Nirma

1.  We have audited the attached Balance Sheet of the Nirma Limited, as
 at 31st March 2009 and also 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 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 annex hereto a statement on
 the matters specified in paragraphs 4 and 5 of the said Order.
 
 4.  Refer note no 8 of Notes to Accounts in Schedule 19 regarding the
 scheme of Demerged undertaking.  The company has taken over Demerged
 undertaking of Core Healthcare Ltd. (CHL) under the composite scheme of
 Arrangement sanctioned by the Honble High Court of Gujarat by order
 dated 1st March, 2007.  The appointed date for this purpose was 1st
 December, 2004 and the effective date is 7th March, 2007.  Three
 parties have filed appeal against this order before the Division Bench
 of Honble High Court of Gujarat and their appeal, which has been
 admitted, is pending. The company has given effect to the above scheme
 subject to the decision in appeal before the Honble High Court.
 
 5.  Further to our comments in the Annexure referred to in paragraph
 (3) & (4) 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, the Company has kept proper books of account, as
 required by law, so far as appears from our examination of the books.
 
 c) The Balance Sheet and Profit and Loss Account, dealt with by this
 report, are in agreement with the books of account.
 
 d) In our opinion, the Balance Sheet and Profit and Loss Account 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 the written representations received from the
 directors, as on 31st March, 2009 and taken on record by the Board of
 Directors, we report that none of the directors of the Company are
 disqualified as on 31st March, 2009 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 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.
 
 (i) In the case of Balance Sheet, of the state of affairs of the
 Company as at 31st March, 2009, and (ii) In the case of Profit and Loss
 Account, of the Profit for the year ended on that date.  (iii) In the
 case of Cash Flow Statement, of the cash flow for the year ended on
 that date.
 
 ANNEXURE TO AUDITORS REPORT
 
 Referred to paragraph (3) thereof
 
 1.  (a) The Company has maintained proper records except for assets
 acquired from the Demerged Undertaking showing full particulars
 including quantitative details and situation of fixed assets on the
 basis of available information.
 
 (b) As explained to us, the fixed assets have been physically verified
 by the management during the year except fixed assets acquired from
 Demerged Undertaking in phased periodical manner, which in our opinion,
 is reasonable, having regard to the size of the Company and nature of
 its assets. To the best of our knowledge, no material discrepancies
 have been noticed on verification.
 
 (c) In our opinion, the Company has not disposed of substantial part of
 fixed assets during the year and the going concern status of Company is
 not affected.
 
 2.  (a) The inventories other than that of with third parties have been
 physically verified by the management at reasonable intervals. There is
 a process of obtaining confirmation in respect of inventory with the
 third parties.
 
 (b) In our opinion and according to the information and explanations
 given to us the procedures for 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, the Company has maintained proper records of
 inventories. The discrepancies between the physical stocks and the book
 stocks are not material and have been properly dealt with in the books
 of account.
 
 3.  In respect of loans, secured or unsecured, granted or taken by the
 Company to and from companies, firms or other parties covered in the
 register maintained under Section 301 of the Companies Act, 1956.
 
 (a) During the year the company has taken loan from three parties
 amounting to Rs.320.95 Crore. The maximum amount involved during the
 year was Rs.320.95 crore and the year-end balance of such loan taken
 was Nil. Further during the year, company has also taken unsecured loan
 from two companies amounting to Rs.582.65 Crore. The maximum amount
 involved during the year was Rs.392.23 Crore and the year-end balance
 was Rs.66.78 Crore.
 
 b) In our opinion and according to information and explanation given to
 us, the rate of interest, wherever applicable and other terms and
 condition are not prima facie prejudicial to the interest of the
 company.
 
 c) The company was regular in payment of principal amount and interest
 as per the terms of the said loan.
 
 d) There is not overdue amount of more than Rupees one lacs in respect
 of the loan granted/taken to any parties listed in the register
 maintained under section 301 of the Companies Act, 1956. Accordingly
 para 4 (III) (d) of the Order are not applicable.
 
 4.  In our opinion and according to the information and explanations
 given to us, there is an internal control system commensurate with the
 size of the Company and the nature of its business with regard to
 purchase of inventories, fixed assets and also for the sale of goods &
 services. During the course of our audit, no major weaknesses have been
 noticed in the internal control system.
 
 5.  In respect of transactions covered under Section 301 of the
 Companies Act, 1956:
 
 (a) In our opinion and according to the information and explanations
 given to us, the transactions made in pursuance of contracts or
 arrangements, that needed 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, there are no transactions in pursuance of contracts or
 arrangements entered in the register maintained under Section 301 of
 the Companies Act, 1956 aggregating during the year to
 Rs.5,00,000/-(Rupees Five Lacs only) or more in respect of any party.
 
 6.  The Company has not accepted any deposits from the public.
 
 7.  The Company has a system of internal audit, which in our opinion,
 is commensurate with the size of the Company and nature of its
 business.
 
 8.  The Central Government has prescribed the maintenance of cost
 records under section 209(1) d of the Companies Act 1956 in respect of
 certain manufacturing activities of the Company. We have broadly
 reviewed the accounts and records of the Company in this connection and
 are of the opinion, that prima facie, the prescribed accounts and
 records have been made and maintained. We have not, however, made the
 detailed examination of the same.
 
 9.  (a) According to the records, information and explanations provided
 to us, the Company is generally regular in depositing with appropriate
 authorities undisputed amount of provident fund, employees state
 insurance, income-tax, sales-tax, service tax and any other statutory
 dues applicable to it and no undisputed amounts except Sales tax of
 Rs.3.67 Crore, payable were outstanding as at 31st March, 2009 for a
 period of more than six months from the date they became payable.
 
 (b) Following are the details of disputed Income Tax, Wealth Tax, Sales
 Tax, Excise Duty, Custom Duty and Stamp Duty that have not been paid to
 the concerned authorities.
 
 
 Sr. Name of the Statue     Nature of Dues Forum where    Unpaid Amount
 No.                                       Dispute is     (Rs. in Crores)
                                           pending
 
 
 1. Income Tax Act, 1961     Income Tax    High Court              5.86
                                           Tribunal 58.96
                                           Commissioner Of 
                                           Income Tax (Appeals)  275.04
 
 2. Central Excise Act, 1944 Excise Duty   Tribunal                1.35
                                           Commissioner of 
                                           Excise (Appeals)        0.03
 
 3. Central Sales Tax Act 
    and Sales                Central Sales Joint Commissioner     19.33 
    Tax Act of various       Tax and Sales 
    States                   Tax           Additional commissioner 0.09
 
 4. Wealth Tax Act.1957      Wealth Tax    Assessing Officer   Rs. 5440
 
 5. Customs Duty Act. 1962   Customs Duty  High Court              0.56
                                           Supreme Court*         20.00
                                           Tribunal                0.88
 
 6. The Bombay Stamp Act, 
    1958                     Stamp Duty    High Court              3.17
 
 *Stay granted by Honble Supreme Court.
 
 In the absence of information as mentioned in Note 8 of Schedule 19 of
 the accounts information in this Para pertaining to earlier period and
 out standing as on 31.03.09 in respect of Demerged undertaking of CHL
 received by the company are not adequately disclosed.
 
 10.  During the current year, the company has neither accumulated
 losses nor incurred cash losses during the financial year ended on that
 date and in the immediately preceding financial year.
 
 11.  Based on our audit procedures and on the information and
 explanations given by the management, the Company has not defaulted in
 repayment of the dues to any bank.
 
 12.  Based on our examination 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.
 
 13.  The Company is not a chit/nidhi/mutual benefit fund/society and
 clause (xiii) of the order is not applicable.
 
 14.  The Company is not dealing or trading in shares, securities,
 debentures and other investments.
 
 15.  In our opinion and according to the information and explanations
 given to us, the terms and conditions of the corporate guarantee given
 by the Company, for various term loans and revolver loans taken by
 wholly owned foreign subsidiaries, and limit earmarked limit to one of
 the associate company are not prejudicial to the interest of the
 Company.
 
 16.  In our opinion and according to the information and explanations
 given to us, term loans have been applied for the purpose for which
 they were raised.
 
 17.  According to the information and explanations given to us and on
 an overall examination of the Financial Statements of the Company and
 after placing reliance on the reasonable assumptions made by the
 Company for classification of long term and short term usages of funds,
 we are of the opinion that prima facie as at the close of the year no
 Short term funds have been utilized for long term investments.
 
 18.  During the year, the Company has not made any preferential
 allotment of shares to parties and companies covered in the register
 maintained under Section 301 of the Act.
 
 19.  The Company has not issued any debenture during the year.
 
 20.  The Company has not raised any money by public issue during the
 year.
 
 21.  Based upon the audit procedures performed and information and
 explanations given to us, we report that no fraud on or by the company
 has been noticed or reported during the year.
 
                                              For Hemanshu Shah & Co.  
                                               Chartered Accountants 
 
 Place : Ahmedabad                                    H. C. SHAH
 Date  : June 20, 2009                                Proprietor
                                             Membership No.36441