We have audited the attached Balance Sheet of SOMA TEXTILES &
 INDUSTRIES LIMITED, as at 31st March, 2011 and also the Profit and Loss
 Account and 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.
 
 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 (Auditors'' Report) Order, 2003 as amended
 by the Companies (Auditors'' Report) (Amendment) Order, 2004 (together
 the ''Order'') issued by the Central Government of India in terms of
 sub-Section (4A) of Section 227 of the Companies Act, 1956 of India and
 on the basis of such checks of the books and records of the Company as
 we considered appropriate and according to the information and
 explanations given to us, we enclose in the Annexure a 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:
 
 (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 account as required by law have
 been kept by the Company so far as appears from our examination of
 those books and proper report adequate for the purposes of our audit
 have been received from the branch not audited by us. The financial
 records of Baramati branch of Company have been audited by Shankarlal
 Jain & Associates, Chartered Accountants, Mumbai, (Firm Registration
 No. 109901W) a copy of whose report has been forwarded to us. We have
 relied on that report and have appropriately dealt with the same in our
 report.
 
 (iii) The Balance Sheet, Profit and Loss Account and cash flow
 statement dealt with by this report are in agreement with the books of
 account and with the audited reports from the branch;
 
 (iv) In our opinion, the Balance Sheet, Profit and 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 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(l) of Section 274 of the Companies Act, 1956;
 
 (vi) In our opinion and to the best of our information and according to
 the explanations given to us, and subject to our observations in Note
 No. 23 of Schedule 22(B) - Notes on Accounts, relating to income of Rs.
 26,724,438/- shown by the Company under the head Prior Period in the
 Profit and Loss Account, pertaining to its claims for Deemed Duty
 Drawback for the period 1st April, 1994 to 31st March, 2003; and
 further Note No. 24 of Schedule 22(B) - Notes on Accounts, pertaining
 to amount of investment as well as amount advanced by the Company to
 Soma Textile FZC, the said accounts read together with the 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;
 
 (a) In the case of the Balance Sheet, of the state of affairs of the
 Company as at 31 st March, 2011;
 
 (b) In the case of the Profit and Loss Account, of the LOSS for the
 year ended on that date; and
 
 (c) In the case of Cash Flow Statement, of the Cash Flows for the year
 ended on that date.
 
 Annexure referred to in paragraph 3 of our report of even date to the
 members of SOMA TEXTILES & INDUSTRIES LIMITED on the accounts for the
 year ended on 31st March 2011.
 
 (i) (a) The Company has maintained proper records showing full
 particulars, including quantitative details and situation of fixed
 assets.
 
 (b) The Company has a phased programme of physical verification of
 fixed assets which, in our opinion, is reasonable having regard to the
 size of the Company and nature of its assets. In accordance with this
 programme, the management has verified fixed assets during the year and
 no material discrepancies have been noticed on such verification.
 
 (c) In our opinion, the Company has not disposed off a substantial part
 of its fixed assets during the year and the going concerns status of
 the Company is not affected.
 
 (ii) (a) The management conducts regular physical verification of
 inventory at reasonable intervals.
 
 (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. Some
 immaterial discrepancies were noticed on physical verification which
 have been properly dealt with in the books of account.
 
 (iii) (a) The Company has granted interest free loan to its Associate,
 Soma Textile FZC. Total amount outstanding on 31st March 2011 was
 Rs.703,101,360/-.
 
 (b) There are no terms and conditions set out by the Company as on date
 for the loans given to Soma Textile FZC and therefore, we are unable to
 comment on terms and conditions of the said loan.
 
 (c) As there is no stipulation made for repayment of loan by Associate,
 we are unable to report on regularity of receipt of principal amount.
 
 (d) As there is no stipulation of repayment of loan by Associate, we
 are unable to report on overdue amount.
 
 (e) According to the information and explanations given to us the
 Company has taken unsecured loans from companies, firm or other parties
 covered in the register maintained under Section 301 of the Companies
 Act, 1956 and the same are as under.
 
 No. of Parties involved                       Three Parties
 
 Loan Taken                                   Rs. 35,500,000
 
 Balance Outstanding at the end of year       Rs. 35,500,000
 
 (f) Interest free unsecured loan taken from promoters to fulfill
 stipulation of Financial Institution so there is no rate of interest
 specified. Terms and conditions of loans taken are prima facie not
 prejudicial to the interest of the Company;
 
 (g) No stipulation has been specified for the repayment of these loan.
 
 (iv) There is an adequate internal control system commensurate with the
 size of the Company and the nature of its business, for the purchase of
 inventory and fixed assets and for the sale of goods and service.  
 
 (v) (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 as explained to us, the transactions made in
 pursuance of contracts or arrangements entered in the register
 maintained under Section 301 of the Companies Act 1956 and exceeding
 value of Rupees Five Lacs in respect of any party during the year have
 been made at prices which are reasonable having regard to the
 prevailing market prices at the relevant time.  
 
 (vi) The Company has not accepted any deposits from the public.
 Therefore the provisions of Sections 58A, 58AA or any other relevant
 provisions of the Act and the rules framed thereunder or any order
 passed by Company Law Board or National Company Law Tribunal or Reserve
 Bank of India or any Court or any other Tribunal do not apply to
 Company.
 
 (vii) In our opinion and according to information and explanations
 given to us, the Company has a interna! audit system communsurate with
 its size and nature of its business, which may be further strengthened.
 
 (viii) In our opinion, the Company has maintained proper cost records
 prescribed by the Central Government under clause (d) of sub-Section
 (1) of Section 209 of the Act. However, we are not required to carry
 out and have not carried out any detailed examination of such accounts
 and records.
 
 (ix) (a) According to the information and explanations given to us and
 on the basis of our examination of books of account, we are of the
 opinion that the Company is generally regular in depositing undisputed
 statutory dues including Provident Fund, Investor Education and
 Protection Fund, Employees'' State Insurance, Income-tax, Sales-tax,
 Wealth Tax, Service Tax, Custom Duty, Excise Duty, cess and any other
 statutory dues with the appropriate authorities. At the end of the
 year, there were no undisputed dues payable for a period of more than
 six months from the date they became payable.
 
 (b) As on 31st March 2011, according to records of the Company, some
 statutory dues were disputed and not deposited as given below:
 
 Name of Statute Nature of Dues Amount (Rs.) Period to Forum where
                                                       dispute is pending
                                             which its
                                              relates
 
 Central Excise 
 Act,            Penalty for
                 filing              25,428   1996-97  CEGAT, Mumbai and
                                                       the Hon''ble High
                                                       Court
 1944            wrong declaration            1997-98  of Gujarat, 
                                                       Ahmedabad.
 
 Central Excise 
 Act,            Recovery of 
                 CENVAT             158,973   2004-05  The Dy. 
                                                       Commissioner of
                                                       C. Excise, Div-I,
 1944                                                  Ahmedabad.
 
 Central Excise
 Act,            Recovery of 
                 additional       2,485,486   2002-03  The Dy. 
                                                       Commissioner of
                                                       C.Excise, Div-lll,
 1944            TTA duty of Yam                       Ahmedabad.
                 captively 
                 consumed
 
 Central Excise 
 Act,            Refund claim for    97,711   2005-06  Commissioner of
                                                       Central Excise,
                                                       (Appeals),
 1944            amount short 
                 received                              Ahmedabad
                 against refund 
                 claim of yarn 
                 duty after
                 adjusting the 
                 old recovery
 
 Central Excise 
 Act,            Demand for 
                 old duty            50,179   2008-09  OESAT, West Zone,
                                                       Ahmedabad
 1944
 
 The Income Tax  Demand of Income   976,730    A.Y.    Asst. Commissioner
                                                       of Income Tax,
 Act-1961        Tax                          2006-07  Cir.-8, Ahmedabad
 
 The Income Tax  Demand of 
                 Income          26,076,000    A.Y.    Asst. Commissioner
                                                       of Income Tax, Cir
 Act-1961        Tax                          2008-09  8, Ahmedabad
 
 The Income Tax  Demand for 
                 Penalty          1,742,070    A.Y.    Commissioner of 
                                                       Income Tax 
                                                       (Appeal),
 Act-1961        U/s. 271(1)(C)               2006-07  Ahmedabad
 
 The Income Tax  Demand of 
                 Income           2,213,276    A.Y.    Commissioner of
                                                       Income Tax 
                                                       (Appeal),
 Act-1961        Tax                          2007-08  Ahmedabad
 
 Gujarat Sales 
 Tax             Additional 
                 Sales Tax          617,257   1997-98  Gujarat Value
                                                       Added Tax Tribunal
 Act, 1969                                    1998-99
                                              &2000-01
 
 (x) The Company has accumulated losses at the end of the financial year
 not exceeding 50% of its net worth. It has not incurred cash losses in
 the financial year but incurred cash losses in the immediately
 preceding financial year.
 
 (xi) Company is under Corporate Debt Restructuring (CDR) package under
 scheme of RBI which was duly approved and implemented. Company has not
 defaulted in repayment of dues to any financial institution or bank as
 per reschedulement under CDR package. '' , ''
 
 (xii) In our opinion and according to explanations given to us, the
 Company Has not granted loans and advances on the basis of security by
 way of pledge of shares, debentures and other securities. Accordingly
 this clause does not apply.
 
 (xiii) The Company is not a chit fund / nidhi Company / mutual
 benefit, fund or society which would be governed by any special statute.
 Accordingly this clause along with sub clauses do As not’ apply.
 
 (xiv) In our opinion and according to explanation TO given to us, the
 Company is not dealing or trading in shares, securities, debentures and
 other investments. Accordingly this clause does not apply.
 
 (xv) In our opinion and according to explanations given to us, the
 Company has not given any guarantee for loans taken by others from bank
 or financial institutions. Accordingly this clause does not apply.
 
 (xvi) In our opinion and according to explanations given to us, the
 term loans were applied only for the purpose for which they were
 obtained.
 
 (xvii) In our opinion and according to explanations given to us, the
 funds raised on short-term basis have not been used for long-term
 investment.
 
 (xviii) The Company has not made any preferential allotment of shares
 to parties and companies covered in the Register maintained under
 Section 301 of the Act during the year and accordingly this clause does
 not apply.
 
 (xix) The Company has not issued debentures during the year.
 Accordingly this clause does not apply.
 
 (xx) The Company has not raised any money from public issue during the
 financial year. Accordingly this clause does not apply.
 
 (xxi) In our opinion and according to explanations given to us, no
 fraud on or by the Company has been noticed or reported during the
 year.
 
 
 
                                                 For PIPARA & COMPANY
 
                                                Chartered Accountants
 
                                                          GYAN PIPARA
 
                                                            (Partner)
 
 Place : Ahmedabad                               Membership No.034289
 
 Date  : 18th May, 2011                 Firm Registration No. 107929W