1.  We have audited the attached Balance Sheet of SIMBHAOLI SUGARS
 LIMITED (the Company) as at September 30, 2010, the Profit and Loss
 Account and the Cash Flow Statement of the Company for the year ended
 on that date, both 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 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 misstatements. An audit
 includes examining, on a test basis, evidence supporting the amounts
 and the disclosures in the financial statements. An audit also includes
 assessing the accounting principles used and the significant estimates
 made by the 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 (CARO)
 issued by the Central Government in terms of Section 227(4A) 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.
 
 4.  Further to our comments in the Annexure referred to in paragraph 3
 above, we report as follows:
 
 (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 it 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 are in compliance
 with the Accounting Standards referred to in Section 211(3C) of the
 Companies Act, 1956 except for our observation in paragraph 4(f) below;
 
 (e) without qualifying our opinion, we draw attention to:
 
 (i) note 21 in schedule 17 which sets out the position regarding
 repudiation by the insurance company of the Companys insurance claim
 amounting to Rs.  4780 lacs on account of sinking of ship carrying raw
 sugar purchased by the Company. Pending completion of legal proceedings
 in the matter, the effect thereof in these accounts cannot be
 determined at this stage.
 
 (ii) note 22 in schedule 17 relating to accounting for cane purchase
 liability for the sugar season 2007-08 at Rs. 110 per quintal instead
 of State Advised Price of Rs. 125 per quintal fixed by the Uttar
 Pradesh State Government. Pending completion of legal proceedings in
 the matter, the effect thereof on these accounts cannot be determined
 at this stage.
 
 (f) as indicated in note 20 of schedule 17, the Companys management is
 confident that given the cyclicality of sugar industry, steps taken by
 the management and after considering the future projections taken on
 record by the Board of Directors, sufficient future taxable income will
 be available against which deferred tax asset (net) of Rs.  7,040.49
 Lacs will be realized in the future. Accordingly, the Company has
 recognized such deferred tax credit in these accounts. However, in our
 opinion, recognition of such deferred tax credit is not in line with
 the virtual certainty requirement of Accounting Standard 22 Accounting
 for Taxes on Income. Had such deferred tax credit not been recognized,
 loss after tax and debit balance in profit and loss account would have
 been higher by Rs. 7,040.49 lacs and deferred tax asset would have been
 lower by the same amount.
 
 Subject to the foregoing, in our opinion and to the best of our
 information and according to the explanations given to us, the said
 accounts 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 the Balance Sheet, of the state of affairs of the
 Company as at September 30, 2010;
 
 (ii) in the case of the Profit and Loss Account, of the loss 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.
 
 5. On the basis of the written representations received from the
 Directors as on September 30, 2010 taken on record by the Board of
 Directors, none of the Directors is disqualified as on September 30,
 2010 from being appointed as a director in terms of Section 274(1)(g)
 of the Companies Act, 1956.
 
 ANNEXURE TO THE AUDITORS REPORT (Referred to in paragraph 3 of our
 report of even date)
 
 Having regard to the nature of the Companys business /activities/
 result, clauses (xiii) and (xiv) of CARO are not applicable.
 
 (i) In respect of its fixed assets:
 
 (a) The Company has maintained proper records showing full particulars,
 including quantitative details and situation of the fixed assets.
 
 (b) As explained to us, the Company has a programme of physically
 verifying all its fixed assets 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 fixed assets. In accordance with this programme, some
 of the fixed assets were physically verified by the management during
 the year. The discrepancies noticed on such verification between the
 physical balances and fixed assets records were not material and have
 been properly dealt with in the books of account.
 
 (c) In our opinion and according to the information and explanations
 given to us, a substantial part of the fixed assets has not been
 disposed off by the Company during the year.
 
 (ii) In respect of its inventory:
 
 (a) During the year, the inventories have been physically verified by
 the management except for the stocks lying with third parties where
 confirmations have been received in most of the cases. In our opinion,
 the frequency of verification is reasonable.
 
 (b) In our opinion and according to the information and explanation
 given to us, the procedures of physical verification of inventories
 followed by the management are reasonable and adequate in relation to
 the size of the Company and the nature of its business.
 
 (c) In our opinion and according to the information and explanations
 given to us, the Company has maintained proper records of its
 inventories. The discrepancies noticed on physical verification of
 inventories as compared to book records were not material and have been
 properly dealt with in the books of account.
 
 (iii) In respect of loans, secured or unsecured, granted by the Company
 to companies, firms or other parties covered in the Register under
 Section 301 of the Companies Act, 1956, according to the information
 and explanations given to us:
 
 (a) The Company has granted unsecured loan of Rs. 285 lacs to a party
 during the year. The maximum amount involved during the year and the
 year end balance was Rs. 285 lacs.
 
 (b) The rate of interest and other terms and conditions of such loans
 are, in our opinion, prima facie not prejudicial to the interests of
 the Company.
 
 (c) The receipts of principal amounts and interest have been as per
 stipulations.
 
 (d) As per the information and explanations given to us and records of
 the Company, there are no overdue amounts in respect of above loan,
 including interest thereon.
 
 In respect of loans, secured or unsecured, taken by the Company from
 companies, firms or other parties covered in the Register maintained
 under Section 301 of the Companies Act, 1956, according to the
 information and explanations given to us:
 
 (a) The Company had taken interest free unsecured loans from four
 Directors. The maximum amount involved during the year was Rs. 320 lacs
 and the year end balance was Rs. 256 lacs.
 
 (b) The terms and conditions of such interest free loans taken are, in
 our opinion, prima facie not prejudicial to the interests of the
 Company.
 
 (c) The payments of principal amounts of such interest free loans are
 as per stipulations.
 
 (iv) In our opinion and according to the information and explanations
 given to us, there is an adequate internal control system commensurate
 with the size of the Company and the nature of its business with regard
 to purchases of inventory and fixed assets and the sale of goods. There
 are no sales of services. During the course of our audit, we have not
 observed any major weakness in such internal control system.
 
 (v) In respect of contracts or arrangements entered in the Register
 maintained in pursuance of Section 301 of the Companies Act, 1956, to
 the best of our knowledge and belief and according to the information
 and explanations given to us there are no contracts or arrangements
 that need to be entered into the Register maintained under the said
 Section.
 
 (vi) According to the information and explanations given to us, the
 Company has not accepted any deposit from the public during the year.
 
 (vii)In our opinion, the internal audit functions carried out during
 the year by firm of Chartered Accountants appointed by the Management
 have been commensurate with the size of the Company and the nature of
 its business.
 
 (viii) We have broadly reviewed the books of account 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 are of the opinion that prima facie the prescribed
 accounts and records have been made and maintained. We have, however,
 not made a detailed examination of the records with a view to
 determining whether they are accurate or complete.
 
 (ix) According to the information and explanations given to us in
 respect of statutory dues:
 
 (a) The Company has been regular in depositing undisputed dues,
 including provident fund, investor education and protection fund,
 employees state insurance, income-tax, sales tax, wealth tax, customs
 duty, excise duty, cess, entry tax, purchase tax and other material
 statutory dues applicable to it except for tax deducted at source,
 service tax and trade tax where there have been few delays in
 depositing these with the appropriate authorities.
 
 (b) There were no undisputed amounts payable in respect of income-tax,
 wealth tax, custom duty, excise duty, cess and other material statutory
 dues in arrears as at September 30, 2010 for a period of more than six
 months from the date they became payable.
 
 (c) Details of dues of sales tax (trade tax), excise duty and service
 tax which have not been deposited as on September 30, 2010 on account
 of disputes are given below:
 
 Statute   Nature of   Forum where       Period to     Amount   Amount 
             Dues      Dispute is        which the    involved   paid 
                       pending            amount      (Rs. lacs) under
                                         relates                protest
                                                               (Rs. lacs)
 
 U. P. 
 Trade    Trade tax    Trade Tax         1984-85       0.43      0.43
 Tax Act               Appellate Tribunal
 
                       Tade Tax          1995-96       3.18       -
                       Appellate Tribunal
 
                       High Court        2000-01       2.17      1.08
 
                       Trade Tax         2001-02       3.47      1.60
                       Appellate Tribunal
 
                       Deputy            2009-10       0.85      0.85
                       Commissioner
                       (Appeals)
 
 Central    Excise     Commissioner      1979-80      11.01       -
 Excise Act Duty       (Appeals)
 
                       Customs, Excise   2002-03       0.60      0.60
                       & Service tax
                       Appellate Tribunal
 
                       Customs,          2004-05       0.28      0.28
                       Excise & Service
                       Tax Appellate
                       Tribunal
 
                       Commissioner      2008-09      66.78     25.21
                        (Appeals)
 
                       Additional        2006-07       1.50       -
                       Commissioner
 
                       Customs,          2006-07      132.71    52.18
                       Excise & Service
                       Tax Appellate
                       Tribunal
 
                       Additional        2008-09       34.22     4.76
                       Commissioner
 
 Finance  Service tax  Additional        2006-07        0.42      -
 1994 Act              Commissioner
 
 State        Excise   High Court,       2001-02        9.26      -
 Excise Act   Duty     Allahabad
 
                       High Court,       2009-10        8.08      -
                       Allahabad
 
 In the following instances the concerned statutory authority is in
 appeal against favourable order received by the Company.
 
 Statute      Nature of     Forum where     Period to     Amount
                Dues        Dispute is      which the     involved
                            pending           amount     (Rs. lacs)
                                              relates
 
 
 U. P. Trade  Trade tax    High Court,        1996-97        59.96
 Tax Act                   Allahabad
 
 (x) The accumulated losses of the Company at the end of the financial
 year are not less than fifty percent of its net worth and the Company
 has incurred cash losses in the financial year. However, the Company
 has not incurred cash losses in the immediately preceding financial
 year.
 
 (xi) In our opinion and according to the information and explanations
 given to us, during the year, there are minor delays in repayment of
 dues to banks and financial institutions. The Company has not issued
 debentures during the year.
 
 (xii) As the Company has not granted any loans and advances on the
 basis of security by way of pledge of shares, debentures and other
 securities, paragraph 4(xii) of the Order is not applicable.
 
 (xv) As the Company has not given any guarantees during the year for
 loans taken by others from banks or financial institutions, paragraph
 4(xv) of the Order is not applicable.
 
 (xvi) In our opinion and according to the information and explanations
 given to us, the term loans have been applied for the purposes for
 which they were obtained.
 
 (xvii) According to the information and explanations given to us and on
 an overall examination of the Balance Sheet of the Company, we report
 that short term funds of Rs. 20,208 lacs have been used to finance
 fixed assets / long term losses.
 
 (xviii) The Company has not made any preferential allotment of shares
 during the year.
 
 (xix) The Company has not issued any debentures during the year.
 
 (xx) The Company has not raised any money by way of public issue during
 the year.
 
 (xxi) To the best of our knowledge and according to the information and
 explanations given to us, no fraud by the Company and no fraud on the
 Company has been noticed or reported during the year.
 
                                      For Deloitte Haskins & Sells
 
                                             Chartered Accountants
 
                                         (Registration No. 015125N)
 
                                                  Jaideep Bhargava
 
 Place: Gurgaon                                            Partner
 
 Date : November 29, 2010                    (Membership No. 90295)