We have audited the attached Balance Sheet of Nilkanth Engineering
 Limited as at 31st March, 2007 and also the 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 Companys management. Our responsibility is to express an opinion
 on these financial statements based on our audit.
 
 1.  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.
 
 2.  As required by the Companies (Auditors Report) Order, 2003 (as
 amended), issued by the Central Government of India in terms of Section
 227(4A) of the Companies Act, 1956 (the Act) and on the basis of such
 checks as we considered appropriate, and according to the information
 and explanations given to us, we give in the Annexure a statement on
 the matters specified in paragraphs 4 and 5 of the said Order to the
 extent applicable to the Company.
 
 3.  Further to our comments in the Annexure referred to in paragraph 2
 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, Profit and Loss Account and Cash Flow Statement
 dealt with by this report are in agreement with the books of account of
 the Company.
 
 (d) In our opinion, the Balance Sheet, the Profit and Loss Account and
 the Cash Flow Statement dealt by with this report comply with the
 accounting standards to the extent applicable referred to in
 sub-section (3C) of Section 211 of the Companies Act, 1956;
 
 (e) Based on the representations made by the Directors of the Company
 and taken on record by the Board of Directors and the information and
 explanations given to us, we report that none of the Directors is, as
 on 31st March, 2007, prima-facie drsqualified- 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 the said accounts subject to Note No.2 in
 Schedule HI relating to non-provision for diminution in value of
 investments by Us.  58,02,666/- aggregate effect of which has resulted
 in the profit for the year being higher by Rs.5802666/-, resulting in
 the loss for the year at Us. 10,83,302/- as against the reported profit
 for the year at Rs.4719364/- and aggregate Credit balance in the Profit
 & Loss A/c carried to Balance Sheet would be Us. 2,07,66,612/- as
 against the reported credit balance in the Profit & Loss A/c carried to
 Balance Sheet of Us. 2,65,69,278/- read together with 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 conformity with
 the accounting principles generally accepted in India:
 
 i) in the ease of the Balance Sheet, of the state of affairs of the
 Company as at 31st March. 2007;
 
 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 Cash Flow Statement, of the cash flows for the year
 ended on that date.
 
 ANNEXURE TO THE AUDITORS REPORT
 
 Annexure referred to in paragraph 2 of Auditors Report of even date to
 the members of Nilkanth Limited on the accounts for the year ended 31st
 March, 2007.
 
 On the basis of such checks as we considered appropriate and in terms
 of the information and explanations given to us. we state that :-
 
 i. (a) The Company has maintained proper records showing full
 particulars including quantitative details and situation of fixed
 Assets.
 
 (b) As explained to us, all the assets have been physically verified by
 the management during the year and no discrepancy has been noticed on
 such verification.
 
 (c) The company has not disposed off any substantial part of its Fixed
 Assets so as to effect its going concern.  ii.  Since there are no
 Inventories, para 4 (ii) (a), (b) & (c) of the Order is not applicable.
 
 iii. (A) The company has not granted any loan . secured or unsecured-
 to companies, firms or other parties covered in the register Section
 301 of the Companies Act. 1956.  Accordingly para 4(iii) (a) to (d) of
 the order id not applicable.
 
 (B) The company has not taken any loans, secured or unsecured, from
 companies, Firms or other parties covered in the register maintained
 under Section 301 of the Companies Act. 1956. Accordingly, para 4 (iii)
 (e) to (g) of the Order is not applicable.
 
 iv. In our opinion and according to the information and explanations
 given to us. there are adequate internal control systems commensurate
 with the size of the Company and the nature of its business for the
 purchase of fixed assets and for the provision of services. Further, on
 the basis of our examinations and information and according to the
 explanations given to us. we have neither come across nor have been
 informed of any instances of major weakness in the aforesaid internal
 control system.
 
 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 Act, transactions
 that need to be entered into the register maintained under Section 301
 have been so entered.
 
 (b) In our opinion and according to the information and explanations
 given to us, since the company lias not entered into any transactions,
 exceeding Rs. 5 lakhs, in respect of any party during the financial
 year that need to be entered in the register maintained under section
 301 of the Companies Act, 1956, para 4 (v) (b) of the Order is not
 applicable.
 
 vi. The company has not accepted any deposits from the public within
 the purview of the directives issued by the Reserve Bank of India and
 the provisions of Section 58A & 58AA or any other relevant provisions
 of the Companies Act, 1956 and the Rules framed there under.
 
 vii. The company does not have any formal internal audit system during
 the year under review. According to the information and explanations
 given to us by the management, the company is yet to set up formal
 internal audit system. The company, however, has adequate internal
 control procedures commensurate with the size and nature of the
 business of the company.
 
 viii. The Central Government has not prescribed the maintenance of cost
 records under Section 209 (1) (d) of the Companies Act, 1956 for any of
 the products of the company.
 
 ix. (a) According to the information and explanation given to us and
 according to the books and records -as produced and examined, by us, in
 our opinion, the undisputed statutory dues in respect of Provident
 Fund, Investor Education & Protection Fund, Employees State Insurance,
 Income-tax, Wealth-tax, Service Tax, Sales-tax, Custom duty, Excise
 duty, Cess and other material statutory dues, as applicable, have been
 generally regularly deposited by the company during the year with the
 appropriate authorities and there are no undisputed statutory dues
 payable for a period of more than six months from the date they became
 payable as on 31st March, 2007.
 
 (b) According to the information and explanation given to us, on the
 basis of our examination of documents and records, there are no
 disputed dues in respect of Income-tax, Wealth-tax, Service Tax,
 Sales-tax, Custom duty, Excise duty, Cess and other statutory dues
 which have not been deposited with the appropriate authorities as at
 the last date of the financial year.
 
 x.  The company has neither accumulated losses at the end of the
 financial year nor.it has incurred any cash losses during the financial
 year ended on that date or in the immediately preceding financial year.
 
 xi. According to the records of the company examined by us and
 information and explanations given to us, since the company has not
 borrowed from financial institutions/ banks/ by issue of debentures,
 para 4 (xi) of the Order is not applicable to the company.
 
 xii. According to the information and explanation 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, considering the nature of activities carried on
 by the company during the year, the provisions of any special statute,
 applicable to Chit Fund/Nidhi/Mutual benefit fund/Societies are not
 applicable to the company.
 
 xiv. In our opinion, the company has maintained proper records of
 transactions and contracts relating to dealing or trading in shares,
 securities, debentures and other investments during the year and timely
 entries have been made therein. Further, such securities have been held
 by the company in its name or are in the process of transfer in its
 name, except to the extent of exemption granted under Section 49 of the
 Act.
 
 xv. According to the information and explanations given to us and the
 representations made by the Management, since the company has not given
 any guarantee for loans taken by others from bank or financial
 institutions, para 4(xv) of the Order is not applicable.
 
 xvi. In our opinion, on the basis of information and explanations given
 to us, since there are no term loans obtained by the company during the
 year, para 4 (xvi) of the Order is not applicable..
 
 xvii. In our opinion, on the basis of information and explanations
 given to us, since there are no short-term funds raised by the company
 during the year, para 4 (xvii) of the Order is not applicable to the
 Company.
 
 xviii. In our opinion, on the basis of information and explanations
 given to us, since 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 during the year, para 4
 (xviii) of the Order is not applicable.
 
 xix. In our opinion, on the basis of information and explanations given
 to us, since the company has not issued any debenture during the year,
 para 4(xix) of the Order is not applicable.
 
 xx. In our opinion, on the basis of information and explanations given
 to us, since the company has not raised any money by public issue
 during the year, para 4(xx) of the Order is not applicable.
 
 xxi. During the course of our examination of the books of account
 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 fraud on or by
 the company, noticed or reported during the year nor have been informed
 of any such case by the management.
 
                                            FOR M. K. SUREKA & CO.,
                                            CHARTERED ACCOUNTANTS.
 
                                           (M. K. SUREKA),
                                            PROPRIETOR.
                                            MEMBERSHIP NO. 10147.
 
 PLACE : MUMBAI, 
 DATED : 3 Sep 2007