1.  We have audited the attached Balance Sheet of Rico Auto Industries
 Limited as at 31st March, 2011 and also the Profit & Loss Account 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 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 misstatements. 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, we enclose in the Annexure a
 statement on the matters specified in paragraphs 4 & 5 of the said
 Order.
 
 4.  Further to our comments in the Annexure referred to 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, Profit & Loss Account and Cash Flow Statement
 dealt with by this report are in agreement with the books of account.
 
 iv) 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
 Companies Act, 1956;
 
 v) On the basis of the written representations received from the
 Directors, as on 31st March, 2011 and taken on record by the Board of
 Directors, we report that none of the Directors is disqualified as on
 31st March, 2011 from being appointed as a Director in terms of
 requirement under section 274(1)(g) 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 together with the
 Significant Accounting policies and notes appearing thereon as
 contained in Schedule 15 give the information as 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 the case of the Balance Sheet, of the state of affairs of the
 Company as at 31st March, 2011.
 
 (b) In the case of the Profit and Loss Account, of the profit for the
 year ended on that date.
 
 (c) In the case of Cash Flow Statement, of the cash flow for the year
 ended on that date.
 
 ANNEXURE REFERRED TO IN PARAGRAPH ‘3'' OF THE AUDITORS'' REPORT ON THE
 ACCOUNTS OF RICO AUTO INDUSTRIES LIMITED FOR THE YEAR ENDED 31st MARCH,
 2011
 
 i) (a) The Company has maintained proper records to show full
 particulars, including quantitative details and situation of all fixed
 assets.
 
 (b) Fixed Assets have not been physically verified by the management
 during the year but there is a regular programme of verification except
 for furniture and fixtures and office equipments which, in our opinion,
 is reasonable having regard to the size of the Company and nature of
 its assets. No material discrepancies were noticed on such
 verification.
 
 (c) No substantial part of fixed asset has been disposed off during the
 year.
 
 ii) (a) The Inventory has been physically verified during the year by
 the management. In our opinion, the frequency of verification is
 reasonable.
 
 (b) The procedures of physical verification of inventories followed by
 the management are reasonable and adequate in relation to the size of
 the Company and its nature of business.
 
 (c) On the basis of our examination of the records of inventory, we are
 of the opinion that the Company is maintaining proper records of
 inventory. The discrepancies noticed on verification between the
 physical stocks and the book records were not material.
 
 iii) (a) The Company has granted loans secured or unsecured to the
 following Companies, Firms or other parties listed in the register
 maintained under section 301 of the Companies Act, 1956.
 
                                                       (Rs. in Crores)
 
                                                              Maximum
                                                               amount
                                                          outstanding
                                                         at any point
 Sl.  Name of         Relationship       Year end          during the
 No.  Party           with Party         Balance                 year
 
 a)   Rico Jinfei     92.5% Joint        25.25                  26.22
      Wheels          Venture &
      Limited         Subsidiary
      Company
 
 b)   Rasa Autocom    100% Subsidiary    14.03                  14.03
      Limited         Company
 
 c)   Uttarakhand     100% Subsidiary    18.29                  18.29
      Automotives     Company
      Limited
 
 d)   RAA Autocom     100% Subsidiary     4.60                   4.60
      Limited         Company
 
 (b) In our opinion the rate of interest wherever applicable and other
 terms and conditions on which the loans have been granted to Companies,
 Firms or other parties listed in the register maintained under section
 301 of the Companies Act, 1956 are not, prima facie, prejudicial to the
 interest of the Company.
 
 (c) In respect of loans given by the Company, which are repayable on
 demand, the question of overdue amount does not arise hence Clause 4
 (iii) (d) is not applicable.
 
 (d) The Company has not taken any loans, secured or unsecured from
 Companies, Firms or other parties listed in the register maintained
 under section 301 of the Companies Act, 1956. Hence Clause 4 (iii)(f)
 and Clause 4 (iii)(g) is not applicable.
 
 iv) 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 with regard to purchases of inventory, fixed assets and for
 sale of goods and services. During the course of audit, we have not
 observed any continuing failure to correct major weakness in internal
 controls.
 
 v) (a) Based on our audit procedure and according to information and
 explanation given to us by the management, we are of the opinion that
 the transactions that need to be entered in the register maintained
 under section 301 of the Companies Act, 1956 have been so entered.
 
 (b) Based on our audit procedure and according to information and
 explanation given to us by the management, we are of the opinion that
 the transaction made in pursuance of contracts and arrangements entered
 in the register maintained under section 301 in respect of any party
 during the year have been made at prices which are reasonable having
 regard to prevailing market prices at the relevant time.
 
 vi) According to the information and explanation given to us, the
 Company has not accepted any deposits from the public under section 58A
 and 58AA of the Companies Act, 1956 and the Companies (Acceptance of
 Deposits) Rules, 1975.
 
 vii) In our opinion and according to the information and explanations
 given to us, the Company has an adequate internal audit system
 commensurate with the size and nature of its business.
 
 viii) We have broadly reviewed the books of accounts relating to
 materials, labour and other items of cost maintained by the Company
 pursuant to the rules made by the Central Government for the
 maintenance of cost records under section 209(1)(d) of the Companies
 Act, 1956 and we are of the opinion that prima facie the prescribed
 accounts and records have been made and maintained. However, we have
 not carried out detailed examination of the same.
 
 ix) (a) According to the records, undisputed statutory dues including
 Provident Fund, Investor Education & Protection Fund, Employees State
 Insurance, Income Tax, Wealth Tax, Sales Tax, Customs Duty, Excise
 Duty, Education Cess and Service Tax have been deposited with the
 appropriate authorities, though there has been delay in some cases in
 deducting and depositing of Provident Fund and Service Tax. According
 to the information and explanation given to us, there are no undisputed
 amounts payable in respect of Provident Fund, Investor Education &
 Protection Fund, Employees State Insurance, Income Tax, Wealth Tax,
 Sales Tax, Customs Duty, Excise Duty, Education Cess and Service Tax
 which were outstanding, as at 31st March, 2011 for a period of more
 than six months, from the date they became payable.
 
 (b) According to the information and explanations given to us, no dues
 of Provident Fund, Investor Education & Protection Fund, Employees
 State Insurance, Income Tax, Wealth Tax, Sales Tax, Customs Duty,
 Excise Duty, Education Cess and Service Tax which have not been
 deposited on account of any dispute except the following:
 
                                                        Forum where 
 Sl.   Name of          Nature of       Amount          dispute is
 No.   Statute          dues             (Rs.)          pending
 
 a)  H.G.S.T. Act &     Sales Tax     6,54,47,898       Joint Excise
     Central Sales                                      & Taxation
     Tax Act                                            Commissioner
                                                        (Appeal),
                                                        Faridabad
 
 b)  Local Area         LADT                92,691      Joint
     Development                                        Commissioner
     Tax                                                (Appeal),
     Faridabad
 
 c)  Income Tax         TDS           11,15,13,080      Assessing
     Act                                                officer, Income
                                                        Tax, Gurgaon
 
 d)  Central            Excise Duty    5,79,18,563      Customs,
     Excise &           & Service                       Excise &
     Service            Tax                             Service Tax
     Tax Act                                            Appellate
                                                        Tribunal,
                                                        New Delhi
 
 x) The Company has no accumulated losses and has not incurred any cash
 losses during the financial year covered by our audit or in the
 immediately preceding financial year.
 
 xi) Based on our audit procedures and on the information and
 explanations given by the management, we are of the opinion that the
 Company has not defaulted in repayment of dues to any financial
 institution and banks.
 
 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,
 during the year under audit.
 
 xiii) In our opinion, the Company is not a chit fund or a nidhi/ mutual
 benefit fund/society. Therefore, the provisions of clause 4(xiii) of
 this order are not applicable to the Company.
 
 xiv) According to the information and explanations provided to us, we
 are of the opinion that the Company is not dealing in or trading in
 shares, securities, debentures and other investments. Accordingly the
 provisions of clause 4(xiv) of this order are not applicable to the
 Company.
 
 xv) According to the information and explanations given to us, the
 Company has let its Wholly Owned Subsidiary Rasa Autocom Limited
 utilise its non funded letter of credit limits from Yes Bank Limited to
 the extent of Rs.5.00 Crores only and actual utilization thereof as on
 31st March, 2011 was Rs.3.84 Crores. There are no specifically
 stipulated terms and conditions between the Companies.
 
 xvi) According to information and explanations given to us, the Company
 has raised Term Loans amounting to Rs.133.00 Crores during the year for
 various purposes like re-imbursement of capital expenditure, re-payment
 of short debts, shoring up of working capital limits, general corporate
 purposes, etc. On the basis of overall examination of the
 
 Balance Sheet and as per confirmation given by the Management, Rs.83.33
 Crores have been incurred for capital expenditure purposes, Rs.20.82
 Crores for shoring up of net working capital limits and balance
 Rs.28.85 Crores towards re-payment of other short term debts.
 
 xvii) According to the information and explanation given to us and on
 an overall examination of the Balance Sheet of the Company, we report
 that funds raised on short term basis have not been used for long-term
 investment.
 
 xviii)During the period covered by our audit report, the Company has
 converted 64,30,000 warrants into equity shares of Re.1/- each at a
 premium of Rs.16.50 per share on preferential basis to parties and
 companies covered in the register maintained u/s 301 of the Companies
 Act, 1956.
 
 xix) During the period covered by our audit report, the Company has not
 issued any debentures.
 
 xx) The Company has not raised any money by way of public issue.
 
 xxi) Based upon the audit procedures performed and information and
 explanations given by the management, we report that no fraud on or by
 the Company has been noticed or reported during the course of our
 audit.
 
                                                  For GUPTA VIGG & CO.
                      
                                                  Firm Regn.No.001393N
                                                 Chartered Accountants
 
                                                        CA. KAWAL JAIN
 
 Place : Gurgaon                                               PARTNER
 
 Dated : 21st May, 2011                           Membership No.089214