Rico Auto

1.  We have audited the attached Balance Sheet of Rico Auto Industries
 Limited as at 31st March, 2009 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
 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 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 A 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 purposes 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, 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 a Director in terms of clause
 (g) of sub-section (1) of section 274 of the Companies Act, 1956.
 
 vi) During the financial year under audit, the Company has opted and
 changed its accounting policy for exchange difference arising on
 reporting of long term Foreign Currency monetary items in line with the
 notification of the Companies (Accounting Standards)(AS-11) Amendment
 Rules, 2009 on 31st March, 2009. Accordingly Profits/ Losses arising
 from the effect of changes in Foreign Exchange Rates on Foreign
 Currency Loans relating to acquisition of depreciable capital assets
 amounting to Rs.6.27 crores for the year ended 31st March, 2009 are
 added to the cost of such assets. Consequent to the change, the
 depreciation for the year is higher by Rs.0.03 crore and the profit for
 the year is higher by Rs.6.24 crores.  The corresponding Foreign
 Exchange loss of Rs.5.38 crores (net of depreciation) for the year
 ended 31st March, 2008 has been added to the cost of such assets and
 Rs.1.83 crores has been transferred to Deferred Tax Liability and
 Balance of Rs.3.55 crores has been credited in General Reserves.
 
 vii) As stated in Note No. 18 of Schedule 15 to the Notes on Accounts,
 we report that the Company has paid Rs.1.39 crores as managerial
 remuneration to the Managing Director & Joint Managing Director, which
 is in excess of the limit under the Act by Rs.0.91 crore. Had the
 Company accounted for the managerial remuneration in accordance with
 the Act, the profit after tax would have been higher by Rs.0.60 crore
 and Loans and Advances would have been higher by Rs.0.91 crore.
 
 viii) Subject to our comments in Para (vii) above, 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, Para (vi) above 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, 2009.
 
 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 flows for the year
 ended on that date.
 
 
 ANNEXURE A REFERRED TO IN PARAGRAPH 4 OF THE AUDITORS REPORT ON THE
 ACCOUNTS OF RICO AUTO INDUSTRIES LIMITED FOR THE YEAR ENDED 31st MARCH,
 2009
 
 1.  The Company has maintained proper records to show full particulars,
 including quantitative details and situation of all fixed assets.
 
 2.  All the fixed assets have been physically verified by the
 management during the year except for furniture and fixture 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.
 
 3.  No substantial part of fixed asset has been disposed off during the
 year.
 
 4.  The inventory has been physically verified during the year by the
 management. In our opinion, the frequency of verification is
 reasonable.
 
 5.  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.
 
 6.  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.
 
 7.  According to the explanation and information given to us, the
 Company has not taken any loans from Companies, Firms or other parties
 covered in the register maintained under section 301 of the Companies
 Act, 1956.
 
 8.  According to the explanation and information given to us, the
 Company has granted loans to the following Companies, Firms or other
 parties covered in the Register maintained under section 301 of the
 Companies Act, 1956.
 
                                                 (Rs. in Crores)
 
                                                       Maximum
                                                       Amount
                                                       outstanding
 Sl.  Name of    Relationship     Year end             at any point
 No.  Party      with Party       Balance              during the year
 
 i) Rico Jinfei      92.5%          4.64                5.23
 
    Wheels       Joint Venture
    Limited      & Subsidiary
    Company
 ii)Rasa            100%            5.28                5.28
    Autocom       Subsidiary
    Limited       Company
 
 iii) Uttarakhand   100%           16.79               16.79
 Automotives      Subsidiary 
 Limited          Company
 
 iv) Raa            100%            4.39                4.39
 Autocom          Subsidiary
 Limited          Company
 
 9.  In our opinion the rate of interest wherever applicable and other
 terms and conditions on which loan have been granted to companies,
 firms or other parties listed in the registers maintained under section
 301 are not, prima facie, prejudicial to the interest of the Company.
 
 10.  In respect of loan given by the Company, which are repayable on
 demand, the question of overdue amount does not arise.
 
 11.  There is no overdue amount of loans granted to companies, firms or
 other parties listed in the register maintained under section 301 of
 the Companies Act, 1956.
 
 12.  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 with regard to the sale of
 goods and services. During the course of our audit, no major weakness
 has been noticed in the internal controls.
 
 13.  The particulars of contracts or arrangements referred to in
 section 301 of the Act have been entered on the register required to be
 maintained under that section.
 
 14.  In our opinion and according to the information and explanations
 given to us, the transactions made in pursuance of contracts and
 arrangements entered in the Register maintained under section 301 are
 for purchase of certain items of inventories and fixed assets which are
 for the Companys specialized requirements and similarly for sale of
 certain goods for specialized requirements of the buyer and for which
 suitable alternative sources are not available to obtain comparable
 quotations. However, on the basis of information and explanations
 provided to us, the same appear to be reasonable having regard to
 prevailing market prices at the relevant time.
 
 15.  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.
 
 16.  In our opinion the Company has an internal audit system
 commensurate with the size and nature of its Business.
 
 17.  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.
 
 18.  Undisputed statutory dues including Provident Fund, Investor
 Education and Protection Fund, Employees State Insurance, Income Tax,
 Wealth Tax, Sales Tax, Customs Duty, Excise Duty, Education Cess and
 Service Tax have generally been deposited with the appropriate
 authorities though there has been slight delay in few cases. According
 to the information and explanations given to us, there are no
 undisputed amounts payable in respect of Provident Fund, Investor
 Education and 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, 2009 for a period
 of more than six months, from the date they became payable.
 
 19.  According to the records of the Company, no dues of Sales Tax,
 Income Tax, Customs Duty, Wealth Tax, Excise Duty, Education Cess and
 Service Tax which have not been deposited on account of any dispute
 except those mentioned below:
 
                                                    Forum where
 Sl.  Name of       Nature of    Amount             dispute
 No.  Statute       Dues         (Rs.)              is pending
 
 i)   H.GST      Sales Tax   6,34,11,214            Joint Excise
      Act &                                         & Taxation
      Central                                       Commissioner
      Sales                                         (Appeal),
      Tax Act                                       Faridabad
 ii)  Local Area   LADT            92,691           Joint
      Development                                   Commissioner
      Tax                                           (Appeal),
                                                    Faridabad
 iii) Income      Income Tax    91,37,150           Commissioner
      Tax Act                                       of Income Tax,
                                                    Chandigarh
 iv)  Central     Excise       3,79,22,629          Customs,
      Excise &    Duty &                            Excise &
      Service     Service Tax                       Service
      Tax Act                                       Tax Appellate
                                                    Tribunal,
                                                    New Delhi
 
 20.  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.
 
 21.  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 bank.
 
 22.  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.
 
 23.  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.
 
 24.  In our opinion, 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.
 
 25.  According to the information and explanation given to us, the
 Company has not given any guarantee for loans taken by others from
 banks or financial institutions.
 
 26.  According to the information and explanation given to us, the
 Company has raised the following Term Loans and applied the same as
 follows:
 
 (Rs. in Crores)
 
 Name of          Term Loan      Purpose           Application
 the Banks
 
 IDBI Bank         50.00         Capital           For reimbursement
 Limited                         expenditure       of capital
                                                   expenditure
 Standard           7.50         Capital           Partly for
 Chartered                       expenditure       reimbursement of
 Bank                                              capital expenditure
                                                   & partly for
                                                   repayment of Short
                                                   Term Loan
 Yes Bank         25.00          General           For repayment of
 Limited                         Corporate         Short Term Loan
                                 purpose
 
 27.  According to the information and explanations 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.
 
 28.  During the period covered by our audit report, the Company has not
 made any preferential allotment of shares to parties and companies
 covered in the Register maintained u/s 301 of the Act.
 
 29.  During the period covered by our audit report, the Company has not
 issued any debentures.
 
 30.  The Company has not raised any money by way of public issue.
 
 31.  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.  
                                        Chartered Accountants
                                               CA. KAWAL JAIN
 Place :Gurgaon                                       PARTNER
 Dated : 24th June, 2009                  Membership No. 89214