit system
 commensurate with the size and nature of its business.
 
 (viii) The Central Government has not prescribed the maintenance of
 cost records under Section 209(1)(d) of the Act for any of the products
 manufactured by the Company.
 
 (ix) (a) According to the information and explanations given to us and
 on the basis of our examination of the records of the Company, amounts
 deducted/accrued in the books of account in respect of undisputed
 statutory dues including Income-tax, Sales tax, Provident fund, Service
 tax, Customs duty, Excise duty, Value added tax, Employees State
 Insurance Corporation, Investor Education and Protection Fund and other
 material statutory dues have been generally regularly deposited during
 the year by the Company with the appropriate authorities. As explained
 to us, the Company did not have any dues on account of Wealth tax.
 
 There were no dues on account of Cess under Section 441A of the Act,
 since the date from which the aforesaid Section comes into force has
 not yet been notified by the Central Government.
 
 According to the information and explanations given to us, no
 undisputed amounts payable in respect of Income-tax, Sales tax,
 Provident fund, Service tax, Customs duty, Excise duty, Value added
 tax, Employees State Insurance Corporation, Investor Education and
 Protection Fund and other material statutory dues were in arrears as at
 31 March 2011 for a period of more than six months from the date they
 became payable.  (b) According to the information and explanations
 given to us, there are no dues of Income-tax, Sales tax, Service tax,
 Customs duty, Excise duty, Value added tax and Cess which have not been
 deposited with the appropriate authorities on account of any dispute.
 According to the information and explanations given to us, the dues of
 Employees State Insurance Corporation, as listed below have not been
 deposited by the Company on account of disputes:
 
 Name of the 
 statute       Nature of the 
               dues            Amount  Period to which Forum where 
                                                       dispute
                                (Rs)   the amount 
                                       relates         is pending
 
 Employees'' 
 State         Employees'' 
               state           52,498  October 2004 to Assistant  
                                                       Director,
 Insurance 
 Act, 1948    insurance                March 2005      Employees State
                                                       Insurance
                                                       Corporation,
                                                       Aurangabad
 
 (x) The Company does not have any accumulated losses at the end of the
 financial year and has not incurred cash losses in the financial year
 and in the immediately preceding financial year.
 
 (xi) In our opinion and according to the information and explanations
 given to us, the Company did not have any outstanding dues to any
 financial institution, banks or debentureholders during the year.
 
 (xii) According to the information and explanations given to us, the
 Company has not granted any loans and advances on the basis of security
 by way of pledge of shares, debentures and other securities.
 
 (xiii) In our opinion and according to information and explanations
 given to us, the Company is not a chit fund or a nidhi / mutual benefit
 fund / society.
 
 (xiv) According to the information and explanations given to us, the
 Company is not dealing or trading in shares, securities, debentures and
 other investments.
 
 (xv) According to the information and explanations given to us, the
 Company has not given any guarantee for loans taken by others from
 banks or financial institutions.
 
 (xvi) In our opinion and according to the information and explanations
 given to us, the term loans taken by the company have been applied for
 the purpose for which they were raised.
 
 (xvii) According to the information and explanations given to us and on
 an overall examination of the balance sheet of the Company, we are of
 the opinion that the funds raised on short-term basis have not been
 used for long-term investment.
 
 (xviii) In our opinion and according to the information and
 explanations given to us, the Company has not made any preferential
 allotment of shares to companies/firms/parties covered in the register
 maintained under Section 301 of the Act.
 
 (xix) In our opinion and according to the information and explanations
 given to us, the Company did not have any outstanding debentures during
 the year.
 
 (xx) In our opinion and according to the information and explanations
 given to us, the Company has not raised any money by public issues.
 
 (xxi) According to the information and explanations given to us, no
 fraud on or by the Company has been noticed or reported during the
 course of our audit.
 
                                        For B S R & Co.
 
                                        Chartered Accountants
 
                                        Firm''s Registration No: 101248W
 
                                        Vijay Mathur
 
 Mumbai                                 Partner
 
 25 May 2011                            Membership No: 046476