SRF Polymers

We have audited the attached balance sheet of SRF Polymers Ltd., as at
 31st March 2008, and also the profit and loss account and the cash flow
 statement for the year ended on that date annexed thereto.
 
 Responsibilities of management and auditors 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.
 
 Basis of opinion
 
 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 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.
 
 Opinion
 
 As required by the Companies (Auditors 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.
 
 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.
 
 (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;
 
 (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 2008 and taken on record by the Board of
 Directors, we report that none of the directors is disqualified as on
 31st March 2008 from being appointed as a director in terms of clause
 (g) of sub-section (1) 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, the said accounts read together with the
 accounting policies and notes thereon give the information required by
 the Companies Act, 1956, in the manner so required subject to the
 effects of reconciliation and confirmation of balances with regard to
 the amounts of liabilities and advances included in loans and advances
 referred to in note no. 7(a) 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 2008;
 
 (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 the cash flow statement, of the cash flows for the
 year ended on that date.
 
 The Annexure referred to in the main Auditors Report of even date:
 
 The company is not carrying on the business of chit fund, nidhi, or
 mutual benefit, or dealing or trading in shares / securities, hence the
 clauses applicable to these businesses have not been considered below.
 
 Fixed Assets
 
 1.  a. The company has maintained proper record showing full
 particulars including quantitative details and situation of its fixed
 assets. However in respect of certain fixed assets like furniture &
 fixtures, office equipment and data processing equipment record in
 terms of values are only kept.  
 
 b. The company has a regular program of verifying all the 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 the assets.
 
 2.  The company has not disposed off any substantial part of its fixed
 assets during the year, which may have any impact on the going concern
 nature of the company.
 
 Inventories
 
 3 a. The Stock of finished goods, stores, spare parts and raw materials
 have been physically verified by the management at reasonable
 intervals.
 
 b.  The procedures of physical verification of stocks 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 has maintained proper records of inventory showing full
 details regarding quantity of receipts, issues, balances and dates of
 transactions. The discrepancies, noticed on the aforesaid verification,
 between the physical stocks and stocks as per the books have been
 properly dealt with in the books of account.
 
 Transactions with parties u/s 301 of the Companies Act, 1956
 
 4.  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.
 
 5.  The company has not taken any loans, secured or unsecured from
 companies, firms or other parties covered in the register maintained
 under section 301 of the Act.
 
 6.  There are no contracts or arrangements that were required to be
 entered into the register in pursuance of section 301 of the Act.
 
 Loans, Advances and Guarantees
 
 7.  a. The company has taken loans from banks and others.
 
 The terms and conditions on which these have been taken are not prima
 facie prejudicial to the interest of the company.
 
 b.  The payment of principal and interest are regular in respect of all
 such loans taken.
 
 c.  In view of what is stated in (a) & (b) above, there are no overdue
 amounts.
 
 8.  The company has not issued any debenture.
 
 9.  The company has not granted any loans and advances on the basis of
 security by way of pledge of shares, debentures and other securities.
 However, the company has pledged its shares of SRF Ltd., for loans
 taken by SRF Polymers Investments Ltd, its wholly owned subsidiary.
 
 10. The company has stood guarantee for loans taken by SRF Polymers
 Investments Ltd, its wholly owned subsidiary, from banks or financial
 institutions. However the terms and conditions of the same are prima
 facie not prejudicial to the interest of the company.
 
 11.  The term loans taken by the company have been applied for the
 purpose for which they were obtained.
 
 12. The funds raised on short-term basis from the banks have not been
 used for long-term investment and vice versa.
 
 Internal Control
 
 13.a. 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 purchase of inventory, fixed assets and sale of goods and
 services.  b. There are no continuing failures to correct matters in
 respect of lack of adequacy of internal controls brought, to notice.
 
 14. The company has an adequate internal audit system commensurate with
 its size and nature of its business.
 
 Fixed Deposit
 
 15. In our opinion and according to the information and explanations
 given to us, the company has complied with the provisions of section
 58A and 58 AA or any other relevant provisions of the Companies Act
 1956, the Companies (Acceptance of Deposits) Rules, 1975 and directives
 issued by Reserve Bank of India with regard to the deposits accepted
 from the public.
 
 Cost Records
 
 16. 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 as prescribed 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 maintained.  We have,
 however, not made a detailed examination of the records with a view to
 determining whether they are accurate or complete.
 
 Statutory Dues
 
 17.  a. According to the records of the company, undisputed dues
 including provident fund, Investors 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 have
 been generally been regularly deposited with the concerned authorities.
 
 b. Details of dues of sales tax / income tax / wealth tax / service
 tax/ excise duty / which have not been deposited on account of dispute
 are given hereunder:
 
 Name of Statute       Forum where case         Nature of dues
                                                  is pending              
 
 The Central Excise Act,1944      CESTAT          Excise Duty
 The Central Excise Act,1944      CESTAT          Excise Duty
 Tamil Nadu General Sales Tax     Tribunal        Sales Tax
                                                  Act,, 1956
 Central Sales Tax Act, 1956      Tribunal        Sales Tax
 Tamil Nadu General Sales Tax     Tribunal        Sales Tax
                                                  Act, 1956
 Central Sales Tax Act, 1956      Tribunal        Sales Tax
 
 Central Sales Tax Act, 1956 Deputy Commissioner  Sales Tax
                                                  Sales Tax
 The Customs Act, 1962       Commissioner Appeals Custom Duty
 
 Period of dispute                  Amount
                                 (in Rs. Lacs)
 
 1994-95 to 1996-97                 19.17
 April 2002 to Nov 2004            540.30
 Sub Total (A)                     559.47
 1987-88 to 1993-94                  1.40
 1987-88 to 1993-94                 36.59
 2002-03                            23.31
 2002-03 & 03-04                     9.83       
 2002-03                             6.88
 Sub Total (B)                      78.01
 2004-05 & 2005-06                  79.33
 Sub Total (C)                      79.33
 GRAND TOTAL (A+B+C)               716.81
 
 OTHERS
 
 18.  The company has no accumulated losses at the end of the financial
 year. The company has incurred cash losses in the current financial
 year, though there were no cash losses in the immediately preceding
 financial year.
 
 19.  The company has not issued any fresh share capital and hence the
 question of neither the preferential allotment nor the end use thereof
 arises.
 
 20. No fraud on or by the company has been noticed or reported during
 the year.
 
                                    ForTHAKUR, VAIDYANATH AIYAR & CO.  
                                             Chartered Accountants
 
 Place: New Delhi                                    V. Rajaraman
 Date : 4th June, 2008                                  Partner
                                                       M.No.2705