As required by the Companies (Auditor’s Report) Order, 2003, issued by the Central Government of India, in terms of Section 227(4A) of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in the paragraphs 4 and 5 of the said Order.
 

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 the books and proper returns adequate for the purposes of our audit have been received from the branches not visited by us;

3. The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account;

4. 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;

5. On the basis of the written representations received from the Directors as on 31st March, 2006 and taken on record by the Board of Directors, we report that none of the Directors is disqualified as on 31st March, 2006 from being appointed as Director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956 on the said date;

6. The Accounts of the company for the year ended March 31, 2005 have been audited by other auditors and balances on that date have been considered as opening balances for the purpose of these accounts.

7. Without qualifying our opinion, we invite attention to Note No.3 of Schedule 16, in accordance with which goodwill arising from the demerger will be amortised from the next financial year over a period of five years as in the opinion of the management on which we have placed reliance the future economic benefits arising therefrom will accrue accordingly.

8. 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 Company’s Accounting Policies and the Notes thereto, 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 on 31st March, 2006;
   ii) in the case of the Profit and Loss Account, of the Loss of the Company 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.

For B.K. Khare & Co.
Chartered Accountants

1. The Company is maintaining proper records showing full particulars including quantitative details and situation of fixed assets.

2. All the assets have not been physically verified by the management during the year but there is a regular programme of verification, which in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. As explained to us, no material discrepancies were noticed on verification.

3. During the year, Company has not disposed of any substantial/major part of fixed assets.

1. The Management has conducted physical verification of inventory at reasonable intervals. In respect of inventories lying with third parties, confirmations have been received in respect of major portion of such inventories. In our opinion, the frequency of verification is reasonable.

2. In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventory followed by the management were found reasonable and adequate in relation to the size of the Company and the nature of its business.

3. In our opinion and according to the information and explanations given to us and on the basis of our examination of the records of inventory, the Company is maintaining proper records of inventory. The discrepancies noticed on physical verification of inventory as compared to the book records were not material and have been properly dealt with in the books of account.

According to the information and explanations given to us and to the best of our knowledge, the Company has neither granted nor taken any loans, whether secured or unsecured to/from companies, firms or other parties covered in the Register maintained under Section 301 of the Companies Act, 1956.
 

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 nature of its business with regard to the purchase of inventory and fixed assets, and for the sale of goods and services. During the course of our audit, no major weakness has been noticed in the internal controls.

1. 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 Act have been entered in the register required to be maintained under that section.

2. In our opinion and according to the information and explanations given to us, the transactions have been made at prices which are prima facie reasonable having regard to the prevailing market prices at the relevant time.

In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits from the public within the meaning of Section 58A and 58AA and any other relevant provisions of the Companies Act, 1956.
 

In view of the fact that the share capital of the company as of the beginning of the year prior to demerger was less than Rs.50 lacs on facts the requirement of internal audit is not applicable to the company for the current year.
 

We have broadly reviewed the books of accounts maintained by the Company relating to the manufacture of forgings 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 maintained. We have not, however, made a detailed examination of the records with a view to determine whether they are accurate or complete.
 

1. According to the records of the Company and information and explanations given to us, the Company has been regular in depositing 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, cess and other material statutory dues with the appropriate authorities during the year. According to information and explanations given to us, there are no arrears of outstanding statutory dues as mentioned above as at 31st March 2006 for a period of more than six months from the date they became payable.

2. As on 31st March 2006, according to the records of the Company and information and explanations given to us, following are particulars of disputed dues on account of excise duty and cess that have not been deposited

The Company has accumulated losses, as at the end of the year, which are not more than 50% of it’s net worth as on 31.3.06. The Company has not incurred any cash losses in the current and the immediately preceding financial year
 

Based on our audit procedures and on the basis of information and explanations given by the management, we are of the opinion that the Company has not defaulted in the repayment of dues to financial institutions and banks.
 

According to the information and explanations given to us, the Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.
 

In our opinion and according to the information and explanations given to us, the nature of activities of the Company does not attract any Special Statute applicable to Chit Fund, Nidhi or Mutual Benefit Fund/Societies.
 

The company is not dealing or trading in shares, securities or any other investments.
 

According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks and financial institutions, except against loans including interest thereon amounting to Rs.919.23 lakhs for which the company has made adequate provision in the books of account in view of the likely default by the principal debtor.
 

As informed to us the term loans availed by the Company were applied for the purposes for which the loans were obtained.
 

According to information and explanation given to us, on an overall examination of the balance sheet and the Cash Flow Statement of the company, we report that funds raised on short term basis have, prima facie, not been used during the year for long term investment.
 

The Company has not made any preferential allotment to parties and companies covered under register maintained under Section 301 of the Companies Act, 1956.
 

According to the information and explanations given to us, the company has not issued any debentures during the year.
 

The Company has not raised money by making any public issues during the year and hence the question of disclosure and verification of end use of such money does not arise.
 

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 was noticed or reported during the year.