We have audited the attached Balance Sheet of Stone India Limited (the
 Company) as at 31st March, 2011 and also the Profit & Loss Account of
 the Company for the year ended on that date, annexed thereto and the
 cash flow statement for the year ended on that date.  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 any material misstatement. An audit includes
 examining, on test basis, evidence supporting the amounts and the
 disclosures in the financial statements. An audit also includes
 assessing the accounting principles used and significant estimates made
 by the management, as well as evaluating the overall financial
 statement presentation. We believe that our audit provides a reasonable
 basis of our opinion.
 
 1. As required by the Companies (Auditor''s Report) Order, 2003 (the
 order) as amended by the Companies (Auditor''s Report)(Amendment)
 Order, 2004 issued by the Central Government in terms of Section 227
 (4A) of the Companies Act, 1956 (the Act) and according to the
 information and explanations given to us and on the basis of such
 checks as we considered appropriate, we state that:
 
 i) a) The Company has maintained proper records to show full
 particulars including quantitative details and situation of its fixed
 assets.
 
 b) As explained to us, the fixed assets of the Company are physically
 verified by the management over a phased manner, which we consider
 reasonable considering the size of the Company and nature of its
 assets. As explained to us such verification has been carried out by
 the management and the necessary reconciliation with the book records
 was under progress at the year end.
 
 (c) In our opinion, during the year, the company has not disposed off
 substantial part of its fixed assets.
 
 ii) a) The inventory has been physically verified by the management
 during the year. In our opinion and according to the information and
 explanations given to us, the frequency of verification, wherever
 carried out, is reasonable.
 
 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) In our opinion, the Company has maintained proper records of its
 inventory and the discrepancies between the physical stock and book
 records were not material.
 
 iii) Except for the advances recoverable in respect of expenses for a
 wholly owned subsidiary as per the records of the company, it has not
 taken/granted any loans, secured or unsecured , to any companies, firms
 or other parties covered in the Register maintained under Section 301
 of the Act. Advances recoverable as explained are against share
 capital.
 
 iv) Having regard to the fact that comparative quotations are not
 available in respect of certain items of special nature purchased
 during the year, 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 the nature of its
 business with regard to purchases of inventory, fixed assets and with
 regard to sale of goods and services. During the course of our audit,
 we have not observed any continuing failure to correct major weaknesses
 in internal controls.
 
 v) To the best of our knowledge and belief and according to the
 information and explanations given to us and records of the company, we
 are of the opinion that there is no transaction that needs to be
 entered in to the register maintained under section 301 of the Act.
 
 vi) The Company has not received or accepted any deposits during the
 year.
 
 vii) The Company has an internal audit system which covers certain
 specific areas of operations/processes. In the absence of any reports
 in this respect we are unable to comment on the adequacy or otherwise
 of the same.
 
 viii) We are informed that Central Government has not prescribed the
 maintenance of cost records under Section 209 (1) (d) of the Companies
 Act, 1956.
 
 ix) a) According to the information and explanations given to us and as
 per the records of the Company, the Company is regular in depositing
 with appropriate authorities undisputed statutory dues including
 Provident Fund, Investor Education and Protection Fund, Employees''
 State Insurance, Professional Tax, Wealth tax, Custom Duty, Excise
 Duty, Cess and other material statutory dues applicable to it except
 for ESI including as mentioned in Note No.B 9 of Schedule 19, tax
 deducted at Source, income tax, excise duty and sales tax where there
 were delays in depositing the dues to appropriate authorities. However,
 according to the information and explanations given to us, there is no
 undisputed amounts payable in respect of these which were in arrears,
 as at 31st March 2011 for a period of more than six months from the
 date they became payable.
 
 b) According to information and explanations given to us, there are no
 dues of Sales Tax, Income Tax, Customs Duty, Wealth Tax, Excise Duty
 and Cess which have not been deposited on account of any dispute except
 as given below:
 
 Statute         Nature       Forum where     Period to         Amount
                 of Tax       dispute is         which         in Lacs
                              pending          related
 
 West Bengal     Sales Tax   Revisional Board   2004-05         14.30
 Sales Tax 
 Act, 1995
 
 Central Sales   Sales Tax   Revisional Board   2003-04, 
                                                2004-05         30.71
 Tax Act, 1954                                 and 2005-06
 
 Income Tax      Income Tax  Appeal to be filed A.Y. 2006-07    13.48
 Act, 1961                   in the High Court
 
 x) The Company does not have any accumulated losses at the end of the
 financial year. The Company has not incurred cash losses in the current
 financial year and in the immediately preceding financial year.
 
 xi) According to the information and explanation given to us, the
 Company has not defaulted in repayment of dues to banks and financial
 institutions.
 
 xii) The company has not granted any loans and advances on the basis of
 security by way of pledge of shares, debentures and other securities.
 
 xiii) 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 said order are not applicable to the company.
 
 xiv) The Company is not dealing/trading in securities.
 
 xv) According to information and explanations given to us, the company
 has not given any guarantee for loans taken by others from banks or
 financial institutions.
 
 xvi) As per the information and explanations given to us and based on
 the documents and records produced to us, in respect of fresh term
 loans raised during the year, the Company deployed Rs. 202.81 lacs for
 another project and the balance fund has been applied for the purpose
 for which they were raised.
 
 xvii) According to the information and explanations given to us and on
 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
 investment.
 
 xviii) The Company has not made any preferential allotment of shares to
 parties and companies required to be covered in the register maintained
 under section 301 of the Act.
 
 xix) The Company does not have any outstanding debentures during the
 year.
 
 xx) The Company has not raised any money through a public issue during
 the year.
 
 xxi) During the course of our examination of books of accounts carried
 out in accordance with generally accepted auditing practices in India,
 we have neither come across any incidence of fraud on or by the company
 nor have we been informed of any such case by the management.
 
 
 
 
 2.  Attention is invited to the following Notes to Schedule 19
 regarding:
 
 (a) Rental demands on the Company amounting to Rs.228.97 lacs, pending
 decision of the Court exact status of liability is presently not
 ascertainable. (Note B 8)
 
 (b) Payment of managerial remuneration amounting to Rs.18.82 lacs for
 the year is subject to approval of the Central Government.  (Note B7)
 
 3.  We further report that overall impact with respect to the Notes
 given in paragraph (2) above cannot be ascertained and commented upon
 by us.
 
 4.  Further to the above, we report that:
 
 (a) We except as given in Note B 19 of Schedule 19 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) The Balance Sheet, the Profit & Loss Account and Cash Flow
 Statement dealt with by this Report are in agreement with the books of
 account;
 
 (c) 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;
 
 (d) In our opinion, the Profit & Loss Account, Balance Sheet and Cash
 Flow Statement prepared by the Company comply with the various
 Accounting Standards referred to in Sub-section-3(c) of Section 211 of
 the Act;
 
 (e) On the basis of written representations received from the directors
 and taken on record by the Board of Directors, we report that none of
 the directors of the Company is disqualified as on 31st March 2011 from
 being appointed as a director under Section 274 (1) (g) of the Act;
 
 (f) In our opinion and to the best of our information and according to
 the explanations given to us, subject to our remarks as given in para 2
 above whereby as given in para 3 above, we are unable to ascertain and
 indicate the impact thereof on these accounts and Note B 19 of Schedule
 19 regarding non availability of details relating to Micro, Small and
 Medium Enterprise Development Act, 2006 and read together with the
 other notes thereon, these accounts give the information required by
 the Act, 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 Balance Sheet, of the State of Affairs of the
 Company as at 31st March, 2011;
 
 (b) in the case of Profit & Loss Account, of the profit 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.
 
 
                                                  For Lodha & Co.,
                                             Chartered Accountants
                                 Firm ICAI Registration No: 301051E
 
 Place : Kolkata                                            H.S.Jha
 
 Date  : 2nd May, 2011                                      Partner
 
                                               Membership No. 55854