We have audited the attached Balance Sheet of Steelco Gujarat Limited
 (‘the company'') as at 31st March, 2012, and also the Statement of
 Profit & Loss and Cash Flow Statement for the period 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 Jndia. 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 applied 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 issued by
 the Central Government of India in terms of section 227(4A) of the
 Companies Act, 1956, we enclose in the annexure, a statement on the
 matters specified in paragraph 4 of the said Order.
 
 Attention of the members is invited to Note No. 34 regarding the
 financial statements of the Company having been prepared on a going
 concern basis, notwithstanding the fact that its net worth is
 substantially eroded. The appropriateness of the said basis is
 interalia dependent upon the approval of CDR proposal and company''s
 ability to raise requisite finance or generate cash flows in future to
 meet its future revival plans and for continuing operations.
 
 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 account as required by law have
 been kept by the company, so far as it appears from our examination of
 the books.  .
 
 (c) the Balance Sheet and Profit and l oss 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 and 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; 1
 
 (e) on the basis of the written representations received from directors
 of the company and taken on record by the Board of Directors we report
 that no director is disqualified as on 3.1st March, 2012 from being
 appointed as a director in terms of clause (g) ol sub-section (1) of
 section 274 of the Companies Act, 1956; and
 
 (f) in our opinion, and to best of our information and according to the
 explanations given to us, the said accounts read together with
 significant accounting policies and notes ih.eieon; more particularly
 Note No. 13 regarding change in the accounting policy in respect of
 inventory valuation and its consequential effects on the loss for the
 period and inventories, give the information required by the Companies
 Act, 1956, in the manner so required and give a true an 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 31st March, 2012;
 
 (ii) in the case of the Statement of Profit and Loss for the period, of
 the loss for the period ended on that date; and
 
 (iii) in the case of Cash Flow Statement, of the cash flows for the
 year ended on that date
 
 With reference to the Annexure referred to in the Auditors’ Report to
 the Members of Steelco Gujarat Limited on the accounts for the period
 ended 31st March, 2012, we report that:
 
 1.  (a) The Company has maintained proper records to show the
 particulars including quantitative details and situation in respect of
 the fixed assets.
 
 (b) Some of tho fixed assets were physically verified during the period
 by the management in accordance with programme of verification, which
 in our opinion provides for physical verification of all the fixed
 assets at reasonable intervals having regard to the size of the company
 and the nature of its assets. According to the information and
 explanations given to us, no material discrepancies were noticed on
 such verification.  ¦
 
 (c) Fixed assets disposed off during the pciod were not substantial and
 therefore does ndt atfoct the going concern assumption
 
 2.  (a) The inventory has been physically verified by management during
 this period. In our opinion, tho frequency of such verification h
 leasonable.
 
 (b) The procedures tor the physical verification of inventory followed
 by 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. According
 to the information and explanations given to us, no material
 discrepancies were noticed on physical verification of inventory.
 
 3- (a) The Company has not taken any loan, secured or unsecured, to
 companies, firms or other parties listed in the register maintained
 under section 301 of the Companies Act, 1956. Therefore, requirements
 of clauses (iii-b), (iii-c) and (iii-d) of paragraph 4 of the order are
 not applicable.
 
 (b) The Company has not granted any loan, secured or unsecured, to
 companies, firms or other parties listed in the register maintained
 under section 301 of the Companies Act, 1956. Therefore, requirements
 of clauses (iii-b), (iii-c) and (iii-d) of paragraph 4 of the order are
 not applicable.
 
 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 nature of its business
 for the purchase of inventory and fixed assets and for the sale of
 goods. In our opinion, and according to the information and
 explanations given to us, there is no continuing failure to correct
 major weaknesses in internal control.  ,
 
 5.  Based on the audit procedures applied by us and according to the
 information and explanations provided by the management, we are of the
 opinion that the transactions that need to be entered into the register
 maintained under section 301 have been so entered. In our opinion and
 according to the information and explanations given to us, the
 transactions made in pursuance of ''contracts or arrangements entered in
 the registers maintained under Section 301 and exceeding the value of Rs.
 5,00,000/'' in respect of any party during the period 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 deposits from the Public
 within the meaning of the provisions of section 58A and 58AA of the
 Companies Act, 1956 and the rules framed there under. Further, we are
 informed that no order has been passed by the Company Law Board.
 
 7.  The Company has an internal audit system which, in our opinion is
 commensurate with its size and the nature of its business.
 
 8.  We have broadly reviewed the books of accounts maintained by the
 Company pursuant to the order rhade by the Central Government for the
 maintenance of the cost records and are of the opinion that prima
 facie, the prescribed afccounts and records have been made and
 maintained.
 
 9.  (a) According to the information ana explanations given to us and
 on the basis or our examination of the books of account, the
 
 company has generally been regular in depositing undisputed statutory
 dues including Provident Fund, Investor Education and Protection Fund,
 Employees’ State Insurance dues, Income-tax, Sales-tax, Wealth tax,
 Service Tax, Custom duty, Excise duty, cess and any other dues during
 the period with the appropriate authorities. There are no cases of
 non-deposit of any undisputed statutory dues outstanding for a period
 of more than six months as at 31st March, 2012 from the date they
 became payable.
 
 (b) According to the information and explanations given to us, there
 are no cases of non-deposit with appropriate authorities of disputed
 dues of saleis tax, income-tax, customs duty, wealth tax, excise duty
 and cess except the following:
 
 Financial 
 period to     Act            Nature of dues     Forum where 
                                                 dispute          Amount
 which it
 relates                                         is pending    (Rs.in Lacs)
 
 2008-2009    Customs Act     Customs Duty       CESTAT
                                                 Ahmedabad       32.71
 
 2009-2010    Central Excise 
              Act             Excise duty 
                              interest           CESTAT,  
                                                 Ahmedabad        0.70 
              and Service 
              Tax
 
 1991 - 1992  income Tax 
              Act, 1961       Income Tax         H nable 
                                                 Gujarat High
                                                 Court           24.45 
 1992- 1993   Income Tax 
              Act, 1961       Income Tax         H''nable
                                                 Gujarat High 
                                                 Court           26.03 
 
 1993 - 1994  Income Tax 
              Act, 1961       Income Tax         H''nable 
                                                 Gujarat High 
                                                 Court           61.55
 
 10.  The accumulated losses at the end of the financial period are more
 than 50% of its net worth. Moreover, the Cjmpany has incurred cash
 losses in the financial period but it has not incurred cash losses in
 the immediately preceding financial period.
 
 11.  Based on our audit procedures and as per the information and
 according to the explanations given to us, delays were noticed in
 payment of interest & principal on few occasions during the year.
 
 12. The company had not granted any loans against pledge or security of
 shares.  ''
 
 13. The company is not a chit fund/nidhi/mutual benefit fund/society.
 
 14.  According io the on and  company is not aeaiing er trading in shares, securities debenture and other 
 
 15.  According to the information and explanations given to us, the
 Company has not given any guarantees or provided any security in
 respect of borrowings taken by others from banks and financial
 institutions.
 
 16.  Term loans obtained by fhe Company were aocfied curocse were obtained.
 
 17.  According to the statement and other records, we report that ro
 ''unc''s raised save for long term investment and vice versa.
 
 18.  The company has not made any preferential allotment to any
 parties, firms and/or companies covered in the register maintained
 under section 301 of the Companies Act, 1956. Hence, there does not
 arise any question of an enquiry of the price of the issue to ascertain
 whether the same is, prima facie, prejudicial to the interest of the
 Company.
 
 19.  The Company has not issued any debentures hence: question of
 creating securities does not arise.
 
 20.  The company has not raised any money by public issues during the
 period.  ''
 
 21.  To the best of our knowledge and belief, and according to the
 information and explanations given to us, no fraud on or by the company
 was noticed or reported durina the period.
 
                                     For MUKESH M. SHAH & CO.
                                       CHARTERED ACCOUNTANTS
 
                               Firm Registration No. 106625W
 
                                        PARTNER
 
 Place : Ahmedabad.                  Chandresh S. Shah
 
 Date : 31st June, 2012            Membership No. 42132