1.  We have audited the attached Balance Sheet of STEEL EXCHANGE INDIA
 LIMITED as at 30.06.2012 and also the Statement of Profit and Loss for
 the 15 months 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.
 
 2.  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.
 
 3.  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 paragraph 4 and 5 of the said order.
 
 4.  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, Statement of Profit and Loss and Cash Flow
 Statement dealt with by this report are in agreement with the books of
 account.
 
 d) In our opinion, the Balance Sheet, Statement of Profit and Loss and
 Cash Flow Statement dealt with by this report comply with the mandatory
 Accounting Standards referred to in Sub-Section 3(C) of Section 211 of
 the Companies Act'' 1956.
 
 e) On the basis of the written representations received from the
 directors, as on 30th June'' 2012 and taken on record by the Board of
 Directors, we report that none of the directors is disqualified as on
 30th June 2012 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 in conjunction
 with the schedule annexed therewith 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 30th June 2012;
 
 ii) In the case of the Statement of Profit and Loss, of the Profit of
 the Company for the 15 months period ended on that date; and
 
 iii) In the case of the cash flow statement, of the cash flows for the
 15 months period 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.
 
 (c) According to the information and explanations furnished to us, the
 Company has not disposed of a substantial part of its fixed assets
 during the financial period except for the disposal of Wire drawing
 unit 1 located at Auto Nagar, Visakhapatnam as per the note refer to at
 2.10 of the Notes to Financial Statements.
 
 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 one party covered in the
 Register maintained under Section 301 of the Companies Act, 1956. The
 maximum amount involved during the period is Rs. 9.09 Crores and the
 balance of loan granted to such parties as at 30.06.2012 was Rs. 5.21
 Crores.
 
 (b) In our opinion the rate of interest and other terms and conditions
 on which loans have been granted to companies, firms or other parties
 listed in the registers maintained under Section 301 are not, prima
 facie, prejudicial to the interest of the company.
 
 (c) The parties have been regular in the payment of interest and there
 is no stipulation for the repayment of Principal and Interest.
 
 (d) There is no overdue amount of loans granted to companies, firms or
 other parties listed in the registers maintained under section 301 of
 the Companies Act, 1956.
 
 (e) According to the information and explanation given to us, the
 Company has, during the financial period, not taken any loans, secured
 or unsecured from companies, firms or other parties covered in the
 register maintained under section 301 of the Companies Act, 1956.
 Accordingly, paragraph 4 (iii) (e)(f)(g) of the Order is not
 applicable.
 
 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. During the course of our audit, we have not observed
 any continuing failure to correct major weakness in internal control.
 
 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 30th June, 2012 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 Note no:2.28 of notes to accounts
 
 Name of the                   Nature of Dues         Period to which
 Statute                                              the amount relates
 
 CST Act                       Sales Tax              2002-03, 2004-05
 
 APVAT Act                     Sales tax              2011-12
 
 Customs Act                   Customs duty           2003-04
 
 Central Excise Act            Excise duty            2008-09
 
 Central Excise Act            Excise duty            2009-10, 2011-12
 
 Central Excise Act            Excise duty            2010-11
 
 Central Excise Act            Excise duty            2007-08
 
 Building and Other            Cess                   2010-11
 Construction Workers''
 Welfare Cess Act,1996
 
 Name of the                Amount in     Deposits/   Forum where the 
                                                      dispute is 
                            Rs.           Paid        pending
 
 CST Act                    50,71,067       633,884   Appl. Dy. 
                                                      Commissioner 
                                                      Visakhapatnam
 
 APVAT Act                  13,94,858           NIL   Appl. Dy.
                                                      Commissioner
                                                      Visakhapatnam
 
 Customs Act                54,35,648           NIL   Hon''ble High Court
                                                      of Andhra Pradesh
 
 Central Excise Act          1,91,708           NIL   Appeal to CESTAT,
                                                      Bangalore
 
 Central Excise Act           123,075           NIL   Commissioner of 
                                                      Central Excise
                                                      Visakhapatnam
 
 Central Excise Act         14,35,189           NIL   Hon''ble High Court
                                                      of Andhra Pradesh
 
 Central Excise Act         86,30,228           NIL   Appeal to CESTAT, 
                                                      Bangalore
 
 Building and other       1,27,98,000           NIL   Hon''ble High Court
 Constrcution Workers''                                of Andhra Pradesh
 welfare Cess Act,1996
 
 10.  The Company has accumulated losses at the end of the financial
 period consequent to the absorption of accumulatec losses of GSAL
 (India) Limited upon its amalgamation with the Company and has not
 incurred cash losses in the current financial period 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.  In our opinion and according to the information and explanations
 given to us, the terms and conditions which the Company has given a
 Guarantee for loan taken others from banks, and financial institutions
 are not, prima facie, prejudicial to the interest of the company.
 
 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 shares to a
 company covered in the register maintained under Section 301 of the
 Companies Act, 1956 during the 15 months period and the price at which
 the shares are allotted is not, prima facie, prejudicial to the
 interest of the company.
 
 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 15 months period.
 
 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 15 months period.
  
                                                      For Pavuluri & Co
 
                                                  Chartered Accountants
 
                                          Firm Registration No: 012194S
 
                                                        CA. P.A.RAMAIAH
 
 Camp: Visakhapatnam                                            Partner
 
 Date: August 27, 2012                                  M.No.: F-203300