Taneja Aerospace and Aviation Ltd.

1. We have audited the attached Balance Sheet of TANEJA AEROSPACE AND AVIATION LIMITED (the Company) as at March 31, 2012, and the related Profit and Loss Account and Cash Flow Statement of the Company for the financial 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 the 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.

3. As required by the Companies (Auditor's Report) Order, 2003 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 ofthe said Order to the extent applicable.

4. Further to our comments in the Annexure referred to in paragraph 3 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 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 complywith the Accounting Standards referred to in sub-section (3C) of Section 211 ofthe Companies Act, 1956;

(e) On the basis of written representations received from the Directors, as on March 31, 2012 and taken on record by the Board of Directors, we report that none of the Directors is disqualified as on March 31, 2012 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 ofthe 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, read together with the schedules thereto and the notes thereon, 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 ofthe Company as at March 31, 2012;

ii. In the case of Profit and Loss Account, of the Profit 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

(Referred to in paragraph 3 of our report of even date)

(i) a. The company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets.

b. According to the information and explanations given to us, the physical verification of the fixed assets was undertaken by the management during the year and no material discrepancies were noticed on such verification as compared to the book records.

c. According to the information and explanations given to us, the company has not disposed off substantial part of fixed assets during the year, which would affect the going concern of the company.

(ii) a. As explained to us, inventories have been physically verified during the year by the management. In our opinion, the frequency of verification is reasonable.

b. The procedures of physical verification of inventories followed by the management are generally reasonable and adequate in relation to the size ofthe Company and nature of its business.

c. The Company is maintaining proper records of inventory by way of manual bin cards, except in the case of work in progress. No material discrepancies were noticed on physical verification as compared to quantity as per manual records. Company is in the process of integrating its inventory with financial accounts.

(iii) a. During the year under audit, the Company has not granted any fresh loans, secured or unsecured, to companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Out ofthe advances granted in earlier years by way of Inter Corporate Deposit, the maximum amount outstanding during the year was Rs. 508 lakhs and the balance of such loan as at March 31, 2012 is Rs. 29 lakhs (Previous Year Rs.494 lakhs).

b. In our opinion and according to the information and explanations given to us, the rate of interest and other terms and conditions on which the Inter Corporate Deposit indicated in paragraph (iii) (a) above was granted is not, prima facie, prejudicial to the interest of the company.

c. The above referred Inter Corporate Deposit along with interest thereon upto March 31, 2011 has been completely recovered during the year. The amount outstanding as on March 31, 2012 represents the interest component for the year due on March 31, 2012 and has been subsequently received in full.

d. During the year, the Company has taken unsecured loans aggregating to Rs. 1,674 lakhs from one of the companies covered in the register maintained under section 301 of the Companies Act, 1956 (Previous Year Rs.1,344 lakhs). At the year end, the aggregate amount outstanding was Rs.1,340 lakhs (Previous Year Rs.1,125 lakhs). The maximum balance outstanding during the year was Rs.2,300 lakhs (Previous Year Rs.1,692 lakhs).

e. As explained to us, the loan (indicated in paragraph (iii) (d) above) is repayable on demand any time on or after April 01, 2012. In our opinion and according to the information and explanations given to us, the rate of interest and other terms and conditions of loan taken by the company, are prima facie, not prejudicial to the interest of the company.

f. The Company is regular in paying the interest and principal is repayable on demand any time on or after April 01, 2012.

(iv) In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the company and the nature of its business, for purchase of fixed assets and for the sale of goods and services. However, the internal control procedure with regard to inventory control and reconciliation of vendors balances need to be strengthened considering the increasing sales volume of business and transaction.

(v) a) According to the information and explanations given to us and to the best of our knowledge and belief, we are of the opinion that, the transactions that need to be entered into the register maintained under section 301 of the Companies Act, 1956 have been so entered.

b) In our opinion and according to explanations given to us, transactions (other than secured/unsecured loans given/taken dealt with in paragraph (iii) above) made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and exceeding the value of Rupees Five Lakhs have been made at prices which are reasonable having regard to prevailing market prices at the relevant time.

(vi) As per explanations given to us, the Company has not accepted any deposits from public to which the provisions of section 58A and 58AA of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 would apply. Therefore, the provisions of clause 4 (vi) of the Companies (Auditor's Report) Order, 2003 are not applicable to the company.

(vii) The company has appointed firms of Chartered Accountants as their internal auditors. In our opinion, the scope and coverage of internal audit needs to be strengthened especially as mentioned in clause (iv) above.

(viii) The Central Government has not prescribed the maintenance of cost records u/s 209(1) (d) of the Companies Act, 1956 and hence the provisions of clause 4 (viii) of the Companies (Auditor's Report) Order, 2003 are not applicable to the company.

(ix) a) According to the information and explanations given to us, the Company has been generally regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Income-Tax, Sales Tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, Education Cess, Higher education Cess and any other material statutory dues with the appropriate authorities during the year.

b) According to the information and explanations given to us, no disputed amounts payable in respect of Income Tax, Wealth Tax, Sales Tax, Custom Duty, Excise Duty, Educational cess, Educational cess and other material statutory dues, were in arrears, as at March 31, 2012, except:

Name of Nature Amount Period Forum Statue of Dues (Rs. in Which it Where the Lakhs) relates disputes is pending

Central Excise 4.95 F.Y. Office of Excise Duty 2010 -11 Superi Act, 1944 ntendent of Central Excise, Hosur Division

Customs Custom 622.67 F.Y CESTAT Act, 1962 Duty 2007-08

Finance Service 317.70 F.Y CESTAT Act, 1994 Tax 2005-06 to 2009-10

(x) The Company has no accumulated losses as at March 31, 2012. The Company has not incurred any cash losses during the period covered by our audit and in the immediately preceding financial year.

(xi) According to the records of the company examined by us and the information and explanations given to us, the Company has not defaulted in repayment of dues to any financial institution or bank.

(xii) According to the explanations given 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 and according to the information and explanations given to us, 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 are not applicable to the company.

(xiv) In our opinion and according to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4 (xiv) of the Companies (Auditor's Report) Order, 2003 are not applicable to the company.

(xv) In our opinion and according to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from bank or financial institutions. Hence, the provisions of clause 4 (xv) of the Companies (Auditor's Report) Order, 2003 are not applicable to the company.

(xvi) As per the information and explanations given to us, the Company has not taken any Term Loan during the period under audit. Also, Term Loan taken during earlier years have been, on an overall basis, applied for the purpose for which the said loans were obtained.

(xvii) According to information and explanations given to us, and on an overall examination ofthe Balance Sheet and the Cash Flow of the Company, we report that no funds (except inter corporate deposit from an associate company) raised on short-term basis has been used for long-term investment.

(xviii) According to information and explanations given to us, during the period covered by our audit report, the company has not made preferential allotment of equity shares to parties and companies covered in the Register maintained under section 301 ofthe Companies Act, 1956.

(xix) In our opinion and according to the information and explanations given to us, the Company has not issued any secured debentures during the period of our audit. Therefore, clause 4 (xix) of the Companies (Auditor's Report) Order, 2003 is not applicable to the company.

(xx) The company has not raised any funds by way of public issue during the year.

(xxi) To the best of our knowledge and belief and 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 Haresh Upendra & Co

Chartered Accountants

Firm Reg. No.: 103513W

Haresh B. Shah

Partner

Pune, July 24, 2012 Membership No.: 32208