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 state- ments 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 statements presentation. We believe that our audit provides a reasonable basis for our opinion.

As required by the Companies (Auditors Report) Order, 2003 (as amended by the amendment order, 2004 ) issued by the Government of India in terms of subsection (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, to the extent applicable.

Further to our comments in the Annexure referred to 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 it 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 comply with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956;

e) On the basis of written representations received from the Directors, as on 31st March 2007, and taken on record by the Board of Directors, we report that none of the Director is disqualified as on 31st March, 2007 from being appointed as a Director in terms of clause (g) of Sub-section (1) of Section 274 of the Companies Act, 1956;

f) In our opinion and to the best of our information and according to the explanations given to us, the said financial statements together with the notes thereon give the information required by the Com panies Act, 1956, and gives 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 at 31st March 2007;

ii. In the case of the Profit and Loss Account, of the profit for the year ended on that date; and

iii. In the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

Annexure referred to in our report of even date on the accounts for the year ended 31st march 2007.

I. (a) The Company has maintained proper records showing full particulars including Quantitative details and Situation of its Fixed Assets.

(b) Fixed assets have been physically verified by the management periodically in a phased manner and no material discrepancies have been noticed on physical verification as confirmed by the management.

c) The company has been disposed-off Spinning Mill Division during the year for total net consideration of Rs. 175,00,000/-. The sale of Fixed Assets of Spinning Mill Division do not affect the going concern assumption.

II. (a) Physical verification of Inventory (except stock lying with parties, confirmation for which has been obtained and in transit) have been conducted at reasonable intervals during the year by the management.

(b) In our opinion and according the information and explanation given to us, the procedures for 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) In our opinion, the company has maintained proper records of inventory. The discrepancies between the physical stock and the book stocks were not material and have been properly dealt with in the books of accounts.

III. The company has not taken / granted any loans, secured or unsecured, from Companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956.

IV. In our opinion and according to the information and explanation given to us there are adequate internal control procedures commensurate with the size of the company and the nature of its business with regard to purchase of inventories, fixed assets and with regard to the sale of goods and services. During the course of our audit, no major weakness has been noticed in the internal control system.

V. (a) Based on the audit procedures applied by us and according to the information and explanation given to us, we are of the opinion that the contracts or arrangements that need to be entered in the register maintained in pursuance of section 301 of the Companies Act, 1956 have been properly entered in the said register.

(b) In our opinion and according to the information and explanation given to us, the transactions entered in the register maintained under section 301 of the Act have been made at prices which are generally reasonable considering the strategic relationship and having regard to the prevailing market prices at the relevant time.

VI. In our opinion and according to the information and explanation given to us, the company has not accepted deposits as per the provisions of section 58A and 58AA of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 with regard to acceptance of deposits from the public.

VII. The company has adequate internal audit system commensurate with the size and nature of its business.

VIII. The company has not required to maintain cost records as prescribed by the Central Government Under Section 209 (1) (d) of the companies Act 1956 for the products and service of the company.

IX (a) The Company is regular in depositing undisputed statutory dues with the appropriate authorities.

(b) According to the information and explanation given to us, no undisputed arrears of statutory dues for a period of more than six months from the date they became payable.

(c) According to the information and explanation given to us, the following are the details of disputed dues that were not deposited with the concerned authorities:

                                                   Amount
Nature of Statute        Nature of Dues      (Rs. in Lacs)

Income Tax Act, 1961     Income Tax                 1.24
Income Tax Act, 1961     Income Tax               247.47
                                                  248.71

                    Forum where the
Period              dispute in pending

X In our opinion the accumulated loss to the company at the end of the financial year not exceeding fifty percent of its net worth and the company has not incurred cash losses in such financial year and in the immediately preceding the financial year.

XI. According to the information and explanation given to us, the company has not defaulted in repayment of dues to banks and financial institutions with whom transactions have been made during the year.

XII. According to the information and explanation given to us, the company has not granted loans and advances on the basis of securities by way of pledge of shares, debentures and other securities.

XIII. In our opinion the company is not a chit fund or Nidhi mutual benefit fund / society. Therefore the provisions of clause 4(xiii) of the Companies (Auditors Report) Order, 2003 ( as amended by the amendment Order 2004 ) are not applicable to the company.

XIV. As per the information and explanation given to us, the company is dealing in or trading in shares, Commodities securities, debentures and other investments. The company has maintained proper records for all transactions promptly and also all the share, Commodities, securities, debentures and other investments have been held by the company in its own name.

XV. According to the information and explanation given to us, the company has not given any guarantee for loans taken by others from banks or financial institutions, therefore the provisions of clause 4(xv) of the Companies (Auditors report) order, 2003 were not applicable.

XVI. As per the information and explanation given to us the company has not raised any term loan during the year, therefore the provisions of clause 4(xvi) of the Companies (Auditors Report) Order, 2003 were not applicable.

XVII. According to the information and explanation given to us and on overall examination of the balance sheet of the company, we report no funds raised on short term basis have been utilized for long term investment. No long term funds have been used to finance short term asset except permanent working capital.

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. According to the information and explanation given to us, during the period covered by our audit report, the company has not issued any secured debentures.

XX The company has not raised any money by public issues during the period covered by our audit report.

XXI. Based on our audit procedures adopted and information and explanation given to us by the management, no material fraud on or by the company has been noticed or reported during the course of our audit.

Place  : Chennai.                           D.Ravichander
Date   : 31.08.2007                       Chartered Accountant.
                                          Membership No.202903.