We have audited the attached Balance sheet of Sarla Performance Fibers
 Ltd. (Formerly known as Sarla Polyester Limited) as at 31st March, 2011
 and also the Profit and Loss Account and the Cash Flow Statement of the
 Company 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.
 
 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.
 
 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 statement on
 the matters specified in paragraphs 4 and 5 of the said Order.
 
 Further to our comments in the Annexure referred to 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 accounts as required by law have
 been kept by the company so far as appears from our examination of
 those books.
 
 C.  The Balance Sheet, Profit & Loss Account and 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 Companies Act, 1956.
 
 E.  On the basis of 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 clause
 (g) of sub-section (1) of section 274 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
 Significant Accounting Policies and subject to note no. 4 regarding non
 provision of interest receivable from wholly owned subsidiary company
 and notes thereon give the information 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;
 
 i.  In the case of Balance sheet of the state of affairs of the company
 as at 31st March, 2011; 
 
 ii.  In the case of Profit and Loss account of the profit of the
 company for the year ended on that date; and 
 
 iii.  In the case of the Cash Flow Statement, of the cash flows of the
 Company for the year ended on that date.
 
 ANNEXURE TO AUDITORS'' REPORT
 
 As required by the “Companies (Auditors - Report) order, 2003” issued
 by the Department of Company affairs in terms of section 227 (4A) of
 the Companies Act, 1956, we report as under: -
 
 1.  a) The company has maintained proper records showing full
 particulars including quantitative details and situations of fixed
 assets. The management during the year has physically verified the
 fixed assets. We are informed that the management on such verification
 has noticed no material discrepancies.
 
 b) As explained to us, the management during the year has physically
 verified all the assets. Having regard to the size of the operations
 and on the basis of explanations received, in our opinion, no serious
 discrepancies have been noticed.
 
 c) The company has not disposed of any substantial part of its fixed
 assets so as to affect its going concern.
 
 2.  a) The inventories have 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 stocks followed by the
 management are reasonable and adequate in relation to size of the
 company and the nature of its business.
 
 c) The company is maintaining proper records of the inventory. As
 explained to us, there is no material discrepancy noticed on physical
 verification of inventory as compared to book records.
 
 3.  a) The company had granted interest free unsecured loan to one
 company covered in the register maintained u/s 301 of the Companies
 Act, 1956. The amount involved during the year was Rs. 149.85 Lacs and
 closing balance Nil.  The terms of repayment and interest are not
 stipulated hence we do not offer any comments on para 4(iii)(b) & (c)
 of the Companies (Auditor''s Report) Order, 2003.
 
 b) The company has not taken any loan, secured or unsecured, from
 companies, firms and other parties covered in the register maintained
 u/s 301 of Companies Act, 1956 and hence para 4(iii)(e) & (f) of the
 Companies (Auditor''s Report) Order, 2003 are not applicable to the
 company.
 
 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 regards to purchase of inventory, fixed assets and with
 regards to the sale of goods. During the course of our audit we have
 not observed any continuing failure to connect major weakness, in
 Internal Control System.
 
 5.  a) According to the information and explanation given to us, we are
 in opinion that the transactions made in pursuance of contracts or
 arrangements, that needed to be entered in the register maintained U/s
 301 of the companies Act, 1956 have been so entered.
 
 b) In our opinion and according to the information and explanation
 given to us, the transactions in pursuance of contracts or arrangements
 entered in the register maintained U/s 301 of the companies Act, 1956
 and are 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 prevailing market prices at the relevant time.
 
 6.  In our opinion and according to the information and explanations
 given to us, the company has not accepted any deposit from public.
 
 7.  In our opinion, the company has an internal audit system
 commensurate with its size and nature of the business.
 
 8.  We have broadly reviewed the books of account 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 u/s 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. We have not, however, made a
 detailed examination of the same.
 
 9.  a) According to the records of the company, undisputed statutory
 dues including provident fund, investor education and protection fund,
 employees state insurance, income tax, sales tax, wealth tax, custom
 duty, Excise duty, service tax, cess and other material statutory dues
 applicable to it have generally been regularly deposited with the
 appropriate authorities.
 
 b) According to the information and explanations given to us, no
 undisputed amounts payable in respect of income tax, wealth tax, sales
 tax, custom duty, service tax, excise duty and cess were outstanding as
 at 31st March, 2011 for a period of more than six months from the date
 they became payable.
 
 c) According to the information and explanation given to us, there are
 no dues of income tax, wealth tax, sales tax, custom duty, service tax,
 excise duty and cess which have not been deposited on account of any
 dispute except as stated below:
 
 Nature of the       Amount in  Period to Which    Forum Where the
 Dues                   Rupees  Amount Relates     Dispute is 
                                                   pending
 
 Excise Duty      17,81,81,008  F.Y. 1999-2000 to  High Courts of
                                2009-2010          Vapi, Ahmadabad
                                                   and Bombay and 
                                                   Supreme Court of
                                                   India.
 
 Custom Duty          4,75,000  F.Y. 1999-2000,    CESTAT
                                2000-2001 
 
 Income Tax          13,16,645  A.Y. 2003-2004     Income Tax 
                                                   Appellate 
                                                   Tribunal
 
 Income Tax           9,93,080  A.Y. 2007-2008     Comm. Of Income 
                                                   Tax Appeals
 
 Income Tax          30,55,951  A.Y. 2008-2009     Comm. Of Income 
                                                   Tax Appeals
 
 10.  The company has no accumulated losses and the company has not
 incurred any cash losses during the financial year covered under audit
 or in the immediately preceding financial year.
 
 11.  Based on our audit procedure and according to the information and
 explanation given to us, we are of the opinion that the company has not
 defaulted in repayment of dues to financial institutions, banks and
 debenture holders.
 
 12.  The company has not granted loans and advances on the basis of
 security by way of pledge of shares, debentures and other securities.
 
 13.  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
 the Companies (Auditor''s Report) Order, 2003 are not applicable to the
 company.
 
 14.  In our opinion, the company is not dealing in or trading in
 shares, securities, debentures and other investments.
 
 15.  In our opinion, the company has not given guarantees for loans
 taken by others from banks or financial institutions.
 
 16.  In our opinion, the term loans have been applied for the purpose
 for which they were raised.
 
 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 the funds raised on short-term basis have not been used for
 long-term investment.
 
 18.  According to the information and explanations given to us, the
 company has not made preferential allotment of shares to parties and
 companies covered in the register maintained under section 301 of the
 Companies Act 1956.
 
 19.  According to the information and explanations given to us, during
 the year covered by our audit report, the company has not issued any
 debentures.
 
 20.  According to the information and explanations given to us the
 company has not raised any money by public issue during the period
 covered by our audit report.
 
 21.  According to the information and explanations given to us, no
 fraud on or by the company has been noticed or reported during the
 course of our audit.
 
                                       For SUNDARLAL, DESAI & KANODIA
                                                Chartered Accountants
                                   Firm Registration Number - 110560W
 
                                                          M. B. DESAI
                                                              Partner
                                                 Membership No. 33978
 
 Place: Mumbai.
 Date : 10th May, 2011