1.  We have audited the attached balance sheet of Nilachal Refractories
 Limited, as at 31 st March, 2012, the Profit & 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 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 of
 our opinion.
 
 3.  As required by the companies (Auditor''s Report) Order, 2003 issued
 by the Central Government of India in terms of section 227 (4A) 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.  The liability for Gratuity and leave salary payable to the staffs
 has been made as per actual liability as on 31s'' March'' 2012 and not as
 per actuarial valuation and the liability remains non funded.
 
 5.  Further to our comments in the Annexure referred to above and
 subject to note 4 above and read together with other notes in the
 schedule annexed to the financial statements for the year, 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 purpose 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 our
 books.
 
 c.  The balance sheet, profit & 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
 and taken on record by the Board of Directors we report that none of
 the directors is disqualified as on 3 lsl March, 2012 from being
 appointed as a director of the company in terms of section 274( 1) (g)
 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 together
 with the schedules and notes thereon and attached thereto 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:
 
 L In the case of balance sheet, of the state of affairs of the company
 as at 3 lsl March, 2012;
 
 ii.  In the case of profit and loss account, of the profit for the year
 ended on that date; and
 
 iii.  In the case of cash flow statement, of the cash flows for the
 year ended on that date.
 
 
 
                                           
 
 ANNEXURE TO AUDITOR''S REPORT FOR THE YEAR ENDED 31st MARCH, 2012 OF
 
 NILACHAL REFRACTORIES 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) The assets have been physically verified by the management during
 the year where no material discrepancies were noticed.
 
 (c) No fixed assets has been disposed off during the year.
 
 (ii) (a) The inventory has been physically verified during the year by
 the management where no material discrepancies were noticed.
 
 (b) The procedure of physical verification of inventory followed by the
 management is reasonable and adequate in relation to the size of the
 company and the nature of its business.
 
 (c) The company is maintaining proper record of inventory.
 
 iii) (a) It is reported to us that the company have not granted any
 loan, secured or unsecured to companies, firms or other parties covered
 under section 301 of the Companies Act, 1956.
 
 (b) In view of our comment in paragraph 3(a) above , clause 3(b), 3(c)
 and 3(d) of the paragraph 3 of the aforesaid order are not applicable
 to the Company.
 
 (c) The company has taken loans, secured or unsecured from the
 companies, firms or other parties covered in the register maintained
 under section 301 of the Companies Act. In order to meet its financial
 commitment, unsecured loan from the promoters/share holders amounting
 to Rs.2222 lakh involving 15 parties has brought in further and have
 balance of Rs. 3747 lakh at the year end (31s1 March 2012),
 
 (d) Interest has been charged on such loans during the year and other
 terms and conditions of the loans taken by the Company, secured or
 un-secured are, prima facie, not prejudicial to the interest of the
 company.
 
 (e) The Term Loan repayment is done on demand and during the year under
 review, the principal has been partly repaid to the tune of Rs 1005
 lakh involving 9 parties and hence principal and interest are regular
 in payment.
 
 (iv) In our opinion and according to the information and explanations
 given to us and considering the status of the company mentioned
 elsewhere in this report, there are adequate internal control system
 commensurate with the size of the company and the nature of its
 business for the purchases of inventory and fixed assets and for the
 sale of goods and services. During course of our audit, we have not
 observed any continuing failure to correct major weaknesses in internal
 control system.
 
 v) a) According to the information and explanation given to us, the
 particulars of contracts and arrangements referred in section 301 of
 the companies Act, 1956 other than as mentioned in clause (iii) above
 has been entered in the register maintained under that section.
 
 b) In our opinion and according to the information and explanations
 given to us, where each of such transactions is in excess of Rs.5 lakhs
 in respect of any party, the transactions have been made at prices
 which are prima facie reasonable having regard to the prevailing market
 prices at the relevant time.
 
 (vi) We informed that, the unsecured loan brought in by the
 Promoters/shareholders are not covered under Public Deposit pursuant to
 clause 2(b) (xi) of the Companies (Acceptance of Deposits) Rules, 1975
 
 (vii) The company has an internal audit system by external agency,
 commensurate with its size and nature of its business.
 
 viii) Maintenance of cost records is being done as prescribed by the
 Central Government under section 209( 1) (d) of the Companies Act, 1956
 in respect of the company.
 
 (ix) a) The Company have paid undisputed statutory dues of Provident
 Fund, Employees'' State Insurance and Service Tax but there have been
 few instances for delayed payments in respect of the same, as regards
 to other statutory dues like Income Tax, Sales Tax, Wealth Tax, Customs
 Duty, Excise Duty, Cess and Investor Education and Protection Fund, no
 irregularities in deposit of undisputed dues were noticed.
 
 (b) According to the information and explanations given to us, the
 disputed tax liability of sales tax and entry tax assessment which have
 not been deposited is listed below:
 
 
 
 Financial year to 
 which the            Forum where matter is pending     Amount
 matter pertains                                        Rs. In Lakhs
 
 1999-00 to 2001-02   Additional Commissioner of Sales 
                      Tax,                                72.18
                      Central Zone, Orissa, Cuttack 
                     (Sales Tax)
 
 2001-02              Assistant Commissioner of            3.38
                      Commercial Tax, Range-II, Orissa,
                      Cuttack (Entry Tax)
 
 2002-03              Joint Commissioner of Commercial 
                      Tax,                                 0.79   
                      Angul Range, Angul, Orissa, 
                     (Entry Tax)
 
 2002-03              Joint Commissioner of Commercial 
                      Tax,                                24.10
                      Angul Range, Angul, Orissa, 
                     (Sales Tax)
 
 
 
 
 
 (x) The accumulated losses of the company are more than fifty percent
 of its net worth at the year end. The company has not incurred cash
 loss during the year covered under thi s audit and had not incurred
 cash loss in the immediately preceding year.
 
 (xi) As per the records and documents produced before us, we are of
 opinion that the company is regular in payment of dues to the Bank
 against Term Loan in the year under review.
 
 (xii) The company has not granted any loans or advances on the basis of
 security by way of pledge of shares, debentures and other securities.
 
 (xiii) The provisions of any special statute applicable to chit fund or
 a nidhi/mutual benefit fund/ society are not applicable to the company
 
 (xiv) The company is not dealing in or trading in shares, securities,
 debentures and other investments
 
 (xv) As reported to us the company has not given any guarantee for
 loans taken by others.
 
 (xvi) No Term Loan was taken during the year under Audit.
 
 (xvii) According to the information and explanations given to us the
 fund brought in is being utilized for revival of the company 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) The Company has not made any preferential allotment of shares
 during the year.
 
 (xix) The company has not issued any debenture during the year.
 
 (xx) The company has not raised money by public issue during the year.
 
 (xx) According to the information and explanations given to us during
 the course of our audit no fraud on or by the company has been noticed
 or reported during the year.
 
 
 
                                           For P. Mukhopadhyay & Co.
 
                                              Chartered Accountants 
 
                                          (Registration no. 302085E)
 
                                               (Subhas Mukhopadhyay) 
 
 Place : Kolkata                                            Partner
 
 Dated : September 4,2012                 Membership Number: 050384