1.  We have audited the attached balance sheet of Zuari Industries
 Limited (''the Company'') as at March 31, 2011 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 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 (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, 1956.
 
 v. On the basis of the written representations received from the
 directors, as on March 31, 2011, and taken on record by the Board of
 Directors, we report that none of the directors is disqualified as on
 March 31, 2011 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, 2011;
 
 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 frequency 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 not granted any loans, secured or unsecured
 to companies, firms or other parties covered in the register maintained
 under Section 301 of the Companies Act, 1956. Therefore, the provisions
 of paragraph 4 (iii) (a), (b), (c) and (d) of the Companies (Auditor''s
 Report) Order, 2003 (as amended) are not applicable to the Company.
 
 (b) 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 and as such, clauses 4
 (iii) (e) to 4 (iii) (g) of the Companies (Auditor''s 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 of goods.
 During the course of our audit, no major weakness has been noticed in
 the internal control system in respect of these areas. During the
 course of our audit, we have not observed any continuing failure to
 correct major weakness in internal control system of the Company. Due
 to the nature of its business, the Company is not required to sell any
 services.
 
 (v) According to the information and explanations provided by the
 management, we are of the opinion that there are no transactions that
 need to be entered into the register maintained under Section 301 of
 the Companies Act, 1956.  Therefore, the provisions of clause 4(v) of
 the Companies (Auditor''s Report) Order, 2003 (as amended) are not
 applicable to the Company.
 
 (vi) In respect of deposits accepted in earlier years, 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 for 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) The Company is regular in depositing with appropriate
 authorities 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 applicable to it.
 
 Further, since the Central Governent has till date not prescribed the
 amount of cess payable under section 441 A of the Companies Act, 1956,
 we are not in a position to comment upon the regularity or otherwise of
 the company in depositing the same.
 
 (b) 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,
 wealth-tax, service tax, sales-tax, customs duty, excise duty, cess and
 other material undisputed statutory dues 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 of income-tax, sales-tax, wealth-tax, service tax, customs
 duty, excise duty and cess on account of any dispute, other than the
 following:
 
                                    Amount (Rs Period to 
                                               which the  Forum where
 Name of the statute Nature of dues
                                     in lacs)  amount 
                                               relates    dispute is 
                                                          pending
 
 Karnataka Tax on 
 Professions,        Penalty on 
                     Professional 
                     Tax                                  Joint 
                                                          Commissioner of
 Trades, Callings 
 and                 paid on 
                     Company''s        21.28   2005–06 to 
                                              2008–09     Commercial 
                                                          Taxes
 Employments 
 Act,1976            registered 
                     godowns.                              (Appeals)
 
                                                          Additional 
                                                          Commissioner,
 Chapter V of        Service tax 
                     under Goods
                                      84.10   2006–07 to 
                                              2009–10     Customs and 
                                                          Central
 Finance Act 1994    Transport 
                     Agency Services                      Excise, 
                                                          Panaji, Goa
 
 (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. 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 (Auditor''s 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 (Auditor''s 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 a 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. BATLIBOI & CO.
 
                                   Firm''s Registration No.: 301003E
 
                                              Chartered Accountants
 
                                                     per Anil Gupta
 
 Place : Gurgaon                                            Partner
 
 Date : 9th May, 2011                         Membership No.: 87921