1.  We have audited the attached Balance Sheet of MSP Steel & Power
 Limited (''the Company'') as at 31st March, 2012 and also the Statement
 of Profit & Loss and the Cash Flow Statement 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. 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 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 the Companies (Auditor''s Report) Order, 2003 (as
 amended) issued by the Central Government of India in terms of
 sub-section (4A) of Section 227 of the Companies Act, 1956, we enclose
 in the Annexure a statement on the matters specified in paragraphs 4
 and 5 of the said Order.
 
 4.  Attention is drawn to the tax treatment regarding gain of Rs. 3,025
 lacs arisen on settlement of commodity transactions in the earlier
 year, settled otherwise than through actual delivery, which was in the
 nature of speculative income. However based on a legal opinion
 obtained, the same had been treated as income from normal business by
 the Company. Consequently, we are unable to comment on the income tax
 impact of these transactions in the financial statements.
 
 In respect of above matter, audit report for the year ended 31st March,
 2011 was similarly modified.
 
 5.  Further to our comments in the Annexure referred to 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 purposes 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 & Loss and Cash Flow
 Statement dealt with by this report are in agreement with the books of
 account;
 
 iv.  Except for the matter stated in para 4 above, in our opinion, the
 Balance Sheet, Statement of Profit and Loss and Cash Flow Statement
 dealt with by this report comply with the accounting standards referred
 to in sub-section (3C) of section 211 of the Companies Act, 1956;
 
 v.  On the basis of the written representations received from the
 Directors, as on 31st March, 2012, and taken on record by the Board of
 Directors, we report that none of the Directors is disqualified as on
 31st March, 2012 from being appointed as a Director in terms of clause
 (g) of sub-section (1) of section 274 of the Companies Act, 1956;
 
 vi.  Except for the possible effects of our observation in para 4
 above, 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 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 & Loss, of the profit for the
 year ended on that date; and
 
 c) in the case of Cash Flow Statement, of the cash flows for the year
 ended on that date.
 
 (i) (a) The Company has maintained proper records showing full
 particulars, including quantitative details and situation of fixed
 assets.
 
 (b) All fixed assets have not been physically verified by the
 management during the year but there is a regular programme of
 verification in a phased manner to cover all the items over a period of
 three years which, in our opinion, is reasonable having regard to the
 size of the Company and the nature of its assets. As informed, no
 material discrepancies were noticed on such verification.
 
 (c) There was no substantial disposal of fixed assets during the year.
 
 (ii) (a) The management has conducted physical verification of
 inventory at reasonable intervals during the year.
 
 (b) The procedures of physical verification of inventory 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 and as
 informed, no material discrepancies were noticed on physical
 verification.
 
 (iii) (a) The Company has granted loans to two companies covered in the
 register maintained under section 301 of the Companies Act, 1956. The
 maximum amount involved during the year was Rs. 957.14 lacs and the
 year-end balance of loans granted to such parties was Rs. 259.51 lacs.
 
 (b) In our opinion and according to the information and explanations
 given to us, the rate of interest and other terms and conditions for
 such loans are not prima facie prejudicial to the interest of the
 Company.
 
 (c) The above loans are stated to be repayable on demand. As informed,
 the repayment of above loans, to the extent demanded from the
 borrowers, during the year had been received by the Company and thus,
 there has been no default on the part of the borrower.  The payment of
 interest with respect to such loans is stated to have been regular.
 
 (d) In view of the above loans being repayable by the parties on
 demand, there is no overdue amount of loans granted to such parties.
 
 (e) The Company had taken loan from a company covered in the register
 maintained under section 301 of the Companies Act, 1956. The maximum
 amount involved during the year was Rs. 25.30 lacs and the year-end
 balance of loans taken from such company was Rs. 25.30 lacs.
 
 (f) In our opinion and according to the information and explanations
 given to us, the rate of interest and other terms and conditions for
 such loan is not prima facie prejudicial to the interest of the
 Company.
 
 (g) As informed, the loan taken and interest thereon is payable after
 one year, and thus, there has been no default on the part of the
 company in repayment of loan and interest.
 
 (iv) In our opinion and according to the information and explanations
 given to us, there is an adequate internal control system commensurate
 with the size of the Company and the nature of its business, for the
 purchase of inventory and fixed assets and for the sale of goods and
 services. During the course of our audit, we have not observed any
 major weakness or continuing failure to correct any major weakness in
 the internal control system of the company in respect of these areas.
 
 (v) (a) According to the information and explanations provided by the
 management, we are of the opinion that the particulars of contracts or
 arrangements referred to in Section 301 of the Companies Act, 1956 that
 need to be entered in the register maintained under that section, have
 been so entered.
 
 (b) In our opinion and according to the information and explanations
 given to us, the transactions made in pursuance of such contracts or
 arrangements exceeding the value of Rupees five lacs during the year
 have been entered into at prices which are reasonable having regard to
 the prevailing market prices at the relevant time.
 
 (vi) The Company has not accepted any deposits from the public within
 the purview of Section 58A and 58AA of the Companies Act, 1956 and the
 rules framed thereunder.
 
 (vii) In our opinion, the Company has an internal audit system
 commensurate with the size and nature of its business.
 
 (viii) We have broadly reviewed the books of account maintained by the
 Company pursuant to the rules made by the Central Government for the
 maintenance of cost records in respect of the company''s products under
 section 209(1) (d) of the Companies Act, 1956, and are of the opinion
 that prima facie, the prescribed accounts and records have been
 maintained.
 
 (ix) (a) The Company has been generally regular in depositing
 undisputed statutory dues including provident fund, investor education
 and protection fund, income-tax, sales-tax, service tax, customs duty,
 excise duty, cess and other statutory dues with the appropriate
 authorities though there has been slight delay in some cases. During
 the year, there was no dues payable by the Company in respect of wealth
 tax.
 
 (b) According to the information and explanations given to us, the
 Company did not have any undisputed dues in respect of provident fund,
 investor education and protection fund, employees'' state insurance,
 income-tax, wealth-tax, service tax, sales-tax, customs duty, excise
 duty, cess and other statutory dues which were outstanding, at the
 yearend for a period of more than six months from the date they became
 payable except as follows:
 
 Name of the statute           Nature of the dues         Amount
                                                         (Rs. in lacs)
 
 Entry Tax Act                 Entry tax on                  319.10
 (Chhattisgarh), 1976          purchase of materials
 
 Name of the 
 Statute           Period to which the   Due Date      Date of Payment
                   amount relates
 
 Entry Tax Act     April''09-August''11    At the end    Not Yet Paid 
 (Chhattisgarh),                         of respective 
 1976                                    subsequent
                                         month
 
 (c) According to the records of the Company, dues outstanding in
 respect of income tax, sales tax, wealth-tax, service tax, custom duty,
 excise duty, cess etc. which has not been deposited on account of any
 dispute are as follows :
 
 Name of 
 Statute    Nature of
            Dues          Amount    Period to which   Forum where
                                                      dispute is
                         (Rs.in 
                          lacs)     amount relates    pending
 
 Central 
 Sales
 Tax Act,
 1956       Non 
            Collection 
            of ''C'' 
            Forms        105.57     2004-08           Appellate, Deputy
                                                      Commissioner,
                                                      Commercial Tax 
 
 West 
 Bengal 
 Value    
 Added      Dis
            allowance 
            of VAT
            credit        10.39     2007-08           Joint Commissioner
                                                      of
 Tax 
 Act, 2003                                            Sales tax, Kolkata
 
 Central 
 Excise 
 Act, 1944  Disputed  
            dis
            allowances 
            of           776.32     2003-11           CESTAT, New Delhi
            CENVAT 
            credit
 
 Central 
 Excise 
 Act, 1944  Disputed 
            dis
            allowances 
            of         1,872.86     2006-08           Additional
            CENVAT 
            credit                  2010-12           Commissioner 
                                                      central excise & 
                                                      customs
 
 Central 
 Excise 
 Act, 1944  Removal 
            of 
            Finished 
            Goods         87.22     2005-09           CESTAT, New Delhi
            without
            payment 
            of duty
 
 Central 
 Excise 
 Act, 1944  Removal 
            of 
            Finished 
            Goods         38.79     2006-08           Additional
            without
            payment 
            of duty                                   Commissioner
                                                      central excise & 
                                                      customs
 
 Central 
 Excise 
 Act, 1944  Sale of 
            iron ore 
            & coal
            fines         31.89     2009-10           CESTAT, New Delhi
            without 
            payment 
            of duty
 
 Central 
 Excise 
 Act, 1944  Sale of 
            iron ore 
            & coal 
            fines         15.88     2004-07           Commissioner
                                                      Appeals
            without
            payment 
            of duty                                   central excise &
                                                      customs
 
 Central 
 Excise 
 Act, 1944  Sale of 
            iron ore 
            & coal 
            fines        278.71     2004-11           Additional
            without 
            payment 
            of duty                                   Commissioner 
                                                      central excise & 
                                                      customs
 
 Central 
 Excise 
 Act, 1944  Sale of 
            Electricity 
            without      131.90     2005-09           CESTAT, New Delhi
            payment 
            of duty 
 
 Central 
 Excise 
 Act, 1944  Sale of 
            Electricity 
            without       79.84     2010-11           Additional
            payment of 
            duty                                      Commissioner
                                                      central excise &
                                                      customs
 
 Service 
 Tax under 
 Finance    Disputed 
            dis
            allowances 
            of             5.28     2005-06           Additional
 Act, 1994  input
            service 
            tax credit                                Commissioner, 
                                                      Service Tax
 
 Income 
 tax Act, 
 1961       Tax on 
            disputed     121.90     2004-11           Assistant 
                                                      Commissioner
            dis
            allowances                                Income Tax
 
 (x) The Company has no accumulated losses at the end of the financial
 year and it has not incurred any cash losses in the current and
 immediately preceding financial year.
 
 (xi) Based on our audit procedures and as per the information and
 explanations given by the management, we are of the opinion that the
 Company has not defaulted in repayment of dues to financial
 institutions or banks.  The Company did not have any outstanding
 debentures during the year.
 
 (xii) According to the information and explanations given to us and
 based on the documents and records produced 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) In our opinion, the Company is not a chit fund or a nidhi /
 mutual benefit fund / society and therefore, the provisions of clause
 4(xiii) of the Order are not applicable.
 
 (xiv) In our opinion, the Company is not dealing or trading in shares,
 securities, debentures and other investments.  Accordingly, the
 provisions of clause 4(xiv) of the Order are not applicable.
 
 (xv) According to the information and explanations given to us, the
 Company has given guarantee of Rs. 8160.75 lacs for loan taken by a
 subsidiary from a bank and onward guarantee given by a joint venture
 company to Ministry of Coal, the terms and conditions whereof, in our
 opinion, based on the management representation, are not prima-facie
 prejudicial to the interest of the Company.
 
 (xvi) Based on the information and explanations given to us by the
 management, term loans were applied for the purpose for which these
 were 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 short term funds amounting to Rs. 11,276.41 lacs consisting of
 project creditors Rs. 5,061.98, unsecured loans Rs. 3,945.42 and other
 short term borrowings Rs. 2,269.01 have been used towards acquisition of
 fixed assets and long term investment.
 
 (xviii) The Company has not made any preferential allotment of shares
 during the year to parties or companies covered in the register
 maintained under section 301 of the Companies Act, 1956.
 
 (xix) The company did not have any outstanding debentures during the
 year.
 
 (xx) The Company has not raised any money through a public issue during
 the year.
 
 (xxi) 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 .R. BATLIBOI & CO.
 
                                  Firm Registration number: 301003E 
 
                                              Chartered Accountants
 
                                                 per Sanjoy K Gupta
 
 Place: Kolkata                                             Partner
 
 Date: 29th May, 2012                          Membership No.:54968