Zuari Industries

1.  We have audited the attached Balance Sheet of Zuari Industries
 Limited as at March 31, 2009 and also the Profit and Loss account and
 the cash flow statement 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.
 
 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 (Auditors Report) Order, 2003 (as
 amended) 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:
 
 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, proper books of account as required by law have
 been- kept by the Company so far as appears from our examination of
 those books.
 
 iii. The balance sheet, profit and loss account and cash flow statement
 dealt with by this report are in agreement with the books of account.
 
 iv. 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, 1 956.
 
 v. On the basis of the written representations received from the
 directors, as on March 31, 2009, and taken on record by the Board of
 Directors, we report that none of the directors is disqualified as on
 March 31, 2009 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 March 31, 2009;
 
 b) in the case of the profit and loss account, of the profit for the
 year ended on that date; and
 
 c) in the case of cash flow statement, of the cash flows for the year
 ended on that date.
 
 Annexure referred to in paragraph [3] of our report of even date Re:
 Zuari Industries Limited
 
 (i) (a) The Company has maintained proper records showing full
 particulars, including quantitative details and situation of fixed
 assets.
 
 (b) The fixed assets are physically verified by the management in a
 phased manner over a period of two years and accordingly, part of the
 fixed assets were physically verified during the year and the
 discrepancies observed on such verification, as compared to the book
 records, were not material. In our opinion, the freauency of physical
 verification is reasonable having regard to the size of the Company and
 the nature of the assets.
 
 (c) There was no substantial disposal of fixed assets during the year.
 
 (ii) (a) The management has conducted physical verification of
 inventory 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 the nature of its business.
 
 (c) The Company is maintaining proper records of inventory and no
 material discrepancies were noticed on physical verification.
 
 (iii) (a) The Company has granted loan to four Companies covered in the
 register maintained under Section 301 of the Companies Act, 1956. The
 maximum amount involved during the year was Rs. 8,473.10 lacs, and the
 year- end balance of loans granted to such parties was Rs.7,080. 34
 lacs.
 
 (b) In our opinion and according to the information and explanations
 given to us, the rate of interest and other terms and conditions for
 such loans are not prima facie prejudicial to the interest of the
 Company.
 
 (c) In respect of loans granted, repayment of the principal amount is
 as stipulated and payment of interest have been regular.
 
 (d) There is no overdue amount of loans granted to Companies, firms or
 other parties listed in tha register maintained under Section 301 of
 the Companies Act, 1956.
 
 (e) As informed, the Company has not taken any loans, secured or
 unsecured from Companies, firms or other parties covered in the
 register maintained under Section 301 of the Companies Act, 1956.
 Therefore, the provisions of clause 4(f) and (g) of the Companies
 (Auditors Report) Order 2003 (as amended) are not applicable to the
 Company.
 
 (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 o* goods. During the
 course of our audit, no major weakness has been noticed in the internal
 control system in respect of these areas. Due to the nature of its
 business, the Company is not required to seli any services.
 
 (v) (a) According to the information and explanations provided by the
 management, we are of the opinion that the particulars of contracts or
 arrangements referred to in Section 301 of the Act that need to be
 entered into the register maintained under Section 301 have been so
 entered.
 
 (b) In our opinion and according to the information and explanations
 given to us, the transactions made in pursuance of such contracts or
 arrangements exceeding value of Rupees five lakhs have been entered
 into during the financial year at prices which are reasonable having
 regard to the prevailing market prices at the relevant time.
 
 (vi) in respect of deposits accepted, in our opinion and according to
 the information and explanations given to us, directives issued by the
 Reserve Bank of India and the provisions of Sections 58A, 58AA or any
 other relevant provisions of the Companies Act, 1956 and the rules
 framed thereunder, to the extent applicable, have been complied with.
 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
 
 (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 fcr the
 maintenance of cost records under Section 209(1 )(d) of the Companies
 Act, 1956, and are of the opinion that prima facie, the prescribed
 accounts and records have been made and maintained.
 
 (ix) (a) Undisputed statutory dues including provident fund, investor
 education and protection fund, or employees stare insurance,
 income-tax, sales-tax, wealth-tax, service tax, customs duty, excise
 duty, cess have generally been regularly deposited with the appropriate
 authorities though there has been a slight delay in a few cases which
 are not serious.
 
 (b) According to the information and explanations given to us, there
 are no undisputed dues in respect of provident fund, investor education
 and protection fund, employees state insurance, income-tax,
 wealth-tax, service tax, sales-tax, customs duty, excise duty, cess and
 other statutory dues which were 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, there are no dues
 outstanding in respect of income-tax, sales-tax, wealth-tax, service
 tax, customs duty, excise duty and cess on account of any dispute,
 other than the following:
 
 Name of the                    Nature of dues
 statute
 
 Rajasthan               Sales Tax, Interest and Penalty
 Sales Tax Act, 1954     under self declared assessment scheme
 
 Karnataka Tax on        Interest on professional
 Professions, Trades,    Tax paid on Companys
 Callings and            registered godowns 
 Employments Act, 1976
 
 Amount            Period to which                 Forum where
 (Rs. in lacs)    the amount relates       dispute is pending
 
 0.03                  A.Y. 1994-95        Deputy Commissioner
                                           (Appeals I) Commercial 
                                           Taxes, Jaipur
 
 65.34                 F.Y. 2003-04          High Court of
                       to 2008-09            Karnataka
                                             at Bangalore
 
 (x) The Company has no accumulated losses at the end of the financial
 year and it has not incurred cash losses in the current and 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 dues to banks. We have been
 informed that the Company did. not have any outstanding debentures and
 loan from financial institution during the year.
 
 (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 Companies (Auditors Report) Order, 2003 (as amended)
 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 Companies (Auditors Report)
 Order, 2003 (as amended) are not applicable to the
 Company. 
 
 (xv) According to the information and explanations given to us, the
 Company has given guarantee for loans taken by others from bank 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 the information and explanations given to us and on
 an overall examination of the balance sheet of the Company, we report
 that no funds raised on short-term basis have been used for long-term
 investment.
 
 (xviii)The Company has not made any preferential allotment of shares to
 parties or Companies 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 through public issue during
 the year.
 
 (xxi) Based upon the audit procedures performed for the purpose of
 reporting the true and fair view of the financial statements and as per
 the information and explanations given by the management, we report
 that no fraud on or by the Company has been noticed or reported during
 the course of our audit.
 
                                      For S.R. BATUBOI & CO. 
                                      Chartered Accountants
 
                                           per Anil Gupta 
 Place: Gurgaon                                   Partner
 Date : 15th May, 2009               Membership No.: 87921