We have audited the attached Balance Sheet of Sanghvi Forging and
 Engineering Ltd. as at March 31, 2012, the Profit and Loss Account and
 also 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.
 
 1.  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 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.
 
 2.  As required by the Companies (Auditor''s Report) Order, 2003 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.
 
 3.  Further to our comments in the Annexure referred to in paragraph 2
 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 purpose of our
 audit.
 
 b) In our opinion, proper books of account, as required by the law,
 have been kept by the Company, so far as appears from our examination
 of those books.
 
 c) The Balance Sheet, the Profit & 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 & Loss Account and the
 cash flow statement dealt with by this report comply with the mandatory
 Accounting Standards referred to in sub-section (3C) of section 211 of
 the Companies Act 1956
 
 e) In our opinion, and based on information and explanation given to
 us, none of Directors are disqualified as on March 31, 2012 from being
 appointed as Directors in term of section 274(1)(g) of The Companies
 Act, 1956.
 
 f) 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 other notes thereon give the
 information required by the Companies Act, 1956, in the manner so
 required except for the classification of short term liability
 amounting to Rs.12,678.28 thousands classified as a long term liability
 resulting in understatement of short term liabilities and overstatement
 of long term liabilities by the said amount and classification of
 capital advances amounting to Rs. 67,009.22 thousands classified as
 short term loans and advances instead of long term loans and advances
 resulting in overstatement of short term loans and advances and
 understatement of long term loans and advances by the said amount,
 however it has no impact on state of affairs of the Company except
 classification which are contrary to the Schedule VI of Companies Act,
 and present a true and fair view in conformity with the accounting
 principles generally accepted in India:
 
 (i) In so far as it is relates to Balance Sheet, of the state of
 affairs of the Company as at March 31, 2012;
 
 (ii) In so far as it relates to the Profit & Loss Account, the profit
 of the Company for the year ended on that date; and
 
 (iii) In so far as it relates to the cash flow statement, of the cash
 flow of the Company for the year ended on that date.
 
 ANNEXURE TO THE AUDITOR''S REPORT
 
 (Referred to in paragraph 3 of our report of even date)
 
 1 (a) The Company has maintained proper records showing
 
 full particulars, including quantitative details and situation of its
 fixed assets. The fixed asset register is updated.
 
 (b) As explained to us, fixed assets are physically verified by the
 management at the year-end, which in our opinion, is reasonable,
 looking to the size of the Company and its nature of business, and no
 material discrepancies were noticed on such verification.
 
 (c) The Company has not disposed off any substantial part of its fixed
 assets during the year, which can affect the going concern.
 
 2 (a) As explained to us, Inventories has been physically
 
 verified during the year and at the year-end.
 
 (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) The Company is maintaining proper records of inventory. As informed
 to us the discrepancies noticed on physical verification of stocks as
 compared to book records were not Material, however, the same have been
 properly dealt with in the books of account.
 
 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. Hence, Clause (03)(a) to (d) of the Order
 are not applicable.
 
 (b) The Company has taken unsecured loans from 15 parties covered in
 the register maintained under section 301 of the Companies Act, 1956.
 The maximum balance is Rs. 417.54 Lacs (P.Y. 448.51 Lacs) and year end
 balance is Rs. 161.51 Lacs (P.Y. 347.22 Lacs.)
 
 (c) In our opinion and information given to us the rate of interest and
 other terms and conditions of loans taken by the Company, secured or
 unsecured, are prima facie prejudicial to the interest of the Company.
 
 (d) As per information given and explanation given to us, the payment
 of interest is regular and there is no stipulation as regards to
 repayment of principal.
 
 4.  In our opinion and according to the information and explanations
 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 service. During the course of our
 audit, we have not observed any continuing failure to correct major
 weakness in internal controls.
 
 5.  (a) According to the information and explanations given to us, we
 are of the opinion that the transactions that need to be entered into
 the register maintained under section 301 of the Companies Act, 1956
 have been so entered.
 
 (b) In our opinion and according to the information and explanations
 given to us, the transactions made in pursuance of contracts or
 arrangements referred to in (a) above and exceeding the value in Rs. 5
 Lacs with the parties during the year have been made at process which
 are reasonable having regard to the prevailing market prices at the
 relevant time.
 
 6.  The Company has not accepted any deposits during the year from the
 public, within the meaning of the provisions of Section 58A & 58AA of
 the Companies Act, 1956 and rules made there under. Hence, clause (vi)
 of the order is not applicable.
 
 7.  In our opinion, the Company has an internal audit system
 commensurate with its size and nature of its business.
 
 8.  We are informed that the Central Government has prescribed
 maintenance of cost records under Section 209(1) (d) of the Companies
 Act, 1956 and the Company has maintained the prescribed cost records.
 
 9.  (a) The Company is generally regular in depositing with appropriate
 authorities undisputed statutory dues including provident fund, income
 tax, custom duty, excise duty and other material statutory dues
 applicable to it.
 
 (b) According to the information and explanations given to us, there
 are no undisputed amounts payable in respect of income tax, sales tax,
 customs duty, excise duty, as at 31.03.2012 for a period of more than
 six months from the date they became payable, except Income Tax,
 Service Tax and Excise Duty dues:
 
 Name of Statue         Nature of Dues                   Amount   
                                                     (Rs. ''000)   
 
 Income Tax Act, 1961   Disallowances                    856.49
 
 Income Tax Act, 1961   Disallowances                    969.13
 
 Central Excise Act,    Wrong availment of cenvat        776.34
 1944                   credit on capital goods
 
 Central Excise Act,    For Reversal Of Credit with      915.36
 1944                   respect to Service tax Credit 
                        of BAS on paid of Foreign 
                        Commission 
 
 Central Excise Act,    Wrong availment of cenvat        346.14
 1944                   credit against input service 
                        like CHA agents etc. 
 
 
 
 
 Name of Statue         Period to which       Forum where the
                        it relates dispute    is pending
 
 Income Tax Act, 1961   A.Y. 2008-09          CIT (A)
 
 Income Tax Act, 1961   A.Y. 2009-10          CIT (A)
 
 Central Excise Act,    F.Y. 2007-08 &        Commissioner of
 1944                   2008-09               Central Excise 
                                              (Appeals)
 
 Central Excise Act,    F.Y. 2007-08,         Commissioner of
 1944                   F.Y. 2008-09 &        Central Excise 
                        F.Y. 2010-11          (Appeals)
 
 Central Excise Act,    F.Y. 2007-08,         Asst. Commissioner of
 1944                   F.Y. 2008-09,         Central Excise
                        F.Y. 2009-10 &
                        F.Y. 2010-11
 
 
 10.  The Company does not have accumulated losses at the end of the
 financial year and has not incurred any cash losses in the current
 year.
 
 11.  Based on our audit procedures and on the information and
 explanation given to us, we are of the opinion that the Company has not
 defaulted in repayment of its dues to the banks. The Company has not
 issued any debentures.
 
 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 of
 similar nature and hence maintenance of documents and records relating
 to such items are not applicable.
 
 13.  The clause (xiii) of the order is not applicable to the Company,
 as the Company is not a chit fund company or nidhi/mutual benefit
 fund/society
 
 14.  The clause (xiv) of the order is not applicable to the Company as
 the Company is not dealing or trading 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 bank
 or financial institutions.
 
 16.  According to the information and explanations given to us, the
 term loans were applied for the purpose for which they were obtained.
 
 17.  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.
 
 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 Companies Act, 1956. Hence clause (xviii) of the order is
 not applicable.
 
 19.  The Company has not issued any debentures hence clause (xix) of
 the order is not applicable.
 
 20.  The Company has raised Rs. 39,95,19,040/- (4722004 equity shares
 of Rs. 10/- each at a premium of Rs. 75/- per shares) by means of
 public issue during the year and funds have been utilised for the
 purpose for which the issue was made.
 
 21.  To the best of our knowledge and belief and according to
 information and explanation given to us no fraud on or by the Company
 has been noticed or reported during the year under report.
 
 
                                                  For Shah & Bhandari
                                                Chartered Accountants
                                                         FRN: 118852W
 
                                                      Yogesh Bhandari
                                                              Partner
                                                Membership No. 046255
 
 Place: VADODARA 
 Date : 29/05/2012