AUDITORS’ REPORT TO THE MEMBERS OF
AI CHAMPDANY INDUSTRIES LIMITED

A.

We have audited the attached Balance Sheet of AI Champdany Industries Limited as at 31 March 2009, and the related Profit and Loss Account and Cash Flow Statement for the year ended on that date annexed thereto, which we have signed under reference to this report. 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.

B.

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 management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

C.

As required by the Companies (Auditor’s Report) Order, 2003 as amended by Companies (Auditor’s Report) (Amendment) Order, 2004 issued by the Central Government of India in terms of sub-section (4A) of Section 227 of ‘The Companies Act, 1956’ and on the basis of such checks of the books and records of the company
as we considered appropriate and according to the information and explanations given to us, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order (to the extent applicable to the company).

D.

Further to our comments in the Annexure referred to above, we report that:-

I)the year’s profit, and consequently, the net asset position at the end of the year might have been affected by the following, the net impact of which cannot at this stage be ascertained:

i) non ascertainment of profit / loss on outstanding commodity hedging materials as at the end of the year, referred to note 24 in Schedule-17.

ii ) pending assessment of losses in respect of stocks of finished goods damaged by fire we are unable to form an opinion on the adjustments that would be required to be made to the accounts as referred to in note 25 of Schedule17.

iii) non-provision/ascertainment of liability for gratuity on actuarial basis from the year commencing from 1.4.1997 to 31.03.2007 in respect of one unit of the company as referred to in note 26 in Schedule-17;*

iv) recognition of remission of taxes by Sales Tax Authority in the accounts as referred to in Note 27(a) in Schedule-17;*

v) non-ascertainment/provision of possible loss which may arise for non-recovery of interest free loans and advances in the nature of loans as referred to in note 27(b) in Schedule 17*.

vi) non provision of possible losses arising from diminution in the year end carrying cost of investment with Landale & Clark Ltd as referred to in Note 27(c) in Schedule-17*;

*Relate to erstwhile Anglo India Jute Mills Company Limited.

II) subject to our observations set out in para D(I) above, we have obtained all the information and explanations which to the best of our knowledge and belief, were necessary for the purpose of our audit ;

III) further subject to our observations set out in para D(1) above, in our opinion, proper books of accounts as required by law have been maintained by the Company, so far as appears from our examination of those books;

IV) the Balance Sheet, Profit & Loss Account and Cash Flow dealt with by this report are in agreement with the books of account;

V) on the basis of written representations received from the directors as on 31st March, 2009 and taken on record by the Board of Directors, we report that none of the directors are disqualified as on 31st March, 2009 from being appointed as a director under clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956;

VI) in our opinion, the Balance Sheet, Profit & Loss Account and Cash Flow Statement comply with the mandatory accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 except D(I)(i),D1(iii) and D(I)(vi) above;

VII) 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 subject to our foregoing observations in para D(I) 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 31 March, 2009 and

(b) in the case of Profit & Loss Account, of the Profit of the Company for the year ended on that date, and

(c) in the case of the Cash Flow Statement, of the cash flows of the company for the year ended on that date.