We have audited the attached Balance Sheet of Varuna Agroproteins
 Limited, Registered Office at 82-B, Madangir Village, New Delhi-110062,
 as at 31s1 March, 2003 and also the Profit &Loss Account for the year
 ended on that date annexed thereto. These financial statements are the
 responsibility of the Companys 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.
 
 As required by the Manufacturing and Other Companies (Auditors Report)
 Order, 1988, 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 &
 5 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 purpose 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 (and proper returns adequate for the purposes of our audit
 have been received from the branches not visited by us. The branch
 Auditors Report (s) have been forwarded to us and have been
 appropriately dealt with);
 
 iii) The Balance Sheet and Profit & Loss Account dealt with by this
 report are in agreement with the books of account (and with the audited
 returns from the branches) ;
 
 iv) In our opinion, the Balance Sheet and Profit & Loss Account 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 written representations received from the directors,
 as on 31st March 2003, and taken on record by the Board of Directors,
 we report that none of the directors is disqualified as on 31st March
 2003 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 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, 2003; and
 
 b) In the case of the Profit & Loss Account, of the loss for the year
 ended on that date.
 
                                             For CHAUDHRY GOYAL& COMPANY
                                                   Chartered Accountants
 New Delhi                                                 B.B. CHAUDHRY
 30th April, 2003                                                Partner
 
 ANNEXURE TO AUDITORS REPORT (Referred to in Paragraph (1) of our
 report of even date)
 
 1. The Company has maintained proper records showing full particulars
 including quantitative details and situation of fixed assets on the
 basis of information available to us. According to the information and
 explanations given to us, the fixed
 
 assets have been physically verified by the management during the year
 in a phased periodical manner which in our opinion is reasonable,
 having regard to the size of the Company and nature of the assets. No
 material discrepancies were noticed on such verification.
 
 2. None of the fixed assets have been revalued during the year.
 
 3. The stock of stores, spares and chemicals have been physically
 verified by the management at reasonable intervals during the year
 which in our opinion is reasonable.
 
 4. In our opinion, the procedure of physical verification of stocks
 followed by management are reasonable and adequate in relation to the
 size of the Company and nature of its business.
 
 5. The discrepancies noticed on physical verification of stock as
 compared to book records were not significant and have been property
 dealt with in the books of accounts.
 
 6. In our opinion, the valuation of stock is fair and proper in
 accordance with the normally accepted accounting principles and is on
 the same basis as in the previous year.
 
 7. The Company has not taken/given any loan from/to Companies listed
 in the Register maintained under Section 301 of the Companies Act,
 1956.
 
 8. In respect of loans an; advances in the nature of loans given by
 the Company to its employees and others, they are repaying the amount
 as stipulated.
 
 9. 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 purchase of stores, raw materials including
 components, plant and machinery, equipment and other assets and for the
 sale of goods.
 
 10. According to the information and explanations given to us, there
 are no transactions of purchase of goods and materials and sale of
 goods, materials and services made in pursuance of contracts or
 arrangements entered in the Register maintained under section 301 of
 the Companies Act, 1956 and aggregating during the year to Rs.50000/-
 or more in respect of each party.
 
 11. As explained to us, the Company has regular procedure for
 determination of unserviceable or damaged stores, raw materials and
 finished goods.
 
 12. The Company has not accepted any deposits from the public in terms
 of Section 58A of the Companies Act, 1956 and the Rules framed
 thereunder.
 
 13. There are no saleable by-products. Reasonable records are
 maintained for the sale or disposal of realisable scrap and waste
 materials.
 
 14. The Company has an internal audit system commensurate with its
 size and the nature of its business.
 
 15. The maintenance of cost records under Section 209 (i) (d) of the
 Companies Act, 1956 for any products of the Company has not yet been
 prescribed by the Central Government.
 
 16. According to the records of the Company, Provident Fund dues have
 been regularly deposited during the year with the appropriate
 authorities. It has been further informed that Company is not required
 to make Employees State Insurance contribution.
 
 17. According to information and explanations given to us there were
 no disputed amounts payable in respect of Income Tax, Wealth Tax,
 Custom Duty and Excise Duty which have remained outstanding as at 31st
 March, 2003 for a period of more than six months from the date they
 became payable.
 
 18. During the course of examination of the books of account carried
 out in accordance with generally accepted accounting practices, we have
 not come across any expenses charged to Revenue Account which, in our
 opinion and judgment and to the best of our knowledge and belief, could
 be regarded as personal expenses.
 
 19. The Company is a sick industrial Company within the meaning of the
 clause (0) of sub-section (1) of Section 3 of the Sick Industrial
 Companies (Special Provisions) Act, 1985.
 
                                             For CHAUDHRY GOYAL& COMPANY
                                                   Chartered Accountants
 New Delhi                                                 B.B. CHAUDHRY
 30th April, 2003                                                Partner