We have audited the attached Balance Sheet of TAMIL NADU NEWSPRINT AND
 PAPERS LIMITED, as at 31st March 2011, the Profit and Loss account and
 also 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 the 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 (Auditors'' Report) Order, 2003 issued by
 the Central 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 of the said Order.
 
 Further to our comments in the Annexure referred to above, we report
 that
 
 (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 in so far as it appears from examination of
 those books.
 
 (iii) The Balance Sheet, Profit and Loss Account and Cash Flow
 Statement dealt with by this report are in agreement with the books of
 account.
 
 (iv) In our opinion, the Balance Sheet, 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.
 
 (v) In respect of nominee directors appointed by State Government and
 public financial institutions, the provisions of Section 274(l)(g) does
 not apply. In respect of directors other than those specified above, we
 report that, on the basis of written representations received from
 those directors and taken on record by the Board of Directors, none of
 them 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.
 
 (vi) As the Central Government is yet to notify Cess payable under
 Section 441A, the reporting requirement under Section 227(3)(g) of the
 Companies Act, 1956 does not arise.
 
 (vii) In our opinion and to the best of our information and according
 to the explanations given to us, the said accounts 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 Balance Sheet, of the State of Affairs of the
 company as at 31st March 2011;
 
 (b) In the case of Profit and 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.
 
 ANNEXURE TO THE AUDITORS'' REPORT REFERRED TO IN PARAGRAPH 3 OF OUR
 REPORT OF EVEN DATE,
 
 i) (a) The Company is maintaining proper records showing full
 particulars, including quantitative details and situation of Fixed
 Assets;
 
 (b) Fixed assets have been physically verified by the management at
 reasonable intervals; no material discrepancies were noticed on such
 verification.
 
 (c) No substantial part of fixed assets have been disposed off during
 the year.
 
 ii) (a) Physical verification of inventory has been conducted at
 reasonable intervals by the management;
 
 (b) 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 and no
 material discrepancies were noticed on physical verification.
 
 iii) (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) The company has 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.
 
 iv) 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, for the
 purchase of inventory, fixed assets and for 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.
 
 v) As per the information and explanation given to us, there are no
 contracts or arrangements referred to in Section 301 of the Companies
 Act, 1956 that needs to be entered into the register maintained under
 the section.
 
 vi) The company has not accepted any deposits from public during the
 year. Hence the provisions of section 58A, 58AA or other relevant
 provisions of the Companies Act, 1956 are not applicable.
 
 vii) In our opinion, the company has an internal audit system
 commensurate with the size and nature of its business.
 
 viii) The Central Government has prescribed the maintenance of cost
 records under Section 209(l)(d) of the Companies Act, 1956 and we are
 of the opinion that prima facie, the books of accounts prescribed under
 the Cost Accounting Records (Paper) Rules, 1975, have been maintained
 by the company and the proforma specified therein for the year are
 under preparation. We have however not carried out a detailed
 verification of such records.
 
 ix) (a) The company has generally been regular in depositing undisputed
 statutory dues including Provident Fund, Investor Education and
 Protection Fund, Income-Tax, Sales-Tax, Wealth Tax, Service Tax,
 Customs Duty, Excise Duty, cess and any other statutory dues with the
 appropriate authorities. According to the information and explanations
 given to us, no undisputed amounts payable were in arrears, for a
 period more than six months from the date they become payable. The
 Employees'' State Insurance Act does not apply to the company.
 
 (b) According to the information and explanations given to us, there
 are no dues of Sales Tax/Income Tax/Customs Duty/Wealth Tax/Service
 Tax/Excise Duty/Cess which have not been deposited on account of any
 dispute other than those given below:
 
 Name of the 
 Statute         Nature of       Period to 
                                  which         Amount  Forum where the
                 Dues           the amount
                                  pertains   (Rs.Lakhs) dispute is 
                                                        pending
 
 Central Excise 
 Act, 1944       Excise duty
                 exemption      1997-1998,        4.25  Tribunal, Chennai
                                1998-1999
 
 Cenvat Credit 
 Rules, 2004     Input credit 
                 reversal       1997-98,
                                1998-99          50.17  High Court, 
                                                        Chennai.
 
                                1999-2000,
                                2000-01
                                2001-02
 
 Cenvat Credit 
 Rules, 2004     Capital goods 
                 credit         2003-04,
                                2004-05,       1093.07  Tribunal,Chennai.
                                2006-07,
                                2007-08
 
 Cenvat Credit 
 Rules, 2004     Input service 
                 credit         2005-06,
                                2006-07          17.50  Tribunal,Chennai.
 
 Cenvat Credit 
 Rules, 2004     Input service 
                 credit         2006-07,
                                2007-08          30.43  Commissioner 
                                                        (Appeals)
 
 Cenvat Credit 
 Rules, 2004     Capital goods
                 credit         2006-07,
                                2007-08        8257.53  Tribunal,Chennai.
 
 Cenvat Credit 
 Rules, 2004     Input service 
                 credit         2007-08,
                                2008-09         768.44  Tribunal,Chennai.
 
 Cenvat Credit 
 Rules, 2004     Capital goods
                 credit         2008-09,
                                2009-10          20.43  Tribunal,Chennai.
 
 Cenvat Credit 
 Rules, 2004     Capital goods 
                 credit         2008-09          77.89  Commissioner 
                                                        (Appeals)
 
 Cenvat Credit 
 Rules, 2004     Capital goods
                 credit         2009-10         268.72  Tribunal,Chennai.
 
 Cenvat Credit 
 Rules, 2004     Input service 
                 credit         2009-10,
                                2010-11           6.87  Commissioner
                                                        (Appeals)
 
 Cenvat Credit 
 Rules, 2004     Capital goods
                 credit         2010-11           2.57  Tribunal,Chennai.
 
 Cenvat Credit 
 Rules, 2004     Capital goods 
                 credit         2010-11           3.08  Commissioner 
                                                        (Appeals)
 
 Customs Act, 
 1962            Custom Duty    1991-92          44.34  Commissioner
 
 Customs Act, 
 1962            Custom Duty    1997-98          54.81  Commissioner
 
 Customs Act, 
 1962            Custom Duty    1999-00         126.74  Commissioner
 
 Income-tax Act, 
 1961            Income-tax     AY 2002-03       60.69  Assessing Officer
 
 Income-tax 
 Act, 1961       Income-tax     AY 1996-97 to   244.47  Assessing Officer
                                 2000-01 & 
                                 2003-04
 
 Income-tax 
 Act, 1961       Income-tax     AY -1996-97 to  283.58  Commissioner 
                                                       (Appeals)
                                   2000-01 & 
                                   2003-04
 
 Income-tax 
 Act, 1961       Income-tax       AY 2003-04     72.29  High Court, 
                                                        Chennai
 
 Income-tax 
 Act, 1961       Income-tax       AY 2004-05     56.46  Tribunal,Chennai
 
 Income-tax 
 Act, 1961       Income-tax      AY 2005-06     137.96  Commissioner
                                                        (Appeals)
 
 Income-tax 
 Act, 1961       Income-tax      AY 2006-07       5.97  Tribunal,Chennai
 
 Income-tax 
 Act, 1961       Income-tax      AY 2008-09       9.09  Commissioner 
                                                        (Appeals)
 
 Wealth Tax 
 Act, 1957       Wealth Tax      AY 1997-98,     19.46  Assessing Officer
                                  1998-99, 
                                  1999-00,
                                  2001-02,
                                  2002-03,
                                  2003-04
 
 x) The Company does not have accumulated losses as at the end of the
 financial year and has not incurred cash losses during the financial
 year covered by our audit and the immediately preceding financial year.
 
 xi) In our opinion and according to the information and explanation
 given to us, the Company has not defaulted in repayment of dues to any
 financial institution, bank or debenture holders.
 
 xii) The Company has not granted loans and advances on the basis of
 security by way of pledge of shares, debentures and other securities.
 Hence the question of maintenance of documents and records does not
 arise.
 
 xiii) The Company is not a chit fund or a nidhi / mutual benefit fund /
 society. Hence this clause is not applicable to the company.
 
 xiv) In our opinion, the Company is not dealing in or trading in
 shares, securities, debentures and other investments. Hence this clause
 is not applicable to the company.
 
 xv) The company has not given any guarantee for loans taken by others
 from banks or financial institutions based on the records produced to
 us.
 
 xvi) According to the information and explanations given to us, the
 company has not utilized the term loan to the extent of Rs.37.58 crores
 for the purpose for which it has been obtained.
 
 xvii) According to the information and explanations given to us and on
 an overall examination of the Balance Sheet of the company, we report
 that no funds raised on short-term basis have been used for long-term
 investment.
 
 xviii) According to the information and explanations given to us,
 during the year the Company has not made preferential allotment of
 shares to parties and companies covered in the register maintained
 under section 301 of the Act.
 
 xix) As per the information and explanation given to us, the company
 has not issued any debentures during the year.  However, in respect of
 debentures outstanding at the end of the year, necessary security or
 charge has been created.
 
 xx) The company has not raised any money through public issue. Hence
 the provisions of clause 4(xx) of the Companies (Auditor''s Report)
 Order, 2003 are not applicable to the Company.
 
 xxi) According to the information and explanations given to us, no
 fraud on or by the Company has been noticed or reported during the
 course of our audit.
 
 
                                       For P.B. Vijayaraghavan & Co.
 
                                              Chartered Accountants
 
                                      Firm Registration No. 004721S
 
                                                    P.B. Srinivasan
 
 Place - Chennai                                            Partner
 
 Date - 27th May 2011                         Membership No. 203774