Rain Commodities

1.  We have audited the attached Balance Sheet of Rain Commodities
 Limited, as at December 31, 2008, and the related Profit and Loss
 Account and the 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 Companys
 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 (Auditors Report) Order, 2003, as
 amended by the Companies (Auditors 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, the Profit and Loss Account and the Cash Flow
 Statement dealt with by this report are in agreement with the books of
 account;
 
 (d) In our opinion, the Balance Sheet, the Profit and Loss Account and
 the 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 December 31, 2008 and taken on record by the Board of
 Directors, none of the directors is disqualified as on December 31,
 2008 from being appointed as a director in terms of clause (g) of
 sub-section (1) oi Section 274 of the Act;
 
 (f) Attention is drawn to Note VIII (a) on Schedule V - Notes to
 Accounts, regarding the incremental remuneration paid to the executive
 director of Rs. 2,520 thousands, pending the shareholders approval.
 
 (g) 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 thereto and read with paragraph (0
 above 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 December 31,2008;
 
 (ii) in the case of the Profit and 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 AUDITORS REPORT
 
 [Referred to in paragraph 3 of the Auditors Report of even date to the
 members of Rain Commodities Limited on the financial statements for the
 year ended December 31,2008]
 
 1.  (a) The Company is maintaining proper records showing full
 particulars including quantitative details and situation of fixed
 assets.
 
 (b) The fixed assets are physically verified by the management
 according to a phased programme designed to cover all the items over a
 period of three years, which in our opinion, is reasonable having
 regard to the size of the Company and the nature of its assets.
 Pursuant to the programme, a portion of the fixed assets has been
 physically verified by the management during the year and no material
 discrepancies between the book records and the physical verification
 has been noticed.
 
 (c) In our opinion and according to the information and explanations
 given to us, a substantial part of fixed assets has not been disposed
 off by the Company during the year.
 
 2.  (a) The inventory has been physically verified by the management
 during the year according to a phased programme normally so designed
 that each material item is physically verified at least once in a year
 and more often in appropriate cases. 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 as compared
 to book records were not material.
 
 3.  (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 Act.
 
 (b) The company has not taken any loans, secured or unsecured, to
 companies, firms or other parties covered in the register maintained
 under Section 301 of the Act.
 
 4.  In our opinion and according to the information and explanations
 given to us, having regard to the explanation that certain items
 purchased are of special nature for which suitable alternative sources
 do not exist for obtaining comparative quotations, 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, fixed assets
 and for the sale of goods and services.  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 system.
 
 5.  (a) In our opinion and according to the information and
 explanations 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 explanations
 given to us, the transactions made in pursuance of such contracts or
 arrangements and exceeding the value of rupees five lakhs in respect of
 any party during the year have been made at prices which are 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 Section 58A and Section 58AA of the Act and the rules
 framed there under.
 
 7.  In our opinion, the Company has an internal audit system
 commensurate with its size and nature of its business.
 
 8.  We have broadly reviewed the books of account maintained by the
 Company in respect of manufacture of cement 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 and maintained. We have
 not, however, made a detailed examination of the records with a view to
 determine whether they are accurate or complete.
 
 9.  (a) According to the information and explanations given to us and
 the records of the Company examined by us, in our opinion, the Company
 is generally regular in depositing the undisputed statutory dues
 including provident fund, employees state insurance, income-tax,
 sales-tax, wealth tax, service tax, customs duty, excise duty, cess and
 other material statutory dues as applicable with the appropriate
 authorities.
 
 (b) According to the information and explanations given to us and the
 records of the company examined by us, the particulars of dues of
 income-tax, sales-tax, wealth tax, service tax, customs duty, excise
 duty and cess as at December 31, 2008 which have not been deposited on
 account of a dispute, are as follows:
 
 Name of the          Nature of dues
 Statute
 
 Andhra Pradesh       Tax levied on issue of diesel to
 General Sales        the transporters / tax on
 Tax Act, 1957        Second sales / turnover not
                      covered by G forms etc.,
 
 The Central          Turnover not covered by forms,
 Sales Tax Act,       concessional rate not allowed,
 1956                 tax on transport charges, sales
                      tax  on  issue of diesel  to
                      transporters etc.
 
 The Central          Tax levied on issue of
 Sales Tax Act,       Diesel to the transporters
 1956
 
 Central Excise       Modvat credit availed on DG
 Act, 1944            Sets
 
 Central Excise       Cenvat credit utilized  on
 Act, 1944            service tax paid on outward
                      freight for ex-factory sales
 
 Central Excise       Cenvat credit utilized on
 Act, 1944            service tax paid on outward
                      freight for ex-factory sales
 
 Central Excise       Excise Duty paid under protest
 Act, 1944            on sales made to Government
                      and Institutional Consumers
 
 Amount in           Period to which         Forum where the
 Rupees (000)       the amount              dispute is pending
                     relates
 
 56,670              1992-93                 Sales Tax Appellate
                     to                      Tribunal, Andhra
                     2002-03                 Pradesh,
 
 5,604               1993-94 to              Sales Tax Appellate
                     1998-99 and             Tribunal, Andhra
                     2001 -02                Pradesh,
                                             Hyderabad
 
 10,972              1996-97 to              Sales Tax Appellate
                     1999-00                 Tribunal, Andhra
                                             Pradesh, Hyderabad
 
 1,689               1998-2001               Additional
                                             Commissioner (Central
                                             Excise), Hyderabad
 
 1,145               2005-2006               Commissioner
                                            (Appeals), Guntur
 
 2,747               2005-2006               Additional
                                             Commissioner (Central
                                             Excise), Tirupati
 
 1,696               2007-2008               Commissioner
                                            (Appeals), Guntur.
 
 10.  The Company has no accumulated losses as at December 31, 2008, and
 it has not incurred any cash losses in the financial year ended on that
 date or in the immediately preceding financial year.
 
 11.  According to the records of the Company examined by us and the
 information and explanations given to us, the Company has not defaulted
 in repayment of dues to any financial institution or bank as at the
 balance sheet date.
 
 12.  In our opinion and according to the information and explanations
 given to us, the terms and conditions of the guarantees given by the
 Company, for loans taken by its subsidiaries from banks or financial
 institutions, are not prejudicial to the interest of the Company.
 
 13.  The provisions of any special stature 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.  In our opinion and 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 during the current year.
 
 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.  On the basis of an overall examination of the balance sheet of the
 Company, in our opinion and according to the information and
 explanations given to us, there are no funds raised on a short term
 basis which have been used for long term purposes.
 
 18.  The Company has made preferential allotment of shares against the
 share warrants to parties and companies covered in the register
 maintained under Section 301 of the Act during the year. In our
 opinion, and according to the information and explanations given to us,
 the price at which such shares have been issued is not prejudicial to
 the interest of the company.
 
 19.  The Company has not issued any debentures during the year.
 
 20.  The Company has not raised any money by public issues during the
 year.
 
 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.
 
                                                         Partha Mitra
                                                              Partner
                                                Membership No. F50553
 
                                                 For and on behalf of
 Place : Hyderabad                                   Price Waterhouse
 Date  : March 10, 2009                         Chartered Accountants