1.  We have audited the attached Balance Sheet of Vesuvius India
 Limited (''the Company'') as at 31 December 2011, the Profit and Loss
 Account and the Cash Flow Statement of the Company 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 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 (''the
 Order''), 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
 and 5 of the said Order.
 
 4.  Further to our comments in the Annexure referred to above, we
 report that:
 
 (a) 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;
 
 (b) In our opinion, proper books of account as required by law have
 been kept by the Company so far as it appears from our examination of
 those books;
 
 (c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement
 dealt with by this report are in agreement with the books of account;
 
 (d) 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.
 
 (e) On the basis of written representations received from directors as
 on 31 December 2011, and taken on record by the Board of Directors, we
 report that none of the directors is disqualified as on 31 December
 2011 from being appointed as a Director in terms of Section 274(1)(g)
 of the Companies Act, 1956;
 
 (f) 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:
 
 i) in the case of the Balance Sheet, of the state of the affairs of the
 Company asat31 December 2011;
 
 ii) in the case of the Profit and Loss Account, of the profit of the
 Company for the year ended on that date; and
 
 iii) in the case of the 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 a regular programme of physical verification of its
 fixed assets by which all fixed assets are verified in a phased manner
 over a period of three years. In our opinion, this periodicity of
 physical verification is reasonable having regard to the size of the
 Company and the nature of its fixed assets. In accordance with this
 programme, certain fixed assets were physically verified. No material
 discrepancies were noticed on such verification carried out during the
 year.
 
 (c) Fixed assets disposed off during the year were not substantial, and
 therefore, do not affect the going concern assumption.
 
 (ii) (a) The inventory, except goods-in-transit, has been physically
 verified by the management during the year.
 
 In our opinion, the frequency of such verification is reasonable.
 
 (b) The procedures for the 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 verification between the physical stocks and
 the book records were not material.
 
 (iii) The Company has neither granted nor taken any loans, secured or
 unsecured, to or 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 is an adequate internal control system commensurate
 with the size of the Company and the nature of its business with regard
 to purchase of inventories and fixed assets and with regard to the sale
 of goods and services. We have not observed any major weakness in the
 internal control system during the course of the audit.
 
 (v) (a) In our opinion and according to the information and
 explanations given to us, the particulars of contracts or arrangements
 referred to in Section 301 of the Companies Act, 1956 have been entered
 in the register required 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 and
 arrangements referred to in (a) above and exceeding the value of Rs. 5
 lakh with any party during the year have been made at prices which are
 reasonable having regard to prevailing market prices at the relevant
 time except for purchases of certain items of inventories and fixed
 assets that are for the Company''s specialised requirements and
 similarly for sale of certain goods for specialised requirements of
 buyers for which suitable sources are not available to obtain
 comparable quotations.  However, on the basis of information and
 explanations provided, the same appear reasonable.
 
 (vi) The Company has not accepted any deposits from the public during
 the year.
 
 (vii) In our opinion, the Company has an internal audit system
 commensurate with size and nature of its business.
 
 (viii) The Central Government has not prescribed the maintenance of
 cost records under Section 209(1)(d) of the Companies Act 1956 for any
 of the products manufactured/services rendered by the Company.
 
 (ix) (a) According to the information and explanations given to us and
 on the basis of our examination of the records of the Company, amounts
 deducted/accrued in the books of account in respect of 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, and other material
 statutory dues have generally been regularly deposited during the year
 by the Company with appropriate authorities.
 
 According to the information and explanations given to us, no
 undisputed amounts payable in respect of Provident Fund, Investor
 Education and Protection Fund, Employees'' State Insurance, Income-tax,
 Sales tax, Wealth tax, Service tax, Customs duty, Excise duty, and
 other material statutory dues were in arrears as at 31 December 2011,
 for a period of more than six months from the date they became payable.
 
 (b) According to the information and explanations given to us, there
 are no dues of Wealth tax which have not been deposited with the
 appropriate authorities on account of any dispute.
 
 According to the information and explanations given to us, dues of
 Income tax, Sales tax, Service tax, Excise duty and Custom Duty which
 have not been deposited on account of any dispute are listed below:
 
 Name of the 
 statute      Nature of 
              the dues        Amount      Period       Forum where
                                                       dispute is pending
 
 Income 
 Tax 
 Act,1961     Disallowances
              arising in
              income         66,064       Assessment
                                          years        Hon''ble High 
                                                       Court of
              tax 
              proceedings
             (Net of 
              deposit                     1997-98 to
                                          2008-09      Calcutta,Income 
                                                       Tax
              of 
              Rs. 905,819 
              thousands)                               Appellate Tribunal,
                                                       Commissioner of 
                                                       Income Tax 
                                                      (Appeals)
 
 Central
 Excise 
 Act,1944     Disallowance
              of Cenvat 
              Credit            608       Nov 2000,
                                          2007-2008    Commissioner
                                                      (Appeals)
 
 Central
 Excise 
 Act,1944     For non
              payment of
              Excise         14,149       2000         Central Excise 
                                                       and Service
              Duty on 
              Service 
              Charges                                  Tax Appellate 
                                                       Tribunal,
              and 
              Machine 
              hire 
              charges                                  Additional 
                                                       Commissioner
 
 Central
 Excise 
 Act,1944     Penalty 
              for
              delayed
              payment         1,949       June 1999to 
                                          April 2000   Central Excise 
                                                       and Service
              of 
              differential   
              excise duty 
              for                                      Tax Appellate 
                                                       Tribunal
              supply of 
              goods under 
              Advance
              Intermediate 
              licence.
 
 Customs 
 Act,1962     Classification 
              of High 
              Alumina         1,555       2005-06 
                                          till date    Commissioner of
              Cement                                   Customs
 
 Service 
 Tax          For Non / 
              short payment   1,971       2006-2007,
                                          2007-08,     Commissioner 
                                                      (Appeals),
              of payment 
              of service 
              tax                         2008-09,
                                          2009-10,     Additional 
                                                       Commissioner of
                                          2010-2011    Service Tax,
                                                       Deputy
                                                       Commissioner
 
 Central
 Sales 
 Tax          Duetonon-
              submission
              of              6,021       2007-08,
                                          2008-09      Sales Tax 
                                                       Appellate
              declaration
              form.                       2009-10,
                                          2010-2011    Tribunal,
                                                       Commissioner
             (Net of 
              deposit of                              (Appeals), 
                                                       Assistant
              Rs. 8,299 
              thousand)                                Commissioner
 
 State
 Sales 
 Tax          Disallowance
              of Input
              credit          4,352       2005-06,
                                          2006-07,
                                          2007-08,     Commissioner
                                                      (Appeals)
                                          2008-09
 
 (x) The Company does not have any accumulated losses at the end of the
 financial year and has not incurred cash losses in the financial
 year and in the immediately preceding financial year.
 
 (xi) In our opinion and according to the information and explanations
 given to us, the Company has not defaulted in repayment of dues to its
 bankers or to any financial institution. The Company did not have any
 outstanding debentures during the year.
 
 (xii) The Company has not granted any loans and advances on the basis
 of security by way of pledge of shares, debentures and other securities.
 
 (xiii) In our opinion and according to the information and explanations
 given to us, the Company is not a chit fund or a nidhi/mutual
 benefit fund/society.
 
 (xiv) According to the information and explanations given to us, the
 Company is not dealing or trading in shares, securities, debentures and
 other investments.
 
 (xv) 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.
 
 (xvi) The Company did not have any term loans outstanding during the
 year.
 
 (xvii) According to the information and explanations given to us and on
 an overall examination of the balance sheet of the Company, we are of
 the opinion that the funds raised on short-term basis and repaid during
 the year have not been used for long-term investment.
 
 (xviii) The Company has not made any preferential allotment of shares
 to companies/firms/parties covered in the register maintained
 under Section 301 of the Companies Act, 1956.
 
 (xix) The Company did not have any outstanding debentures during the
 year.
 
 (xx) The Company has not raised any money by public issues during the
 year.
 
 (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 BSR& Co.
 
                                        Chartered Accountants 
 
                                        Firm''s Registration No. 101248W
 
                                        Vikram Advani
 
                                        Partner
 
 Place: Kolkata
 
 Date : 29 February 2012                Membership Number No.091765