We have audited the attached Balance Sheet of VTX INDUSTRIES LIMITED,
 COIMBATORE as at 31st March, 2012 and also the Statement of Profit and
 Loss for the year ended on that date annexed thereto and the cash flow
 statement for the year ended on that date. 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 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.
 
 As required by the Companies'' (Auditor''s Report) Order, 2003, issued by
 the Central Government of India in terms of subsection (4A) of section
 227 of the Companies Act 1956, we give in the Annexure a statement on
 the matters specified in paragraph 4 and 5 of the said order.
 
 As required by the Section 227(3) of the Companies Act 1956, we report
 that:
 
 1.  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;
 
 2.  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.
 
 3.  The Balance Sheet, Statement of Profit and Loss and Cash Flow
 Statement dealt with by this report are in agreement with the books of
 account.  
 
 4.  In our opinion the Balance Sheet, Statement of Profit and Loss 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.
 
 5.  On the basis of written representations received from the
 Director is, as on 31st March, 2012, and taken on record by the Board of
 Directors, we report that none of the directors is disqualified as on
 31st March, 2012, from being appointed as a director in terms of clause
 (g) of subsection (1) of Section 274 of the Companies Act, 1956.
 
 Without qualifying our report we draw attention to Note No.39 regarding
 adoption of depreciation rates applicable to continuous process plant
 in respect of plant & machinery of Spinning and Processing units and
 wind mills which is a technical matter. Due to this policy adopted by
 the company, the depreciation for the year is lowered by Rs. 478.19 Lakhs
 (PY Rs. 371.70 Lakhs) with consequential effect on the loss for the year.
 
 In our opinion and to the best of our information and according to the
 explanations given to us, the said financial statements, 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 affairs of the
 Company as at 31st March, 2012.
 
 ii) In the case of the Statement of Profit and Loss, of the Loss for
 the year ended on that date; and
 
 iii) In the case of cash flow statement, of the cash flows for the year
 ended on that date.
 
 ANNEXURE TO THE AUDITORS'' REPORT
 
 1.  (a) The Company is in the process of updating its fixed assets
 register.
 
 (b) The Fixed Assets have been physically verified by the management in
 accordance with a phased programme of verification, which in our
 opinion is reasonable, considering the size and nature of business.
 The frequency of verification is reasonable and discrepancies noticed
 on such physical verification were not material and have been properly
 dealt with in books of account.
 
 (c) In our opinion, the company has not disposed off a substantial part
 of its fixed assets during the year and the going concern status of the
 company is not affected.
 
 2.  (a) According to information and explanations furnished to us, the
 inventories are physically have been verified by the management at
 reasonable intervals.
 
 (b) In our opinion and according to the information and explanation
 given to us, 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 has maintained proper records of inventory, and no
 material discrepancies were noticed on such physical verification of
 inventories and other discrepancies noticed have been appropriately
 dealt with.
 
 3.  The Company has neither taken for granted any loans, secured or
 unsecured, to or from parties covered in the register maintained under
 Section 301 of the Companies Act, 1956.
 
 4.  In our opinion and according to the information and explanations
 furnished 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, fixed assets and for the sale
 of goods and services. During the course of our audit, we have not
 observed any continuing failure to correct major weakness in internal
 control system.
 
 5.  (a) The transactions that need to be entered into the register
 required to be maintained in pursuance of Section 301 of the Act have
 been so entered.
 
 (b) According to the information and explanations furnished to us these
 transactions have been made at prices which are reasonable having
 regard to the prevailing market prices at the relevant time.
 
 6.  The company has accepted deposits from the public within the
 meaning of Section 58A of the Companies Act, 1956. The company has
 complied with the directives issued by Reserve Bank of India and the
 provisions of Section 58A and 58AA of the Companies Act, 1956 and the
 Companies (Acceptance of Deposits) Rules, 1975, with regard to the
 deposits accepted from public.
 
 7.  The Company has an internal audit system commensurate with its size
 and the nature of its business.
 
 8.  We have broadly reviewed the cost records maintained by the Company
 pursuant to the Companies (Cost Accounting Records) Rules, 2011
 prescribed by the central government under section 209(l)(d) of the
 Companies Act, 1956 and are of the opinion that prima facie the
 prescribed cost records have been maintained. We have, however, not
 made a detailed examination of the cost records with a view to
 determine whether they are accurate or complete.
 
 9.  (a) The company is generally regular in depositing undisputed
 statutory dues including Provident Fund, Employee''s State Insurance,
 Investor Education and protection Fund, Income tax, Wealth tax, Service
 Tax, Sales Tax, Customs Duty, Excise Duty, Cess and any other statutory
 dues with the appropriate authorities during the year, except the
 following cases which are outstanding as on 31st March, 2012 for a
 period of more than 6 Months from the date they became payable.:
 
 S.    Nature of Dues              Amount
 No.                               Rs in Lakhs
 
 1.    Provident Fund                85.50
 
 2.    Employees State Insurance      7.58
 
 3.    Wealth Tax                     0.96
 
 4.    Income Tax                    91.51
 
 5.    Dividend Distribution Tax     17.68
 
 6.    Tax Deducted at Source        53.98
 
 b.  There are disputed dues of Tax which have not been deposited and
 the amounts involved, the forum where disputes are pending as under:
 
 Name          Nature      Amount of      Period      Forum
 of the        of the      demand/        to which    where
 Statute       dues        (Paid)         it relates  dispute
                           (Rs in lakhs)              is pending
 
 Income        Income        30.54          1999-00   Madras
 Tax Act,      tax          (30.54)                   High
 1961                                                 Court
 
 Income        Income        27.30          2004-05   CIT 
 Tax Act,      tax          (27.30)                  (Appeal)
 1961
 
 10.  The company has accumulated losses at the end of the financial
 year, but it has not exceeded the fifty percent of its networth.  The
 company has incurred cash losses during the financial year covered by
 the audit and has not incurred cash losses in the immediately preceding
 financial year.
 
 11.  In our opinion and according to information and explanation given
 to us, the company has not defaulted in repayment of its dues to
 financial institutions, banks and debenture holders except the term
 loan installments due from the quarter ended 30.09.2011 to 31.03.2012
 of f 1700.42 Lakhs (Rs. 863.94 Lakhs towards principal and Rs. 836.48 Lakhs
 towards interest).
 
 12.  The company has not granted any loans/ advances on the basis of
 security by way of pledge of shares, debentures and other securities.
 
 13.  The company not being a Chit fund, Nidhi or mutual benefit
 Society, the requirements of clause (xiii) of paragraph 4 of the Order
 is not applicable to the company.
 
 14.  The company is not dealing or trading in shares, securities,
 debentures and other investments. Accordingly, the provision of clause
 (xiv) of paragraph 4 of the Order is not applicable to the company.
 
 15.  According to the information and explanation given to us, the
 company has not given any guarantee for loans taken by others from
 banks or financial institutions.
 
 16.  To the best of our knowledge and belief and according to the
 information and explanation given to us the term loans availed by the
 company were, prima facie, applied by the company during the year for
 the purposes for which the loans were obtained.
 
 17.  According to the information and explanation given to us and on
 an overall examination of the Balance sheet of the company, we are of
 the opinion the; there are no funds raised on short term basis have
 been used for long term purposes.
 
 18.  The company has not made any preferential allotment of shares
 during the year to parties and companies covered in the register
 maintained under section 301 of the Companies Act, 1956.
 
 19.  The company has not issued any debentures during the year.
 
 20.  The Company has not raised any money by way of public issues
 during the year.
 
 21.  According to the information and explanation given to us, no
 material fraud on or by the company has been noticed or reported during
 the year.
 
                                                         For Suri & Co.
 
                                                 Chartered Accountants 
 
                                                Firm Regn. No: 004283S 
 
                                                           K Hariharan
 
 Place : Coimbatore                                            Partner
 
 Date : 29.05.2012                                Membership No:019773