We have audited the attached Balance Sheet of STEEL EXCHANGE INDIA
 LIMITED as at 31.03.2011 and also the Profit and Loss Account 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 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.
 
 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 for as it appears from our examination of
 those books.
 
 c) The Balance Sheet and Profit & Loss account 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 dealt
 with by this report comply with the mandatory Accounting Standards
 referred to in sub-section (3C) of Section 211 of the Companies
 Act''1956.
 
 e) On the basis of the written representations received from the
 directors, as on 31 st 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 jn conjunction
 with the schedule 20 - statement on significant account policies and
 notes to accounts annexed therewith and 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 31 st March'' 2011;
 
 ii) In the case of the 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 STEEL EXCHANGE INDIA LIMITED Referred to
 in paragraph 3 of our report of even date,
 
 1.  (a) The Company has maintained proper records showing full
 particulars including quantitative details and situation of fixed
 assets.
 
 (b) All the assets have not been physically verified by the management
 during the year but there is a regular programme of verification which,
 in our opinion, is reasonable having regard to the size of the company
 and the nature of its business. No material discrepancies were noticed
 on such physical verification.
 
 2.  (a) The inventories have been physically verified by the management
 during the year at reasonable intervals.
 
 (b) The procedures of physical verification of the inventories 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 inventories and
 discrepancies noticed on physical verification of inventories as
 compared to book records were not material.
 
 3.  (a) The Company has granted loans to two parties covered in the
 Register maintained under Section 301 of the Companies Act, 1956. The
 balance outstanding as on 01.04.2010 is Rs. 15.91 Crores and the
 yearend balance of loan granted to such parties was Rs.12.21 Crores.
 
 (b) According to the information and explanation given to us, the
 company has charged interst at the rate of 12% p.a on the above loans.
 
 4.  In our opinion, there are adequate internal control procedures
 commensurate with the size of the Company and the nature of its
 business with regard to purchase of inventories, fixed assets and for
 the sale of goods.
 
 5.  (a) According to the information and explanation 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 according to the information and explanation
 given to us, the transactions made in pursuance of contracts or
 arrangements entered in the register maintained under Section 301 of
 the Companies Act, 1956 aggregating during the year to Rs.5,00,000/- or
 more in respect of any party 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 explanation
 given to us, the Company has not accepted any deposits as defined under
 section 58A of the Companies Act''1956.
 
 7.  In our opinion, the Company has an adequate internal audit system
 commensurate with its size and nature of its business.
 
 8.  We have broadly reviewed the Books of Account maintained by the
 Company as prescribed by the Central Government for 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. However, we have not carried out a detailed
 examination of the accounts and records.
 
 9.  (a) According to the books and records of the company, the company
 is regular in depositing undisputed statutory dues including Provident
 Fund, Investor Education and Protection Fund, Employees'' State
 Insurance, Income Tax, Sales Tax, Customs Duty, Excise Duty, Cess and
 other statutory dues with appropriate authorities.  According to the
 information and explanations given to us, there are no undisputed
 amounts payable in respect of such statutory dues which have remained
 outstanding as at 31st March, 2011 for a period exceeding six months
 from the date they became payable.
 
 (b) Disputed Statutory dues such as sales Tax income tax has been
 disclosed in Point no 14 of Schedule 20.
 
 Name of the Nature of Dues  Amount in Rs.  Deposits/   Pending with
 Statute                                      Paid
 
 CST Act     Sales Tax of 
             2002-2003         22,43,895    2,80,487    Appl. Dy. 
                                                        Commissioner
                                                        Visakhapatnam
 
 Customs Act Customs duty
             pertaining                                 Hon''ble High 
                                                        Court of Andhra
             to 2003-04        54,35,648        NIL     Pradesh
 
 CST Act     Sales Tax of
             2004-05           28,27,172    3,53,397    Appl. Dy. 
                                                        Commissioner
                                                        Visakhapatnam
 
 10.  The Company has no accumulated losses and has not incurred cash
 losses in the current financial year and immediately preceding
 financial year.
 
 11.  In our opinion and according to the information and explanations
 given to us, the Company has not defaulted in repayment of its dues to
 banks and financial institutions.
 
 12.  The Company has not granted any loans or advances on the basis of
 security by way of pledge of shares, debentures or 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 or trading in shares,
 securities, debentures or other investments and hence, the requirements
 of clause 4(xiv) of the Companies (Auditor''s Report) Order, 2003 are
 not applicable to the Company.
 
 15.  According to the information and explanations given to us, the
 company has not given any guarantee for loans taken by others from
 banks, and financial institutions.
 
 16.  In our opinion, the term loans have been applied for the purpose
 for which they were raised.
 
 17.  In our opinion and according to the information and explanations
 given to us and on an overall examination of the balance sheet of the
 company, we report that funds raised on short-term basis have not been
 used for long-term investments. No long-term funds have been used to
 finance short-term assets.
 
 18.  The company has made a preferential allotment of share to parties
 and companies covered in the register maintained under Section 301 of
 the Companies Act, 1956 during the year.
 
 19.  No debentures have been issued by the company and hence, the
 question of creating securities in respect there of does not arise.
 
 20.  The company has not raised any money by way of public issues
 during the year.
 
 21.  On the basis of our examination and according to the information
 and explanations given to us, no fraud, on or by the Company, has been
 noticed or reported during the year.
 
                                                   For Pavuluri & Co
 
                                               Chartered Accountants 
 
                                       Firm Registration No: 012194S
 
                                                     CA. P.A.RAMAIAH
 
 Camp: Malliveedu, L.Kota (M), Vizianagaram (Dt)             Partner
 
 Date: 27.08.2011                                       M.No.:203300