1.  We have audited the attached Balance Sheet of TANFAC INDUSTRIES
 LIMITED (''the company'') as at March 31, 2012 and also the Statement of
 Profit and Loss and 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.
 
 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 the 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 [as
 amended] [''the order''] issued by the Central Government in terms of
 subsection [4A] of Section 227 of The Companies Act, 1956,(''the Act'')
 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:
 
 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, the Company has kept proper books of accounts as
 required by law so far as appears from our examination of those books;
 
 iii. The Balance Sheet, statement of Profit and Loss and Cash Flow
 Statement dealt with by the report are in agreement with the books of
 account;
 
 iv.  In our opinion, the Balance Sheet, Statement of Profit & Loss and
 Cash Flow Statement dealt with by this report comply with the
 Accounting Standards referred to in subsection (3C) of Section 211 of
 the Act;
 
 v.  On the basis of the written representations received from the
 Directors as on March 31, 2012and taken on record by the Board of
 Directors, we report that none of the Directors are disqualified as on
 March 31, 2012 from being appointed as a Director in terms of Section
 274(1)(g) of the Act;
 
 vi.  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 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 March 31, 2012.
 
 b.  In the case of the Statement of Profit and Loss, of the loss of the
 Company for the year ended on that date, and
 
 c.  In the case of Cash Flow Statement of the Cash Flows of the Company
 for the year ended on that date.
 
 i.  a The Company has maintained proper records showing full
 particulars, including quantitative details and situation of Fixed
 Assets.
 
 b) The Company has phased programme for physical verification of all
 its fixed Assets, which in opinion, is reasonable having regard to the
 size of the company and nature of its asset. As informed to us, no
 material discrepancies were noticed on such verification.
 
 c There was no substantial disposal of fixed assets during the year.
 
 ii.  a) The management has conducted physical verification of
 inventories at reasonable intervals during the year;
 
 b) The procedures of physical verification of inventory followed by the
 Management are reasonable and adequate in relation to the size of the
 Company and nature of its business.
 
 c) The Company is maintaining proper records of inventory and as
 informed to us, no material discrepancies were noticed on physical
 verification.
 
 iii. a) As informed, 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 Act. Hence, clauses (iii)(b), (c)
 and (d) of the Order are not applicable.
 
 b) As informed, the Company has not taken any secured or unsecured
 loans from companies, firms or other parties listed in the Register
 maintained under Section 301 of the Act. Hence, clauses (iii) (f) and
 (g) of the Order are not applicable.
 
 iv.  In our opinion and according to the information and explanations
 given to us, there is an adequate internal control system commensurate
 with the size of the Company and the nature of its business, for the
 purchase of inventory and fixed assets, and for the sale of goods and
 services. During the course of our audit and on the basis of
 examination of the books and records of the company as also according
 to information and explanations given, and as per checking carried out
 in accordance with the auditing standards generally accepted in India,
 neither we have observed nor we have been reported of any continuing
 failure to correct any major weakness in the internal control system of
 the company.
 
 v.  (a) According to the information and explanations provided to us,
 there have been no transactions which need to be entered in the
 register maintained under Section 301 of the Act. Hence, clause (v) (b)
 of the Order is not applicable to the Company.
 
 vi.  According to the information and explanations given to us, the
 Company has not accepted any public deposits within the meaning of the
 directives issued by the Reserve Bank of India and the provisions of
 Sections 58A, 58AA or any other relevant provisions of the Act and the
 rules framed there under. We are informed by the management that no
 order has been passed by the Company Law Board, National Company Law
 Tribunal or Reserve Bank of India or any Court or any other Tribunal in
 this respect.
 
 vii. In our opinion, the Company has an internal audit system
 commensurate with the size and nature of its business.
 
 viii.We have broadly reviewed the books of account 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 Act, in
 respect of the Company''s products to which said rules are made
 applicable and are of the opinion that prima facie, the prescribed
 accounts and records have been maintained.
 
 ix.  a) The Company is generally 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. Further,
 since the Central Government has till date not prescribed the amount of
 cess payable under Section 441A of the Act, we are not in a position to
 comment upon the regularity or otherwise of the Company in depositing
 the same.
 
 outstanding at the year end, for a period of more than six months from
 the date they became payable
 
 c) According to the records of the Company, the dues outstanding of
 income-tax, sales- tax, wealth-tax, service tax, customs duty, excise
 duty and cess on account of any dispute, are as follows:
 
 Name of                        Disputed   Period to   Forum where
 Statute    Nature of the Dues  amount     which the   dispute is
                               (Rs in 
                                Lakhs)     amount 
                                           relates     pending
 
                                                       Written petition
 TNGST      Levy of sales tax
            from sales           52.77     2004 05     before Hon''ble 
 Act 1959   affected through 
            Pondicherry                                High Court of 
                                                       Madras
 
 Custom     Duty on fluorspar 
            shipment             10.79     1998-99     Customs Officer
 Act        shortage
 
                                                       SB,CEGAT
            Interest Accrued 
            to be added           0.27     2001-02     Chennai
 
            Sale of Scrap         0.74     2003-04     SB,CEGAT Chennai
 
                                                       Additional/Joint
            Cenvat credit 
            disallowed on                  April 03 
                                 31.02                 Commissioner,
            steels/pipes                   August ''05  Pondicherry
 
            Cenvat credit 
            disallowed on                  September
                                           ''05 -       Additional/Joint
                                  4.74                 Commissioner,
 Central    steels/pipes                   March ''06   Pondicherry
 
 Excise Act 
 
                                                       Additional/Joint
            Cenvat credit 
            disallowed on         4.84     April 06    Commissioner,
            steels/pipes                   March ''07   Pondicherry
 
                                                       Additional/Joint
            Cenvat credit 
            disallowed on                  April 07 
                                  0.47                 Commissioner,
            steels/pipes                   March ''07   Pondicherry
 
                                                       Additional/Joint
            Cenvat credit 
            disallowed on                  October 07  
            steels/pipes          1.93     March ''08   Commissioner
                                                       Pondicherry
 
                                                       Additional/Joint
            Cenvat credit 
            disallowed on                  April 08 - 
                                 10.49                 Commissioner,
            steels/pipes                   September 
                                           ''08         Pondicherry
 
            Cenvat credit 
            disallowed on                  September
                                           ''08 -       Additional/Joint
                                 21.55                 Commissioner,
            steels/pipes                   March ''09   Pondicherry
 
            Total                76.05
 
                                                       The
                                           2001-02 to  Commissioner/
            Service Tax on 
            Lease Rent            12.3                 The Asst.
                                           2004-05     Commissioner,
 Finance                                               Pondicherry
 Act, 1994  Service tax on 
            consulting                     2002-03 to
 (Service   Engineers/
            Management            0.46     2003 04     CESTAT, Chennai
 Tax)       Consultancy 
           (including penalty)
 
                                                       The
            Service tax 
            on GTA               19.64     2006-07 to  Commissioner,
                                           2007-08     Pondicherry
 
            Service Tax on 
            tangible assets       1.13     2008-09     CESTAT, Chennai
 
            Total                33.53
 
            Replacement of 
            equipment claimed 
            as revenue 
            expenditure,                               Income Tax
            reclassified by 
            Dept. as capital     85.39     2003 - 04   Appellate Tribunal
            expenditure [tax 
            demanded]
           (Including Interest)
 
                                                       The Commissioner
            Disallowance of 
            various expenses     71.95     2005-06     of Income Tax
           (Including Interest)                       [Appeals],Chennai
 
 Income                                                The Commissioner
            Disallowance of 
            various expenses 
 Tax Act                         71.42     2006-07     of Income Tax
           (Including Interest)                       [Appeals],Chennai 
 
                                                       The Commissioner
            Disallowance of 
            various expenses     75.79     2007-08     of Income Tax
           (Including Interest)                       [Appeals],Chennai
 
                                                       The Commissioner
            Disallowance of 
            various expenses     16.89     2008-09     of Income Tax
           (Including Interest)                       [Appeals],Chennai
 
                                321.44
 
 x.  The Company has accumulated losses of Rs 2.922.42 lakhs and has
 incurred a cash loss of Rs 1,446.63 lakhs in the current financial year
 but has not incurred cash loss in the immediately preceding financial
 year.
 
 xi.  Based on our audit procedures and as per the information and
 explanations given by the management, we are of the opinion that the
 Company has not defaulted in repayment of due to a financial
 institution or bank. The company has not issued any debenture.
 
 xii. According to the information and explanations given to us and
 based on the documents and records produced to us, the Company has not
 granted 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 Order are not applicable to the Company.
 
 xiv. In our opinion, the Company is not dealing in or trading in
 shares, securities, debentures and other investments. Accordingly, the
 provisions of clause 4(xiv) of the Order are not applicable to the
 Company.
 
 xv.  According to the information and explanations given to us, the
 Company has not given guarantee for loans taken by others from banks or
 financial institutions, the terms and conditions whereof in our opinion
 are not prima facie prejudicial to the interest of the Company.
 
 xvi. Based on information and explanations given to us by the
 management, term loans were applied for the purpose for which the loans
 were obtained.
 
 xvii.  According to information and explanation given to us and overall
 examination of the balance sheet of the company, we report that the
 funds raised on short term basis have been used for long term
 investment to the extent of Rs 299.32 lakhs
 
 xviii.During the year, the Company has not made any preferential
 allotment of share, hence clause 4(xviii) of the order is not
 applicable to it
 
 xix. The Company has not issued any debentures.  Hence, clause 4(xix)
 of the order is not applicable to it
 
 xx.  The Company has not raised any money by way of public issue.
 Hence, clause 4(xx) of the order is not applicable to it
 
 xx. During the course of our examination of the books and records of
 the company, carried out in accordance with the auditing standards
 generally accepted in India, we have neither come across any instance
 of fraud on or by the company noticed or reported during the course of
 our audit nor have we been informed of any such case by the management
  
                                              M/s. Khimji Kunverji & Co.  
   
                                                  Chartered Accountants 
 
                                           Firm Registration No.105146W 
 
                                                      Hashmukh B Dehdia
 
 Camp: Chennai                                                  Partner
 
 Date: 29th May, 2012                              Membership No. 33494