1.  We have audited the attached Balance Sheet of ORIENT PAPER &
 INDUSTRIES LIMITED (the Company) as at 31st March, 2012 and also the
 Statement of Profit & Loss and 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 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 (as
 amended) 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.  As stated in to Note No.40, no provision has been made for Water
 Tax demand amounting to Rs.21879.32 lacs (including interest and
 penalty) since the Company''s application for waiver thereof is under
 consideration by the Government of Madhya Pradesh. Had the above
 liability been considered, profit for the year would have been Rs.
 6447.01 lacs (after considering tax impact) as against the reported
 profit of Rs. 21227.58 lacs and reserves & surplus as at the balance
 sheet date would have been Rs.95027.79 lacs as against the reported
 figure of Rs.109808.36 lacs.
 
 In respect of above, the previous year''s audit report was similarly
 modified.
 
 5.  Further to our comments in the Annexure referred to above :-
 
 i) 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;
 
 ii) 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;
 
 iii) The Balance Sheet, the Statement of Profit & Loss and Cash Flow
 statement dealt with by this report are in agreement with the books of
 account;
 
 iv) In our opinion, the Balance Sheet, the Statement of Profit & Loss
 and Cash Flow Statement comply with the Accounting Standards referred
 to in sub-section (3C) of Section 211 of the Companies Act, 1956;
 
 v) On the basis of written representations received from the directors
 as on 31st March, 2012 and taken on record by the Board of Directors,
 we report that none of the directors is disqualified as on March 31,
 2012 from being appointed as 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 statements of account, except
 for the possible impact of our comments on the matter stated in para
 
 (4) above, 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, 2012;
 
 ii) in the case of the Statement of Profit & Loss, of the profit of the
 Company 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 (referred to in our report of even
 date to the members of orient paper & industries limited as at and for
 the year ended 31st march, 2012)
 
 i) a) The Company has maintained proper records showing full
 particulars, including quantitative details and situation of fixed
 assets.
 
 b) All fixed assets have not been physically verified by the management
 during the year but there is a regular programme of verification
 (except for assets of the written down value of Rs.1416.86 lacs at
 Brajrajnagar unit, due to suspension of production activities) which,
 in our opinion, is reasonable having regard to the size of the Company
 and the nature of its assets. As informed, no material discrepancies
 were noticed on such verification. However, discrepancies, if any, at
 Brajrajnagar unit are unascertainable due to non verification of fixed
 assets for the reasons mentioned above.
 
 c) There was no disposal of a substantial part of fixed assets during
 the year.
 
 ii) a) The management has conducted physical verification of inventory
 at reasonable intervals during the year except for the value of
 Rs.32.90 lacs at Brajrajnagar unit, due to suspension of production
 activities.
 
 b) The procedures of physical verification of inventory 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 and no
 material discrepancies were noticed on such physical verification.
 However, discrepancies, if any, at Brajrajnagar unit are
 unascertainable due to non verification of inventories for the reasons
 mentioned in
 
 (a) above.
 
 iii) a) According to the information and explanations given to us, the
 Company has not granted any loans, secured or unsecured, to companies,
 firms or other parties covered in the register maintained under section
 301 of the Companies Act, 1956. Accordingly, the provisions of clause 4
 (iii ) (a) to (d) of the Order are not applicable to - the Company and
 hence not commented upon.
 
 b) According to the information and explanations given to us, 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, the provisions of clause 4
 (iii ) (e) to (g) of the Order are not applicable to the Company and
 hence not commented upon.
 
 iv) In our opinion and according to the information and explanations
 given to us, and having regard to the explanation that some of the
 items purchased are of a proprietary nature and alternate sources do
 not exist for obtaining quotations thereof, it appears that there is an
 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 weakness or
 continuing failure to correct any major weakness in the internal
 control system of the Company in respect of these areas.
 
 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 Companies Act, 1956 that
 need to be entered into the register maintained under the above
 section, have been so entered.
 
 b) In our opinion and according to the information and explanations
 given to us, the transactions made in pursuance of such contracts or
 arrangements exceeding the value of Rupees five lakhs entered into
 during the financial year, are at prices which are reasonable having
 regard to the prevailing market prices at the relevant time.
 
 vi) The Company has not accepted any deposit 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 accounts 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 in respect of paper, cement, electrical consumer durables and
 chemicals and are of the opinion that prima facie, the prescribed
 accounts and records have been made and maintained.
 
 ix) a) The Company is regular in depositing with 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 and other material statutory dues applicable to it though there
 have been slight delays in certain cases and also certain payments are
 not yet made as indicated in (b) below.
 
 b) According to the information and explanations given to us,
 undisputed amounts payable in respect of provident fund, investor
 education and protection fund, employees'' state insurance, income-tax,
 sales-tax, wealth-tax, service tax, custom duty, excise duty, cess and
 other material statutory dues outstanding at the year end for a period
 of more than six months from the date they became payable, are as
 follows :
 
 Name of the 
 statute        Nature 
                of the     Amount     Period to
                                      which the    Due Date     Date of
                                                                Payment
                dues      (Rs in 
                           lacs)      amount
                                      relates
 
 Orissa 
 Municipal 
 Act           Industrial
               Licence      21.10     1996-97 to   Beginning
                                                   of the       Not yet
                                                                Paid
               Fees                   2010-11      respective
                                                   years
 
 Electricity 
 Duty Act 
 (Orissa)      Interest 
               on duty
               payable      74.43     1998-99 to   Subsequent   Not yet
                                                                Paid
               on own 
               generation 
               of power               2009-10      month after
                                                   accrual
 
 (c) According to the records of the Company, the dues outstanding in
 respect of sales tax, income tax, custom duty, wealth tax, service tax,
 excise duty & cess on account of any dispute, are as follows :
 
 Name of the
 statute        Nature of 
                the dues         Period to 
                                 which         Amount       Forum where
                                                            dispute
                                 the amount   (Rs. in
                                               lacs)        is pending
                                 relates
 
 Central 
 Excise and    Disallowance 
               of Cenvat credit  1979-83,       778.08     Deputy/
                                                           Assistant
                                                           Commissioner/
 Customs Act,
 1944          on inputs and 
               capital goods     1986-98,                  Commissioner
                                                           /High
 
                                 2000-2010                 Court/ CESTAT
 
               Inclusion of 
               interest in
               Assessable value  1994-96         10.99     Dy. 
                                                           Commissioner/
                                                           Commissioner
 
               Disallowance of
               refund on post    1976-77 to     149.06     Deputy 
                                                           Commissioner
               manufacturing 
               expenses of paper 1983-84
 
               Differential 
               duty on 
               manufacture of    1975 to 1977,   47.49     Asst Commiss
                                                           -ioner/ Deputy
               paper/ duty on 
               various inputs
               due to            1978 to 1985,             Commissioner/
                                                           Commissioner
               difference in 
               classification/ 
               Duty on           1993-97,
                                 2000-01,                  Appeals/Addl.
                                                           Commissioner/
               shortage 
               /excess etc.      2002-03 & 
                                 2005-07                   Jt. 
                                                           Commissioner
 
 A. P. Sales 
 Tax/AP Vat 
 Act/          Demand on 
               second sales 
               and freight       1983-85, 
                                 1990-91,       282.23     Asst. 
                                                           Commissioner/
                                                           Appellate
 Central Sales 
 Tax Act, 1956 charges 
               realized 
               separately by 
               raising           1993-94 to                Dy. 
                                                           Commissioner/
                                                           Sales Tax
                                                           Appellate
               debit invoices
               and other 
               matters           2004-05 &
                                 2009-10                   Tribunal/
                                                           High Court.
 
 MP Sales 
 Tax Act,
 1961/         Demand with 
               respect to 
               disallowance of   1998-99,        59.27     Deputy
                                                           Commissioner
                                                           Appeals/
 Central Sales 
 Tax Act 1956  cash discount, 
               levy of higher 
               rate of           2000-02 & 
                                 2005-06                   Appellate 
                                                           Board/High
                                                           Court
                                                           purchase 
                                                           tax, differ
                                                           -ence in
                                                           classific
                                                           ation of 
                                                           goods etc.
 
 Other State
 /Central 
 Sales Tax 
 Acts          Sales tax on 
               stock transfer/
               export sales,     Various        212.51     Asst. Commiss
                                                           ioner/ Deputy
               non submission 
               of forms,
               penalty etc.                                commissioner/
                                                           Sales Tax
                                                           officer/Sales
                                                           Tax Appellate
                                                           Tribunal/ 
                                                           High court/
                                                           Supreme Court
 
 Income Tax 
 Act,1961      Tax deducted 
               at source & 
               interest 
               thereon           2006-07 to
                                 2008-09      2,699.77     Commissioner
                                                          (Appeals)
 
 M.P. Upkar 
 Adhinium, 
 2004          Energy
               development 
               cess on 
               consumption       2001-2002 to 3,090.61     Supreme Court
               of Captive 
               power 
               including
               surcharge         2011-12
 
 x) The Company has no accumulated losses at the end of the financial
 year and it has not incurred cash losses in the current year and in the
 immediately preceding financial year.
 
 xi) Based on our audit procedures and as per the information and
 explanations given by the management, we are of the opinion that the
 Company has not defaulted in repayment of dues to financial
 institutions, banks or debenture holders.
 
 xii) According to the information and explanations given to us and
 based on the documents and records produced 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 / society and therefore, the provisions of clause
 4(xiii) of the Order are not applicable.
 
 xiv) In our opinion, the Company is not dealing or trading in shares,
 securities, debentures and other investments.  Accordingly, the
 provisions of clause 4(xiv) of the Order are not applicable.
 
 xv) According to the information and explanations provided to us, the
 Company has not given guarantee for loans taken by others from banks or
 financial institutions.
 
 xvi) Based on the information and explanations given to us by the
 management, term loans were applied for the purpose for which these
 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.
 
 xviii) The Company has made preferential allotment of shares to a
 company covered in the register maintained under section 301 of the
 Companies Act, 1956. In our opinion, the price at which shares have
 been issued is not prejudicial to the interest of the Company.
 
 xix) According to the information and explanations given to us, the
 Company had created security in respect of debentures issued in earlier
 years and outstanding during the year.
 
 xx) The Company has not raised any money through a public issue during
 the year.
 
 xxi) Based upon the audit procedures performed for the purpose of
 reporting the true and fair view of the financial statements and as per
 the information and explanations given by the management, we report
 that no fraud on or by the Company has been noticed or reported during
 the year.
 
                                           For S.R. BATLIBOI & CO.
 
                               Firm Registration Number : 301003E 
 
                                            Chartered Accountants
 
                                                  per Raj Agrawal
 
 Place : New Delhi.                                       Partner
 
 Date : 2nd May,2012                         Membership No. 82028