1.  We have audited the attached Balance sheet of RAASI REFRACTORIES
 LIMITED as at 31s1 March 2011 and the related profit & Loss Account and
 Cash Flow Statement for the year ended on that date annexed thereto,
 which we have signed under reference to this report.  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 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 by Companies (Auditor''s Report) (Amendment) Order, 2004 issued
 by the Central Government of India in terms of sub-section (4A) of
 section 227 of The Companies Act, 1956'' of India (the ''Act'') and on the
 basis of such checks of the books and records of the Company 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.
 
 4.  Further to our comments in the Annexure referred to in paragraph 3
 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 & 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 & 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 Act;
 
 (e) On the basis of written representations received from the
 directors, as on 31st March 2011, and taken on record by the Board of
 Directors, none of the directors is disqualified as on 31st March 2011
 from being appointed as a director in terms of clause (g) of
 sub-section (1) of Section 274 of the Act;
 
 (f) In our opinion and to the best of our information and according to
 the explanations given to us, the said financial statements together
 with the notes thereon and attached there to give in the prescribed
 manner the information required by the Act 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 at 31sl March, 2011;
 
 (ii) in the case of the Profit & Loss Account, of the profit for the
 year ended on that date; and
 
 (iii) in the case of the Cash Flow Statement, of the cash flows for the
 year ended on that date.
 
 ANNEXURE TO AUDITOR''S REPORT
 
 (Referred to in paragraph 3 of the Auditors'' Report of even date to the
 members of RAASI REFRACTORIES LIMITED on the financial statement for
 the year ended 31st March, 2011)
 
 1.  (a) The Company is maintaining proper records showing full
 particulars including quantitative details and situation of fixed
 assets.
 
 (b) Fixed assets are physically verified by the management according to
 a phased Programme designed to coverall the fixed assets once a year,
 which in our opinion, is reasonable having regard to the size of the
 Company and the nature of its assets. No material discrepancies between
 the book records and the physical inventory have been noticed.
 
 (c) In our opinion and according to the information and explanations
 given to us, no substantial part of fixed assets has been disposed off
 by the Company during the year.
 
 2.  (a) The inventory has been physically verified by the management
 during the year-end. In our opinion, the frequency of verification is
 reasonable.
 
 (b) In our opinion, 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) On the basis of our examination of the inventory records, in our
 opinion, the company is maintaining proper records of inventory. The
 discrepancies noticed on physical verification of inventory by the
 management as compared to the book records were not material.
 
 3.  According to information and explanation given to us:
 
 (a) 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.
 
 (b) The company has taken the following unsecured loans from companies
 covered in the register maintained under section 301 of the
 CompaniesAct. 1956 ¦.
 
 (i) Unsecured loan taken from M/s Sarvesh Refractories Ltd. in the
 earlier years with interest @1% per annum and the outstanding balance
 as on the Balance Sheet date is Rs 410.72 lakhs as against the
 outstanding balance of Rs. 407.06 lakhs at the end of previous year.
 
 (ii) Unsecured interest free loan taken from M/s Sarvesh Refractory Ltd
 in the earlier year Rs. 100.00 lakhs for investment purpose is
 outstanding as on the Balance Sheet date.
 
 4.  In our opinion and according to the information and explanation
 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. Further,
 on the basis of our examination of the books and records of the
 company, and according to the information and explanations given to us,
 we have neither come across nor have been informed of any continuing
 failure to correct major weaknesses in the aforesaid internal control
 procedures.
 
 5.  (a) In our opinion and according to the information and explanation
 given to us, the particulars of contracts or arrangements referred to
 in Section 301 of the Act have been entered in the register required to
 be maintained under that section.
 
 (b) In our opinion and according to the information and explanation
 given to us, there are no transactions made in pursuance of such
 contracts or arrangements and exceeding Rupees.  Five Lakhs in respect
 of any party during the year, which have been made at prices which are
 not reasonable having regard to the prevailing market prices at the
 relevant time.
 
 6.  The company has not accepted any deposits from the public within
 the meaning of Sections 58A and 58AA of the Act and the rules framed
 there under.
 
 7.  In our opinion, the company has an internal audit system
 commensurate with the size and nature of its business.
 
 8.  According to information and explanation given to us the Central
 Government has not prescribed maintenance of cost records for the
 company as required under Section 209 (1) (d) of the Companies
 Act,1956.
 
 y. (a) According to the information and explanations given to us and
 records of the company examined by us, in our opinion, the company is
 generally depositing undisputed statutory dues in respect of income tax,
 sales tax, customs duty, excise duty, cess with the appropriate
 authorities.
 
 (b) The following undisputed statutory liabilities are outstanding for
 more than 6 months as on the balance sheet date. Service Tax - Rs.
 15,17,745.00, Provident Fund Rs.17,48,926, Professional Tax71,544
 &T.D.S. 1,32,735.
 
 (c) According to the information and explanations given to us the
 following statutory dues are disputed and have not been paid.
 
 (i) Income Tax of Rs. 13,40,608/- for the year FY. 2007-08. Demand made
 by The Asst.  Commissioner of Income Tax and the appeal pending before
 The Commissioner of Income Tax (Appeals)-IV, Hyderabad.
 
 (ii) Sales Tax of Rs. 24,99,538 for the year 2004-05. Demand made by
 The Asst.  Commissioner (CT), Nalgonda and an appeal by the company the
 Appellate Deputy Commissioner (CT) Hyderabad, Rural Division has
 remanded back the appeal to the Asst. Commissioner (CT), Nalgonda for
 revision
 
 10.  The company is having accumulated losses as at 31st March, 2011
 and it has not incurred any cash losses in the financial year ended on
 that date or in the immediately preceding financial year.
 
 11.  As per the information and explanations given to us and the
 records verified by us, no repayments of principal or interest have
 been made in case of the following financial institutions:
 
 Particulars      Principal amount     Interest     Period due from
                         Rs.             Rs.
 
 Term loan 
 from UIIC            2,51,625         4,58,156       01.04.1999
 
 12.  The Company has not granted any loans and advances on the basis of
 security by way of pledge of shares, debentures and other securities.
 
 13.  The provisions of any special statute applicable to chit
 fund/nidhi/mutual benefit fund/ societies are not applicable to the
 Company.
 
 14.  In our opinion, the Company is not a dealer or trader in shares,
 securities, debentures and other investments.
 
 15.  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.
 
 16.  In our opinion, and according to the information and explanations
 given to us, on an overall basis, the term loans have been applied for
 the purposes for which they were obtained.
 
 17.  According to the information and explanation 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 of the company.
 
 18.  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 during the year.
 
 19.  The company has not issued any debentures and hence, the
 provisions of clause 4 (xix) of the companies (Auditor Report) Order
 2003 are not applicable.
 
 20.  The company has not raised any money by public issues during the
 year hence, the provisions of clause 4(xix) of the companies (Auditor
 Report) Order 2003 are not applicable.
 
 21.  During the course of our examination of the books and records of
 the company, 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 we been informed of such case by the management.
 
                                                   For SRB& ASSOCIATES
 
                                                 Chartered Accountants
 
                                                   T. Lakshmi Narayana
 
 Date:  30.05.2011                                             Partner
 
 Place: Hyderabad                                 Membership No: 14674