1. We have audited the attached Balance Sheet of Nahar International
 Limited as at 31st March, 2004, the Profit and Loss Account and also
 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 the 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 misstatements. 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 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. 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 such
 books;
 
 c) the Balance Sheet, Profit and Loss Account and Cash Flow Statement
 dealt with by this report are in agreement with the books of account;
 
 d) in our opinion, the Balance Sheet, Profit and Loss Account 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.
 
 e) On the basis of written representations received from the Directors
 as on 31st March, 2004 and taken on record by the Board of Directors,
 we report that none of the directors is disqualified as on 31st March,
 2004 from being appointed as a director in terms of clause (g) of
 sub-section (1) of section 274 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 financial statements read
 together with the Significant Accounting Policies 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 confirmity 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, 2004;
 
 ii) In the case of the Profit and Loss Account, of the profit for the
 year ended on that date ; and
 
 iii) In the case of the Cash Flow Statement, of the cash flows for the
 year ended on that date.
 
                                                    for RAJ GUPTA & CO.
                                                  Chartered Accountants
 
 Place : Ludhiana                                            R.K. GUPTA
 Dated : 10th June, 2004                                        Partner
                                                   Membership No. 17039
 
 Annexure to the Auditors' Report
 Re: Nahar International Limited
 (Referred to in paragraph 3 of our report of even date)
 
 i. a) The company has maintained proper records showing full
 particulars including quantitative details and situation of fixed
 assets.
 
 b) As explained to us, most of the fixed assets have been physically
 verified by the management at reasonable intervals. No material
 discrepancies were noticed on such verification.
 
 c) The company has not disposed off substantial part of fixed assets
 during the year except that sale/transfer of fixed assets pertaining to
 the steel unit which was closed down during the year 2001-2002. The
 same has no affect on the going concern of the company.
 
 ii. a) According to information and explanations given to us, physical
 verification of inventories has been conducted at reasonable intervals
 by the management.
 
 b) In our opinion, 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) The company is maintaining proper records of inventory.  As
 explained to us, the discrepancies noticed on physical verification
 were not material. However, the discrepancies noticed have been
 properly dealt with in the books of account.
 
 iii. According to the information and explanations given to us, the
 company has neither granted nor taken any loans, secured or unsecured,
 from/to companies, firms or other parties listed in the register
 maintained under Section 301 of the Companies Act, 1956. Hence clause
 (iii)-(b), (c) and (d) 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, with regard to purchases of inventory, fixed assets and with
 regard to the sale of goods. During the course of our audit, we have
 not observed any continuing failure to correct major weakness in
 internal controls.
 
 v. a) According to the information and explanations given to us, we are
 of the opinion that the transactions that need to be entered into the
 register maintained under section 301 of the Companies Act, 1956 have
 been so entered.
 
 b) In our opinion and according to the information and explanations
 given to us, the transactions made in purchase of contracts or
 arrangements entered in the register maintained under section 301 of
 the Companies Act, 1956 and exceeding the value of rupees five lakhs in
 respect of any party during the year have been made at prices which are
 reasonable having regard to prevailing market prices at the relevant
 time.
 
 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. 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 under section 209(1)(d) of the Companies
 Act, 1956 and we are of the opinion that prima facie, the prescribed
 accounts and records have been made and maintained.
 
 ix. a) Undisputed statutory dues including provident fund, Investor
 education protection fund, employees' state insurance, income tax,
 sales tax, wealth tax, custom duty, excise duty, cess have been
 regularly deposited by the company with the appropriate authorities in
 all the cases during the year.
 
 b) According to the information and explanations given to us, there are
 no disputed dues outstanding in the books of account for sales tax,
 income tax, custom duty, wealth tax, excise duty and cess. However,
 following demands have been raised by various statues for which the
 company has filed appeals :
 
 Name of the       Nature of        Amount      Forum where
 Statue            dues          (Rs.in Lacs)   dispute is pending
 
 Tamilnadu         Sales tax on      70.47      Tamilnadu Taxation
 General Sales     high seas                    Special Tribunal
 Tax Act, 1956     sales
 
 The Central       Excise Duty      153.39      Commissioner
 Excise Act, 1944  demands                      Appeals
 
                   -do-              15.40      Supreme Court
 
                   Computation of   201.92      Commissioner/
                   assessable                   Deputy
                   value                        Commissioner,
                                                Bhiwadi
 
 x. The accumulated losses at the end of the financial year are not more
 than 50 percent of its net worth. The company has not incurred cash
 losses during the financial year covered by our audit and in the
 immediately preceding financial year.
 
 xi. In our opinion and according to the information and explanations
 given to us, the company has not defaulted in repayment of dues to any
 financial institution or bank.
 
 xii. As explained 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 and Society. Therefore, the provisions of clause 4 (xiii)
 of the Companies (Auditor's Report) Order, 2003 are not applicable to
 the company.
 
 xiv. In our opinion, the company is not dealing in or trading in
 shares, securities, debentures and other investments. Accordingly, the
 provisions of clause 4 (xiv) of the Companies (Auditor's Report) Order,
 2003 are not applicable to the company.
 
 xv. According to the information and explanations given to us, the
 company has not given any guarantees for loans taken by others from
 banks or financial institutions.
 
 xvi. In our opinion and according to the information and explanations
 given to us and on an overall examination, the term loans have been
 applied for the purpose for which the loans 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 no funds raised on short-term basis have been used for long-term
 investment by the company.  No long-term funds have been used to
 finance short-term assets except for permanent working capital and
 non-current assets.
 
 xviii. The company has not made any preferential allotment of share to
 parties and companies covered in the register maintained under section
 301 of the Companies Act, 1956.
 
 xix. The company has not issued debentures during the year.
 
 xx. The company has not raised any money by public issue during the
 year.
 
 xxi. According to the information and explanations given to us and to
 the best of our knowledge and belief, no fraud on or by the company has
 been noticed or reported by the company during the year.
 
                                                   for RAJ GUPTA & Co.,
                                                  Chartered Accountants
 
 Place : Ludhiana                                            R.K. GUPTA
 Dated : 10th June, 2004                                        Partner
                                                     Membership No. 170