We have audited the attached Balance Sheet of SURYALATA SPINNING MILLS
 LIMITED, SECUNDERABAD, (A.P.) as at 31st March, 2012 and also the
 Statement of Profit and Loss and the Cash Flow Statement 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.
 
 We report as follows:
 
 1.  As required by the Companies (Auditors'' Report) Order, 2003, issued
 by the 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:
 
 2.  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, the Statement of Profit and Loss and Cash Flow
 statement dealt with by this report are in agreement with the books of
 account.
 
 iv) In our opinion, the Balance Sheet, the Statement of Profit and Loss
 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 the written representations received from the
 directors, as on 31st March, 2012 and taken on record by the Board of
 Directors, we report that, none of the directors is disqualified as on
 31st March, 2012 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 in conjunction
 with the Schedules 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:
 
 a) in the case of the Balance Sheet, of the state of affairs of the
 Company as at 31st March, 2012;
 
 b) in the case of the Statement of Profit and Loss, of the Profit of
 the Company 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.
 
 Re: SURYALATA SPINNING MILLS LIMITED, SECUNDERABAD.
 
 Annexure referred to in paragraph 1 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) As explained to us, the management has physically verified most of
 the fixed assets during the year and 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 the assets. No material
 discrepancies were noticed on such verification.
 
 c) The plant and machinery disposed off during the year by the company
 is not substantial and hence, it has not affected the going concern
 status of the Company.
 
 2.  a) The Inventory has been physically verified during the year by
 the Management. In our opinion, the frequency of verification is
 reasonable.
 
 b) In our opinion, the procedures of physical verification of
 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 is maintaining proper records of inventory. The
 discrepancies noticed on physical verification between the physical
 stocks and book records were not material.
 
 3.  a) 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 Companies Act, 1956.
 
 b) In view of our comment in paragraph 3(a) above, III (b), (c) & (d)
 of the aforesaid order are not applicable to the company.
 
 e) During the year, the company has taken unsecured loans from 3
 parties covered in the register maintained under section 301 of the
 companies Act, 1956 and the maximum amount involved during the year was
 Rs. 172.15 lakhs.
 
 f) In our opinion the rate of interest and other terms and conditions
 on which loans have been taken from the other parties listed in the
 register maintained under section 301 of the Companies Act, 1956 are
 not prima-facie prejudicial to the interests of the company.
 
 g) The company is regular in payment of the principal amount and
 interest thereon as stipulated.
 
 4.  In our opinion and according to the information and explanations
 given to us, there are adequate internal control systems commensurate
 with the size of the Company and the nature of its business with regard
 to purchase 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 control
 system.
 
 5.  a) In our opinion and according to the information and explanations
 given to us, we are of the opinion that the particulars of contracts or
 arrangements referred to in section 301 of the Companies Act, 1956 have
 been entered in the register to be maintained under that section.
 
 b) 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 register maintained under Section 301 of
 the Companies Act, 1956 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 complied with the provisions of Section
 58A and 58AA and other relevant provisions of the Companies Act, 1956
 and the Companies (Acceptance of Deposits) Rules, 1975 with regard to
 the deposits accepted from the public.
 
 7.  In our opinion, the Company has an internal audit system
 commensurate with its size and nature of its business.
 
 8.  We have broadly reviewed the books of account relating to
 materials, labour and other items of cost maintained by the company
 pursuant to the Rules made by the Central Government for the
 maintenance of cost records under section 209(1)(d) of the Companies
 Act, 1956 in respect of yarn and are of the opinion that prima facie
 the prescribed accounts and records have been made and maintained.
 
 9.  a) According to 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, Income-tax, Sales Tax, Wealth Tax, Service
 Tax, Customs Duty, Excise Duty, Cess and other material statutory dues
 applicable to it.
 
 b) According to the information and explanations given to us, no
 undisputed amounts payable in respect of Income Tax, Wealth Tax,
 Service Tax, Sales Tax, Customs Duty, Excise Duty and Cess were in
 arrears as at 31st March, 2012 for a period of more than six months
 from the date they became payable .
 
 c) According to the records of the Company and the information and
 explanations given to us, the dues of sales tax, Income Tax, Customs
 Duty, Wealth Tax, Service Tax, Excise Duty and Cess which have not been
 deposited on account of any dispute are as follows :
 
 Nature              Amount        Period to      Forum 
 of                 (Rs in         which          where the 
 disputed            Lakhs)        the            dispute
 dues                              amount         is pending
                                   relates
 
 Income-tax          2.76          Asst.          Commissioner 
                                   year           of Income-tax
                                   2007-08       (Appeals), Hyderbad
 
 10.  The Company has no accumulated losses at the end of the financial
 year. The Company has not incurred any cash losses during the financial
 year covered by our audit 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 dues to any
 financial institutions and banks.
 
 12.  The Company has not granted any loans and advances on the basis of
 security by way of pledge of shares, debentures and other securities.
 
 13.  The Company is not a chit fund or a nidhi/ mutual benefit
 fund/society and therefore the requirements relating to such companies
 are not applicable to the Company.
 
 14.  The Company is not dealing or trading in shares, securities,
 debentures and other investments.
 
 15.  According to the information and explanations given to us, the
 Company has not given any guarantee for loans taken by others from
 banks or financial institutions.
 
 16.  In our opinion, and according to the information and explanations
 given to us the term loans were applied for the purpose for which the
 loans were obtained.
 
 17.  In our opinion, and according to the information and explanations
 given to us the funds raised on short-term basis have not been used for
 long-term investment.
 
 18.  During the year, the Company has converted 4,00,000 share warrants
 into Equity Shares of Rs.10/- at a premium of Rs.100/- each.
 
 19.  During the year, the Company has not issued any debentures and
 therefore the question of creating security in respect thereof does not
 arise.
 
 20.  During the year, the Company has not raised any money by public
 issue.
 
 21.  Based upon the audit procedures performed and according to the
 information and explanations given to us, we report that no fraud on or
 by the Company has been noticed or reported during the year.
 
                                              for BRAHMAYYA & CO.,
 
                                           Chartered Accountants
 
                                           Firm Regn. No.000513S
 
                                                        K.S. RAO
 
 Place: Hyderabad                                        Partner
 
 Date : 6th August, 2012                    Membership No. 15850