We have audited the accompanying financial statements of Hindusthan Udyog Limited ("the Company"), which comprise the Balance Sheet as at March 31 st, 2014, the Statement of Profit and Loss, and Cash Flow Statement for the year then ended on that date and a summary of significant accounting policies and other explanatory information.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flow of the Company in accordance with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 ("the Act"). This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Act 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 31st, 2014;

(b) in the case of the Statement of Profit and Loss, of the profit for the year ended on that date; and

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

Emphasis of Matter

Without qualifying our opinion, we draw attention to:

Note no. 11 of the financial statements which states that Provision for amortisation of long term leasehold land at Durgapur has not been made.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order, 2003 ("the order") issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order, save as the matters specified in clauses (vi), (viii), (xii), (xiii), (xiv), (xv), (xix) & (xx) of paragraph 4 which are not applicable to the company.

2. As required by Sec 227(3) of the Act, 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 purpose 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, Statement of Profit and Loss, and Cash Flow Statement dealt with by this Report are in agreement with the books of account;

d. In our opinion, the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement comply with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956; and

e. On the basis of written representations received from the directors as on March 31 st, 2014, and taken on record by the Board of Directors, none of the directors is disqualified as on March 31 st, 2014, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

ANNEXURE TO INDEPENDENT AUDITORS' REPORT

(Referred to in our report of even date attached)

i. (a) The Company has maintained proper records showing full particulars including quantitative details and situation of Fixed Assets.

(b) The fixed assets of the Company have been physically verified by the management at reasonable intervals and no material discrepancies have been noticed on such verification.

(c) The Company has sold certain Fixed Assets of small value during the year.The value of assets so disposed off, being negligible, and such disposal does not affect the going concern status of the company.

ii. (a) As explained to us the inventories of Finished Goods, Raw Materials and Stores and Spares have

been physically verified by the management during the year. In our opinion, the frequency of verification is reasonable.

(b) In accordance with the information and explanations given to us, the procedures of physical verification of inventory followed by the management appear to be reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) On the basis of our examination of the inventory records, in our opinion, the Company has maintained proper records of inventory. The discrepancies noticed on physical verification of inventory as compared with book records were not material considering the size of the company and the nature of its business and the same have been properly adjusted in the accounts.

iii. (a) The Company has granted loan, secured or unsecured, to companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. The no. of parties being one, the amount involved in this regard is Rs. 1142 lacs (including interest) which have been fully recovered by the Company during the year.

(b) The Company has not taken any loan, 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 sub-clause b of sub-Para (iii) 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, fixed assets and for the sale of goods and services. We have not observed any major weaknesses in the internal control system.

v. Based on the audit procedures applied by us and according to the information and explanations given to us, the transactions that need to be entered in the Register required to be maintained under Section 301 of Companies Act, 1956 have been so entered and these transactions have been made at prices which are reasonable having regard to the prevailing market prices during the year under audit.

vi. According to information and explanations given to us, the Company has not accepted any deposits from the Public. Hence, the provisions of Sections 58A and 58AA of the Companies Act, 1956 and the Companies (Acceptance of Deposit) Rules, 1975 are not applicable to the Company.

vii. The Company does not have any Internal Audit System commensurate with its size and nature of business.

viii. The Central Government has not prescribed maintenance of cost records under section 209(I)(d) of the Companies Act, 1956.

ix. (a) According to the records of the Company and information and explanations given to us, the Company is generally regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Income Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, Cess and other statutory dues with the appropriate authorities.

(b) According to the information and explanations given to us, no undisputed amount payable in respect of the aforesaid statutory dues were in arrears as at 31st March, 2014 for a period of more than six months from the date they became payable.

(c) According to the records of the Company and the information and explanations given to us, the Following are the details of disputed dues in respect of Sales Tax as on 31st March, 2014 as shown in Enclosure-I.

x. According to the information and explanation provided to us, the Company has accumulated losses of Rs. 20,22,24,392/- as at 31st March, 2014 and it has not incurred any cash losses in the financial year ended on that date or in the immediate preceding financial year.

xi. Based on our audit procedures and the information and explanations given to us, the Company has not defaulted in repayment of dues to any financial institution or bank. Moreover, the Company has not issued debentures.

xii. Based on our examination of records, we are of the opinion that the Company has not granted any 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/nidhi/mutual benefit fund/society.

xiv. According to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debentures and other investments.

xv. According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions.

xvi. According to information and explanations given to us, the term loans have, prima facie, been applied for the purpose for which the loans were obtained.

xvii. On an overall examination of the Balance Sheet of the Company and information and explanations given to us, we are of the opinion that the funds raised by the Company on short term basis have not been used for long term investment.

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

xix. The Company has not issued any debentures. Hence, this clause is not applicable to the Company.

xx. The Company has not raised any money during the year covered by audit by way of public issue.

xxi. 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 S. GHOSE & CO.
                                                 Chartered Accountants
                                              Registration No. 302184E

                                                 Chandan Chattopadhyay
Place: Kolkata                                                 Partner
Date : 30th May, 2014                            Membership No. 051254