1.  We have audited the attached Balance Sheet of RAINBOW PAPERS
 LIMITED as at 31st March 2012, and also 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.
 
 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 the companies (Auditor''s Report) (Amendments) Order 2004
 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.  Further to our comments in the Annexure referred to in Paragraph 3
 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 accounts 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
 and Cash Flow Statement dealt with this Report comply with the
 Accounting Standards referred to in Sub-section (3C) of Section 211 of
 the Companies Act, 1956;
 
 vi.  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
 31st March, 2012 from being appointed as a Director in terms of Clause
 (g) of Sub-Section (1) of Section 274 of the Companies Act, 1956;
 
 vii. 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
 Significant Accounting Policies and notes thereon, give the information
 required by the Companies Act, 1956, in the manner so required and
 gives a true and fair view in conformity with the accounting principles
 generally accepted in India;
 
 (a) In the case of the Balance Sheet, of the state of affairs of the
 Company as at 31st March, 2012.
 
 (b) In the case of the Statement of Profit and Loss, of the profit for
 the year ended on that date.
 
 (c) In the case of the Cash Flow statement, of the cash flows for the
 year ended on that date.
 
 ANNEXURE TO THE AUDITORS'' REPORT (Referred to in paragraph (3) of our
 Report of even date)
 
 i) a. The Company is maintaining proper records showing full
 particulars including quantitative details and situation of fixed
 assets.
 
 b.  As explained to us, the Company has a phased program of physical
 verification of its fixed assets, which in our opinion, is reasonable,
 having regard to the size of the Company and nature of its business.
 During the year, the company has physically verified some of the assets
 and no material discrepancies were noticed on such verification.
 
 c.  In our opinion, the Company has not disposed of substantial part of
 fixed assets during the year and hence the going concern status of the
 Company is not affected.
 
 ii) a. The inventory has been physically verified during the year by
 the management. 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.  On the basis of our examination of the records of the Company, we
 are of the opinion that the company is maintaining proper records of
 inventories. As explained to us, there was no material discrepancies
 noticed on physical verification of inventories as compared to the book
 records.
 
 iii) In respect of the 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 given any Loan during the year to companies,
 firms or other parties covered in the register maintained under Section
 301 of the Companies Act, 1956. Consequently, the requirements of
 Clause 4 (iii) (b), (c)&(d) of the Order are not applicable.
 
 e) The Company has taken Loan from one party. In respect of the said
 loans, the maximum amount outstanding at any time during the year was Rs.
 2745 Lacs and year-end balance is Rs.2745 Lacs.
 
 f) In our opinion and according to the information and explanations
 given to us, the rate of interest and other terms and conditions of the
 loans taken by the Company, are not prejudicial to the interest of the
 Company.
 
 g) In respect of the said Loans and interest thereon, there are no
 overdue amounts.
 
 iv) In our opinion and according to the information and explanations
 given to us, there is an adequate internal control system & procedures
 commensurate with the size of the Company and the nature of its
 business for the purchase of inventory, fixed assets and also with
 regard to the sale of goods and services. Duringthe course of our
 audit, we have not observed any continuing failure to correct major
 weaknesses in internal control system
 
 v) In our opinion and according to the information and explanations
 given to us, there were no transactions exceeding Rs. 5 Lacs with any
 party covered under section 301 of the Companies Act, 1956 that needs
 to be entered into the register maintained under the said section.
 Hence clause 4 (v)
 
 (b) of the Order is not applicable.
 
 vi) In our opinion and according to the information and explanations
 given to us, the Company has not accepted any deposit from the public
 and hence the provisions of Section 58A and 58AA or any other relevant
 provisions of the Companies Act, 1956 and the Companies (Acceptance of
 Deposits) Rules, 1975 with regard to the deposits accepted from the
 public are not applicable to the Company.
 
 vii) The Company has appointed a firm of Chartered Accountants as its
 Internal Auditor for the year under audit. The internal audit for the
 year is therefore carried out by the said firm. In our opinion, the
 Company has an internal audit system commensurate with the size of the
 company and nature of its business.
 
 viii) We have broadly reviewed the cost records maintained by the
 Company pursuant to the Companies (Cost Accounting Records) Rules, 2011
 prescribed by the Central Government under section 209(l)(d) of the
 Companies Act, 1956 and are of the opinion that prima facie the
 prescribed cost records have been maintained. We have, however, not
 made a detailed examination of the cost records with a view to
 determine whether they are accurate or complete.
 
 ix) a. According to the information & explanations given to us,
 undisputed statutory dues including Provident Fund, Employee State
 Insurance, Income Tax, Sales tax, Wealth Tax, Service Tax, Customs
 Duty, Excise Duty, Cess and other dues have been generally regularly
 deposited with the appropriate authorities. According to the
 information and explanations given to us, no undisputed amounts payable
 in respect of the aforesaid dues were outstanding as at 31st March,
 2012 for a period of more than six months from the date of becoming
 payable.
 
 b.  According to the information and explanations given & the records
 of the Company examined by us, the details of disputed dues not paid
 are as follows:
 
 Name of the     Nature of    Forum where    Total    Amount    Period to
 Statue          Dues         Pending        Amount   paid
                                                      under     which it
                                             Rs.      protest   relates
 
 Revenue Dept,  Additional    Gujarat 
                              Revenue        37.56 
                                             Lacs      18.78 lacs  2003
 Gujarat State  premium       Tribunal,       Interest
                on Land       Ahmedabad **
 
 ** The Tribunal has cancelled the order regarding additional premium on
 Land and the matter is again referred to The Collectors, Mehsana for
 re-valuation of premium amount.
 
 x) The Company does not have any accumulated losses at the end of the
 financial year. The Company has not incurred cash losses during the
 financial year covered by our audit and the immediately preceding
 financial year.
 
 xi) Based on our audit procedures and on the basis of information and
 explanations given by the management, we are of the opinion that the
 Company has not defaulted in repayment of dues to the banks. The
 company does not have any debentures.
 
 xii) In our opinion and according to the explanations given to us, the
 Company has not granted any loans against security by way of pledge of
 shares, debentures and other securities. Therefore the provisions of
 this clause 4 (xii) of the Order are not applicable to the Company.
 
 xiii) In our opinion, the Company is not a chit fund or a nidhi/mutual
 benefit fund/ society. Therefore, clause4(xiii) of the Order is not
 applicable to the Company.
 
 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 to the
 Company.
 
 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.
 
 xvi)In our opinion and according to the information and explanations
 given to us, the Term Loans availed by the Company have been applied
 for the purpose for which they were obtained
 
 xvii) According to information and explanation given to us and on an
 overall examination of the financial statements and other records of
 the company, we are of the opinion that funds raised on short term
 basis have not been used for long term investment. Further we report
 that unsecured loans raised from one bank are not considered as short
 term loans, as the said borrowings are rolled over and considered by
 the company available for long term period and the amount raised is
 used for long term purposes.
 
 xviii)During the year, the Company has issued 40,00,000 Equity Shares
 at a price of Rs. 61/- (face value Rs. 2/- each) amounting to Rs. 2,440 Lacs
 as preferential allotment of shares to the company covered in the
 register maintained u/s 301 of the Companies Act, 1956. The price at
 which such shares has been issued is not prejudicial to the interest of
 the Company.
 
 xix) During the year covered by our audit report, the Company has not
 issued any debentures.  Accordingly, the provision of clause (xix) of
 the Order are not applicable to the Company.
 
 xx) The Company has not raised any money by way of public issue during
 the year. However, we have verified the end use of money initially
 raised through GDR issue. The same is disclosed in the notes to the
 Financial Statements (Refer Note No. 3(e)).
 
 xxi) Based on the audit procedures performed and representation
 obtained from management we report that, no case of fraud on or by the
 Company has been noticed or reported for the year under audit.
 
                                           For Talati & Talati
 
                                         Chartered Accountants
 
                                           Firm Reg No:110758W
 
                                                  Anand Sharma
 
 Place: Ahmedabad                                      Partner
 
 Date: May 24th 2012                     Membership No: 129033