We have audited the attached Balance Sheet of PENNAR INDUSTRIES
 LIMITED, HYDERABAD, as at 31st March, 2012 and the statement of Profit
 and Loss and 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.
 
 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.
 
 1.  As required by the Companies (Auditor''s 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 give in the Annexure a
 statement on the matters specified in paragraphs 4 and 5 of the said
 Order.
 
 2.  Further to our comments in the annexure referred to in paragraph 1
 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 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, statement of Profit and 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, statement of 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.
 
 v) In our opinion and based on written representation received from
 directors, and taken on record by the Board of Directors, none of the
 Directors is disqualified as on 31st March, 2012 from being appointed
 as a Director in terms of Clause (g) of sub-section (1) to 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 with significant
 accounting policies and 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:
 
 a) In so far as it relates to Balance Sheet, of the state of affairs of
 the Company as at 31st March, 2012
 
 b) In so far as it relates to statement of Profit and Loss, of the
 Profit of the Company for the year ended on that date. And
 
 c) In so far as it relates to Cash Flow Statement, of the cash flows of
 the Company for the year ended on 31st March, 2012.
 
 Referred to as in Paragraph 1 of our report of even date
 
 1.  In respect of its Fixed assets:
 
 (a) The company has maintained proper records showing full particulars
 including details and situation of fixed assets.
 
 (b) As explained to us, the fixed assets have been physically verified
 by the management during the year in a phased periodical manner, which
 in our opinion is reasonable, having regard to the size of the company
 and the nature of its assets. No material discrepancies were noticed on
 such physical verification.
 
 (c) During the year, the company has not disposed of substantial part
 of the Assets. According to the information and explanations given to
 us, we are of the opinion that no transactions are effected involving
 disposal of assets so as to affect going concern status of the company.
 
 2.  In respect of its Inventories:
 
 (a) As explained to us, inventories have been physically verified
 during the year by the management at regular intervals. In our opinion,
 the frequency of verification is reasonable.
 
 (b) In our opinion and according to the information and explanations
 given to us, 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) The company has maintained proper records of inventories. In our
 opinion and according to the information and explanations given to us,
 the discrepancies noticed on verification between the physical stocks
 and the book records were not material, 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/from Companies, firms or other parties covered in the
 register maintained under section 301 of the Companies Act, 1956:
 
 a) The Company has not taken/granted loans from/to Companies, firms or
 other parties listed in the register maintained under section 301 of
 the Companies Act, 1956.
 
 b) As the Company has not taken/granted loans from/to Companies, firms
 or other parties listed in the register maintained under section 301 of
 the Companies Act, 1956, the question of statement on the rate of
 interest and other terms and conditions on which Company has
 taken/granted loans from/to Companies, firms or other parties listed in
 the register maintained under section 301 of the Companies Act, 1956
 does not arise.
 
 c) As the Company has not taken/granted loans from/to Companies, firms
 or other parties listed in the register maintained under section 301 of
 the Companies Act, 1956, the question of statement on the regular
 payment/ receipt of the principal and interest amounts as stipulated
 does not arise.
 
 d) As the Company has not taken/granted loans from/to Companies, firms
 or other parties listed in the register maintained under section 301 of
 the Companies Act, 1956, the question of statement on the steps taken
 for recovery/payment of the Principal and interest on overdue amount of
 more than one lakh does not arise.
 
 4.  In our opinion and according to the information and explanations
 given to us, there are adequate internal control procedures
 commensurate with the size of the Company and the nature of its
 business, for the purchase of inventory, fixed assets and for the sale
 of goods. During the course of our audit, based on our audit procedures
 applied, we have not observed any continuing failure to correct major
 weaknesses in internal controls.
 
 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, the transactions made in pursuance of contracts or
 arrangements entered in the register maintained under section 301 of
 the companies Act, 1956 and exceeding the value of Rs. 5,00,000/- with
 parties covered above during the year have been made at prices which
 are reasonable having regard to prevailing market prices at the
 relevant time.
 
 6.  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 of the Companies Act, 1956 and the Companies (Acceptance
 of Deposits) Rules, 1975 and the Company is regular in filing
 compliance reports with the Company Law Board.
 
 7.  In our opinion, the company has independent internal audit system
 commensurate with the size and nature of its business.
 
 8.  We have broadly reviewed the books of account maintained by the
 Company in respect of products where, pursuant to the Rules made by the
 Central Government of India, the maintenance of cost records has been
 prescribed under clause (d) of sub section (1) of section 209 of the
 Act and are of the opinion that prima facie, the prescribed accounts
 and records have been made maintained. We have not, however, made a
 detailed examination of the records with a view to determine whether
 they are accurate or complete.
 
 9.  In respect of statutory dues:
 
 (a) According to the records of the company and as per the information
 and explanations given to us, the company is generally regular in
 depositing with appropriate authorities undisputed Statutory dues
 including Provident fund, Investor education & protection fund,
 Employee''s state insurance, Wealth tax, Custom duty, Income tax, Excise
 duty, Cess and other material statutory dues applicable to it.
 
 (b) According to the information and explanations given to us, no
 disputed amounts payable in respect of Wealth tax, Income tax, Sales
 tax, Customs duty, Excise duty and Cess were outstanding, as at 31st
 March, 2012 for a period of more than six months from the date they
 became payable.
 
 (c) According to the information and explanations given to us, an
 amount of Rs. 210.3 Lacs of Sales tax, Customs duty, and interest which
 have not been deposited on account of dispute as given below:
 
 10.  In our opinion, the company neither has accumulated losses at the
 end of the year exceeding fifty percent of its net worth, nor incurred
 cash losses during the financial year covered by our audit and in the
 immediately preceding financial year.
 
 11.  As per the records of the Company and according to the information
 and explanations given to us, we are of the opinion the company has not
 defaulted in repayment of dues to financial institutions, banks or
 debenture holders.
 
 S 
 No    Name of the         Nature of the           Forum where dispute
       Statute             dues                    is pending 
 
 
 1     Customs Act, 1962   Interest on             The Commissioner
                           Customs Duty            of Custom 
                           Paid                   (Appeals)
 
 2     A.P VAT Act, 2005   Entry Tax on Cix        The Supreme
                                                   Court of India
 
       Total                    -                       -
 
 Name of the                Amount         Deposit        Unpaid Deposit
 Statuts                   (Rs. In Lacs)   Amount         Amount
                                          (Rs.in Lacs)   (Rs.in Lacs)
 
 Customs Act, 1962            44.7             -             44.7
 
 A.P.VAT Act, 2005           218.6           53.0           165.6  
 
 Total                       236.3           53.0           210.3 
 
 12.  According to the information and explanations given to us, the
 company has not given any loans and advances on the basis of security
 by way of pledge of Shares, debentures and other securities.
 
 13.  In our opinion, the company is not a chit fund or a nidhi / mutual
 benefit fund/society. Accordingly the provisions of clause 4(xiii) of
 the Companies (Auditor''s Report) Order, 2003 are not applicable to the
 company.
 
 14.  In our opinion, the company is not dealing in or trading in
 shares, securities, and debentures and other investments. Accordingly
 the provisions of clause 4(xiv) of the Companies (Auditor''s Report)
 Order, 2003 are not applicable to the company.
 
 15.  According to the information and explanations given to us, the
 Company has given corporate guarantee for securing loans taken by the
 Pennar Engineered Building Systems Ltd (PEBSL) from State Bank of India
 to the tune of Rs. 13,813 Lacs and further the company has provided
 collateral security by way of lien on fixed deposits of Rs.200 Lacs and
 pledge of 61,50,000 shares of Pennar Engineered Building Systems Ltd
 amounting to Rs. 615 Lacs for securing the said loan.
 
 16.  In our opinion, during the year the company has raised fresh term
 loans upto an amount of Rs 15,00,00,000 from Axis Bank Ltd and the same
 were applied for the purpose for which the loans were obtained.
 
 17.  In our opinion, according to the information and explanations
 given to us and on an overall examination of statements and records of
 the company, that the funds raised on short-term basis have, prima
 facie, not been used during the year for long-term investment.
 
 18.  In our opinion, the Company has not made any preferential
 allotment of shares/securities during the year to parties and companies
 covered in the register maintained under section 301 of the Companies
 Act, 1956.
 
 19.  In our opinion, the Company has not raised money by way of public
 issue for any specific purpose during the year.
 
 20.  According to the information and explanations given to us, the
 Company has not issued debentures during the period covered by our
 report. Hence, the Company is not required to create/register/modify
 any Security/Charge
 
 21.  According to the information and explanations given to us and
 based on audit procedures performed, no fraud on or by the Company has
 been noticed during the year.
 
 
 
                                                  For RAMBABU & Co.,
 
                                              Chartered Accountants
 
                                              Firm Reg. No: 002976S
 
 Place: Hyderabad                                      RAVI RAMBABU
 
 Date: 29th May, 2012                                       Partner
 
                                                Mebership.No. 18541