Praj Industries

We have audited the attached Balance Sheet of Praj Industries Limited
 as at 31st March, 2009, and also the Profit and Loss Account and 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.
 
 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
 for our opinion.
 
 1.  As required by the Companies (Auditors 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 the 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:
 
 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 the books
 and proper returns adequate for the purposes of our audit have been
 received from the branches not visited by us;
 
 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;
 
 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 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 is disqualified as on
 31st March, 2009 from being appointed as Director in terms of clause
 (g) of sub-section (1) of Section 274 of the Companies Act, 1956 on the
 said date;
 
 f) In our opinion, and to the best of our information and according to
 the explanations given to us, the said accounts, read together with the
 Companys Accounting Policies and the Notes 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:
 
 i) in the case of the Balance Sheet, of the state of affairs of the
 Company as on 31st March, 2009;
 
 ii) in the case of the Profit and Loss Account, 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 paragraph 1 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 company has a programme of physical verification of fixed
 assets by which all fixed assets are verified in a phased manner over a
 period of two years. In our opinion, this periodicity of physical
 verification is reasonable having regards to the size of the Company
 and the nature of its assets. No material discrepancies were noticed on
 such verification.
 
 (c) Fixed assets disposed off during the year were not substantial and
 therefore do not affect the going concern assumption.
 
 (ii) (a) The inventory, except goods-in-transit and stocks lying with
 the third parties, has been physically verified by the management
 during the year. In our opinion, the frequency of such verification is
 reasonable. For stocks lying with the third parties at the year end,
 written confirmations have been obtained.
 
 (b) The procedures for the 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 and according to information and explanation given
 to us and on the basis of our examination of the records of the
 inventory, the Company is maintaining proper records of inventory.
 Discrepancies noticed on verification between the physical stocks and
 the book records were not material and have been appropriately dealt
 with in the books of account.
 
 (iii) The Company has neither granted nor taken any loans, secured or
 unsecured, to or from companies, firms or other parties covered in the
 registered maintained under Section 301 of the Companies Act, 1956
 (the Act)
 
 (iv) In our opinion and according to the information and explanations
 given to us, there is an adequate internal control system commensurate
 with the size of the Company and the nature of its business with regard
 to purchase of inventories and fixed assets and with regard to the sale
 of goods and services. In our opinion and according to the information
 and explanations given to us, there is no continuing failure to correct
 major weakness in internal control system.
 
 (v) (a) In our opinion and according to information and explanation
 given to us, there are no transaction for purchase of services made in
 pursuance of contracts and arrangements between the parties referred to
 in Section 301 of the Act. Thus the particulars relating to the same
 have not been entered in the register required to be maintained under
 the Section 301 of the Act.
 
 (b) In view of the above, this clause is not applicable.
 
 (vi) The Company has not accepted any deposits from the public.
 Therefore, the provisions of Section 58A and 58AA and any other
 relevant provisions of the Companies Act, 1956 and rules framed
 thereunder are not applicable.
 
 (vii) In our opinion, the Company has an internal audit system
 commensurate with the size and nature of its business.
 
 (viii) According to the information and explanations given to us, the
 Central Government has not prescribed the maintenance of cost records
 under Section 209(1) (d) of the Act for any of the products
 manufactured/services rendered by the Company.
 
 (ix) (a) According to the information and explanations given to us and
 on the basis of our examination of the records of the Company, the
 Company has been regular in depositing amounts deducted/accrued in the
 books of account in respect of undisputed statutory dues including
 Provident Fund, Investor Education and Protection Fund, Employees
 State Insurance, Income- Tax, Sales-Tax, Wealth-Tax, Service-Tax,
 Customs Duty, Excise Duty, cess and other material statutory dues with
 the appropriate authorities.
 
 According to the information and explanations given to us, no
 undisputed amounts payable in respect of Provident Fund, Investor
 Education and Protection Fund, Employees State Insurance, Income-Tax,
 Sales- Tax, Wealth-Tax, Service-Tax, Customs Duty, Excise Duty, cess
 and other material statutory dues were in arrears as at 31st March,
 2009 for the period of more than six months from the date they became
 payable.
 
 As explained to us, the Company did not have any dues on account of
 cess under Section 441A of the Act since the aforesaid Section has not
 yet been made effective by the Central Government.
 
 (b) According to the information and explanations given to us, there
 are no dues of Income-Tax, Sales- Tax, Wealth-Tax, Service-Tax, Customs
 Duty and Excise Duty, which have not been deposited with the
 
 appropriate authorities on account of disputes other than those
 mentioned below :
 
 Name of statute         Nature of dues                   Amount
                                                    (in millions)
 
 Central Sales Tax Act,  Demand on account of non-          3.91
 1956                    submission of statutory
                         declaration forms
 
 Central Sales Tax Act,  Demand on account of non-          1.19
 1956                    submission of statutory
                         declaration forms
 
 Income Tax Act, 1961    Demand on account of               3.76
                         Assessment Order
 
 Period to              Forum where pending
 which the
 amount relates
 
 F.Y. 2002-03           Deputy Commissioner (Appeals)
 
 F.Y. 2003-04           Deputy Commissioner (Appeals)
 
 F.Y. 2002-03           CIT (Appeals)
 
 (x) The Company does not have accumulated losses at the end of the
 financial year and has not incurred any cash losses in the financial
 year and the immediately preceding financial year.
 
 (xi) In our opinion and according to the information and explanations
 given to us, the Company has not defaulted in payment of dues to its
 bankers or to any financial institutions. The Company did not have any
 outstanding debentures during the year.
 
 (xii) 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 and according to the information and explanations
 given to us, the Company is not chit fund or in nidhi/mutual benefit
 fund/society.
 
 (xiv) According to the information and explanations given to us, the
 Company is not dealing or trading in shares, securities, debentures and
 other investments.
 
 (xv) According to the information and explanations given to us, the
 Company has not given any guarantee for loans taken by others from
 banks or financial institutions, except against line of credit made
 available to subsidiary Praj Schneider Inc amounting to Rs. 50.00
 million and the terms and conditions thereof are not prejudicial to the
 interest of the company.
 
 (xvi) The Company did not have any term loans outstanding during the
 year.
 
 (xvii) According to the information and explanations given to us and on
 an overall examination of the Balance Sheet of the Company, we are of
 the opinion that funds raised on short term basis have not been used
 for long-term investment.
 
 (xviii)According to the information and explanations given to us,
 during the year, the Company has not made preferential allotment of
 shares to parties covered in the register maintained under Section 301
 of the Act.
 
 (xix) The Company did not have any outstanding debentures during the
 year.
 
 (xx) The Company has not raised any money by public issues.
 
 (xxi) According to the information and explanations given to us, no
 fraud on or by the Company has been noticed or reported during the
 course of our audit.
 
                                              FOR B. K. KHARE & CO.
                                             CHARTERED ACCOUNTANTS
 
                                                       U. B. JOSHI
 PLACE : PUNE                                              PARTNER
 DATED : 21 APRIL 2009                      MEMBERSHIP NO.: 044097