NELCO

1.  We have audited the attached Balance Sheet of NELCO LIMITED, as at
 31st March 2008, 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 Companys
 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 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.
 
 3.  As required by the Companies (Auditors 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, to the extent applicable.
 
 4.  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 ouf 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, Profit and Loss Account and Cash Flow
 Statement dealt with by this report are in agreement with the books of
 account;
 
 (iv) 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, to the extent applicable;
 
 (v) on the basis of written representations received from the
 directors, as on 31st March 2008, and taken on record by the Board of
 Directors, we report that none of the directors is disqualified as on
 31st March 2008 from being appointed as a director in terms of clause
 (g) of sub-section (1) of section 274 of the Companies Act, 1956;
 
 (vi) in our opinion and to the best of our information and according to
 the explanations given to us, the said accounts read together with
 notes thereon, 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 31st March 2008;
 
 (b) in the case of the Profit and Loss Account, of the profit for the
 year ended on that date; and
 
 (c) in the case of the Cash Flow Statement, of the cash flows for the
 year ended on that date.
 
 ANNEXURE TO THE AUDITORS REPORT
 
 (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, physical verification of major items of fixed
 assets was conducted by the management during the year. In our opinion,
 the frequency of physical verification is reasonable having regard to
 the size and operations of the Company and the nature of its assets.
 According to the information and explanations given to us, no material
 discrepancies were noticed on such verification.
 
 (c) The Company has not disposed off substantial part of fixed assets
 during the period.
 
 (ii) (a) The inventories have been physically verified by the
 management at reasonable intervals during the year. In respect of
 stocks lying with third parties, confirmations have been received in
 certain cases and the others have been confirmed 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) In our opinion and according to the information and explanations
 given to us, the Company has maintained proper records of its
 inventories and no material discrepancies were noticed on physical
 verification.
 
 (iii) The Company has neither granted nor taken any loans, secured or
 unsecured to / from companies, firms or other parties covered in the
 register maintained under section 301 of the Companies Act, 1956.
 Accordingly, sub-clause (b), (c), (d), (f) and (g) are not applicable.
 
 (iv) In our opinion and according to the information and explanations
 given to us, there is 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 weaknesses in internal controls.
 
 (v) No transactions have been entered during the year in the register
 maintained in pursuance of section 30 of the Companies Act, 1956 and
 based on the audit procedures applied by us and according to the
 information and explanations given and the representations made to us,
 we have not come across any transaction that need to be entered into
 the register maintained in pursuance of section 301 of the Companies
 Act, 1956.  Accordingly, sub-clause (b) is not applicable.
 
 (vi) In our opinion and according to the information and explanations
 given to us, the Company has complied with the provisions of sections
 58A and 58AA or any other relevant provisions of the Companies Act,
 1956 and the Companies (Acceptance of Deposits) Rules, 1975 with regard
 to the deposits accepted from the public. As informed to us, no order
 has been passed by the Company Law Board or National Company Law
 Tribunal or Reserve Bank of India or any other court or any other
 Tribunal.
 
 (vii) In our opinion, the Company has an internal audit system
 commensurate with its size and nature of its business.
 
 (viii) We have broadly reviewed the books of account and records
 maintained by the Company relating to the manufacture of Electronics
 Products, pursuant to the order made by the Central Government for the
 maintenance of cost records 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 made and maintained. We have, however,
 not made a detailed examination of the records with a view to
 determining whether they are accurate or complete.
 
 (ix) (a) According to the records of the Company, the Company is
 generally regular in depositing with the 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 any other
 statutory dues applicable to it. Based on our audit procedures and
 according to the information and explanations given to us, there are no
 arrears of undisputed statutory dues which remained outstanding as at
 31st March 2008 for a period of more than six months from the date they
 became payable.
 
 (b) According to the records made available to us and the information
 and explanations given by the management, the details of the dues of
 sales tax / income tax / custom duty / wealth tax / service tax /
 excise duty / cess, which have not been deposited on account of any
 dispute, are given below :
 
 Particulars             Financial year to which
 
 the matter pertains
 
 Income Tax                        2004-05
 
 Sales Tax                      1985-86 to 1988-89,
                                1996-97,2001-02,
                                and 2003-04
                                1989-90 and 1990-91
 Customs Duty                   1990-91 to 1992-93
 
 Excise Duty                    1985-86
                                1983-84 to 1993-94
                                2006-07
 
 Service Tax                    2003-04
                                2005-06 to 2006-07
                                2006-07
                                2006-07
 
 Forum where the dispute                      Amount
 is pending                               (Rs. in lakhs)
 
 CIT, (Appeals)                               36.85
 Commissioner (Appeals)                       32.29
 High Court                                   17.43
 High Court                                   30.04
 Assistant Commissioner                        0.54
 Commissioner (Appeals)                     2038.05
 Assistant Director - DGCEI                    1.07
 Deputy Commissioner                          53.83
 Joint Commissioner                           19.98
 Commissioner                                 48.03
 Additional Commissioner                      18.19
 
 (x) The Company does not have accumulated losses at the end of the
 financial year. The Company has not incurred cash losses during the
 current financial year and in the immediately preceding financial year.
 
 (xi) Based on our audit procedures and according to the information and
 explanations given by the management, we are of the opinion that the
 Company has not defaulted in the repayment of dues to financial
 institutions, banks and debenture holders.
 
 (xii) Based on our examination of the records and according to the
 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 Company is not a chit / nidhi / mutual benefit fund /
 society.
 
 (xiv) In our opinion, the Company is not a dealer or trader in shares,
 securities, debentures and other investments.  Accordingly, provisions
 of the Clause are not applicable.
 
 (xv) During the year, the Company has not given any guarantees or
 provided any securities for loans taken by others from banks or
 financial institutions.
 
 (xvi) To the best of our knowledge and belief and according to the
 information and explanations given to us, term loans availed by the
 Company were, prima facie, applied by the Company during the year for
 the purposes for which the loans were obtained, other than temporary
 deployment pending application.
 
 (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 short term funds have been used for long-term purposes, other
 than temporary deployment pending application.
 
 (xviii) The Company has not made any preferential allotment of shares
 to parties and companies covered in the register maintained under
 section 301 of the Companies Act, 1956.
 
 (xix) During the year the Company has not issued any debentures.
 
 (xx) The Company has not raised any money by public issue during the
 year.
 
 (xxi) During the course of our examination of the books and records of
 the Company, carried out in accordance with the generally accepted
 auditing practices in India and according to the information and
 explanations given to us, we have neither come across any instance of
 material fraud on or by the Company, noticed or reported during the
 year, nor have we been informed of such case by the management.
 
                                             For N.M. RAIJI & CO.,
                                            Chartered Accountants
 
                                                 Y.N. THAKKAR
 Place : Mumbai                                    Partner
 Date  : 15th May 2008                         Membership No. 33329