1 We have audited the attached Balance Sheet of M/s. VARUN POLYMOL
 ORGANICS LIMITED as at 31st March, 2003 and also the Profit and 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 misstatements. An audit includes
 examining, on a test basis, evidence supporting the amounts and
 disclosure 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 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 Oder.
 
 2. Further to our comments in the Annexure referred to above:
 
 (a) In our opinion the company cannot be said to be a going concern as
 the measures to revive it do not seem to be getting the necessary
 results. Consequently in our opinion adjustments are required to be
 made to the amount at which assets and liabilities are recorded and
 classified. The financial statements [and notes thereto] do not
 disclose this fact.
 
 (b) 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.
 
 (c) The Balance Sheet and Profit and Loss Account dealt with by this
 report are in agreement with the books of account;
 
 (d) The accounts have been prepared on principles applicable to a going
 concern despite significant erosion in net worth.
 
 (e) In our opinion, the Balance Sheet and Profit and 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.
 
 (f) 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.
 
 (g) In our opinion and to (he 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 principlies
 generally accepted in India.
 
 i) in the case of the Balance Sheet, of the state of affairs of the
 company as at 31st March. 2003; and
 
 ii) in the case of the Profit & Loss Account, of the LOSS for the year
 ended on that date.
 
                                                    For and on behalf of
                                                     THANAWALA & COMPANY
                                                   Chartered Accountants
                                                                    Sd/-
                                                          V.K. Thanawala
 Place: Mumbai                                                Proprietor
 Dated: 28.4.2003
 
 ANNEXURE TO AUDITORS REPORT
 
 The Annexure referred to in paragraph 1 of the auditors report to the
 members of Varun Polymol Organics Limited for the year ended March 31,
 2003. We report that :
 
 1 The company has maintained proper records showing full particulars
 incuding quantitative details and situation of fixed assests. None of
 the fixed assests have been physically verified by the Management
 during the year.
 
 2. None of the fixed assests have been revalued during the year.
 
 3. The company has taken unsecured interest free loans from company,
 firms or other parties listed in the register, maintained u/s 301. The
 terms & conditions on which loans have been obtained are not prima
 facie, prejudicial to the interest of the company.
 
 4. The company has not granted any loans secured or unsecured to
 companies, firms or other parties listed in the register maintained
 under section 301 of the Companies Act, 1956.
 
 5. In respect of interest free Loans & Advances in the nature of Loan
 given by the company to the employees, repayments of the principal
 amount as stipulated are not being done.
 
 6. The Company has not made any Purchase of goods and material and sale
 of goods, materials & services aggregating to more than Rs. 50,000/-
 during the year, from a company in which Directors are interested as
 listed in Register maintained U/s 301 of the Companies Act, 1956.
 
 7. In our opinion and according to the information and explanation
 given to us, the Company has complied with the provisions of section 58
 A of of the Companies Act, 1956, and the Companies [Acceptance of
 Deposits] Rules, 1975, with regard to the deposits accepted from the
 public.
 
 8. No Internal Audit of the company is carried out as the company has
 been referred to BIFR and operations remain suspended during the year.
 
 9. According to the books and records examined by us and the
 information and explanations given to us, there were no undisputed
 amounts payable in respect of income tax, wealth tax, sales tax,
 customs duty and excise duty which have remained outstanding as at 31s
 March, 2003 for a period of more than six months from the date they
 became payable.
 
 10. The company has not maintained any inventories during the year and
 consequently, paragraph 4(a) (iii) to 4(A)(vi), 4(A)(xii), 4(A)(xiv)
 and 4(A) (xvi) of the Manufacturing and Other Companies [Auditors
 Report] Order, 1988, are not applicable in relation to its activities.
 
 11. The Company is a sick industrial Company within the meaning of
 Clause (o) of Section 3 (1) of the Sick Industrial Companies [Special
 Provisions] Act, 1985.
 
                                                    For and on behalf of
                                                     THANAWALA & COMPANY
                                                   Chartered Accountants
                                                                    sd/-
                                                          V.K. Thanawala
 Place: Mumbai                                                Proprietor
 Date: 28.4.2003