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 statements are free of material misstatement(s). An audit includes examining, on a test basis, evidence supporting the amounts and the 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 out audit provides a reasonable basis for our opinion and we report that :

i) No provision has been made for disputed Excise Duty liability amounting to Rs.1054 lakhs, without considering Interest thereon the amount of which is not ascertainable; [Note B3a]

ii) Current Assets includes an amount of Rs.103 Lakhs being an excise duty refund receivable, the claim in respect of which has been rejected by the excise department. [Note B3b]

iii) Although the Finished and Semi finished Inventories are valued at lower of the cost or the estimated realisable value, the method is not In accordance with AS 2 "Valuation of Inventory" because the cost calculated by the Company Includes administrative, selling, distribution and finance cost also resulting into, in most of the cases, cost being higher than the net realisable value. The financial impact of this is unascertainable [Note B9]

iv) Sundry Debtors includes amount receivable on sale of Land amounting to Rs.1179.5 Lakhs. The conveyance for the same is not yet executed. [Note B5]

v) Investments are valued at First In First Out basis as against Average Cost as required by the AS 13 "Accounting for Investments" issued by The Institute of Chartered Accountants of India as a result of which loss on sale of Investment is overstated and value of Investments is understated by Rs.205 Lakhs. [Note B10];

vi) Deferred Taxation reserve is not created as required by the AS 22 "Deferred Taxation" issued by The Institute of Chartered Accountants of India, the amount of which is not ascertainable.

2 Further, subject to our comments referred to in paragraph 1, we report that :

i) 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.

ii) In our opinion, proper books of accounts, as required by law, have been kept by the Company so far as it appears from our examination of books.

iii) The Balance Sheet and Profit and Loss Account dealt with by this Report are in agreement with the books of accounts.

iv) In our opinion, the Profit and Loss Account and the Balance Sheet comply with the Accounting Standards as referred in the Section 211(3C) of the Companies Act, 1956 except those stated above.

v) On the basis of written representations from the Directors, taken on record by the Board of Directors, none of the Directors are disqualified as on 31st March 2002 from being appointed as a Director under Section 274(1)(g) of the Companies Act, 1956.

3. We further report that the aggregate effect of the items mentioned in para 1 above on the Loss for the year and on the Profit and Loss Account, Investment, Sundry Debtors and Net Block and Current Liabilities at the end of the year, to the extent the resultant impact could be determined/quantified/ascertained, namely, by considering the items mentioned in the para i(i), (ii), (iv) and (v) and without considering wholly the effects of the items mentioned in para 1(iii) and (vi) being not ascertainable/quantified/determinate, would be as follows :

i) The reported Loss for the year is understated by Rs.952 Lakhs.

ii) The reported Debit Balance in Profit and Loss is understated by Rs.2413 Lakhs.

iii) The reported Sundry Debtors are overstated by Rs.1179.5 Lakhs.

(iv) The reported other current Assets are overstated by Rs.103 Lakhs.

(v) The reported Current Liabilities are understated by Rs.1378.5 Lakhs.

vi) The reported Investments are understated by Rs.205 Lakhs.

vii) The reported Net Block is understated by Rs. 42.32 Lakhs.

4. Subject to the above, in our opinion and to the best of our information and according to the explanations given to us, the said accounts, read, with the notes thereon and in particular Note regarding disputed Income tax liability [Note B give the information required by the Companies Act, 1956 in the manner so required and give "a true and fair view :-

i) In case of the Balance Sheet of the state of affairs of the company as at 31st March, 2002 and

ii) In the case of the Profit & Loss Account of the loss for the year ended on that date.

5. Further, as required by the Manufacturing and Other Companies (Auditors Report) Order 1988 issued by the Company Law Board in terms of Section 227(4A) of the Companies Act, 1956 and on the basis of the information and explanations given to us and such checks as we considered appropriate, we report that :

i) The records of fixed assets maintained by the Company are incomplete except at the Feeds Division. Assets have not been physically verified during the year and therefore the discrepancies cannot be ascertained.

ii) The Plant & Machinery and Buildings located at Satara plant has been revalued during the year and as a result of which Rs. 205.4 Lakhs is charged to the profit & loss A/c being Revaluation Loss.

iii) We are informed that the stocks of finished goods, stores, spare parts and raw materials have been physically verified by the Management at reasonable intervals.

iv) In our opinion, the procedure of physical verification of stocks followed by the Management, having regard to perpetual inventory system, covering the detailed verification of all items of inventories once in a year, is reasonable and adequate in relation to the size of the Company and the nature of its business.

v) As per the information and explanations given to us the discrepancy between physical stocks and book records noticed on detailed physical verification was not material compared to the stocks being carried and has been written off.

vi) Subject to the comments in para 1 above and the valuation of finished and semi-finished goods in the manner as stated in Note B:9, which method is not in accordance with the requirements of Accounting Standard - 2, in our opinion and on the basis of our examination of stock records, we report that the valuation of other raw materials is fair and proper and is in accordance with the normally accepted accounting principles and on the same basis as in the earlier year.

vii) The register required to be maintained under section 301 of the Companies Act, 1956 is not updated. We are informed that the Company has obtained loan from companies required to be listed in the register to be maintained under section 301 of the Companies Act, 1956. In our opinion the rate of interest and other terms and conditions are prima facie not prejudicial to the interest of the Company.

viii) The register required to be maintained under section 301 of the Companies Act, 1956 is not updated. Though there is no subsidiary of the Company as on Balance Sheet date, we are informed that there were transactions with the company while it had a subsidiary, in the nature of advances paid and also for the acquisition of Assets and Liability in the ordinary course of business. The outstanding balance of Rs.1,24,09,037 is written off in the books after acquisition of Assets and liability of the subsidiary. There are other advances to companies required to be listed in the register to be maintained under section 301 of the Companies Act, 1956.

ix) Subject to our comments in para viii above the interest free loans or advances given to employees are being recovered as per the terms stipulated.

x) In our opinion, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business for the sale of goods.

As per the information and explanations given to us, the formal procedures of internal control laid down by the Company with regard to the purchase of stores, raw materials including components, plant and machinery, equipment are in our opinion commensurate with the size of the company and the nature of its business.

xi) We are informed that there were no transactions of purchase of goods and materials and services and sale of goods, materials and services made in pursuance of contracts or arrangements which are required to be entered in the register, to be maintained under section 301 of the Companies Act, 1956 and aggregating during the year to Rs.50,000/- or more in respect of each party.

xii) The company has determined un-serviceable or damaged stores, raw materials and finished goods and due provision for the loss has been made.

xiii) According to the information and explanations given to us, and in our opinion, the Company has complied with the provisions of section 58A of the Companies Act, 1956 and the Rules framed thereunder with regard to the deposits accepted from the public.

xiv) According to the information and explanations given to us, the Company maintains reasonable records for the sale and disposal of realisable scrap attracting excise duty. With respect to other realisable scrap, only actual sales are recorded. As informed, the company has no by-products.

xv) The Company does not have the system of internal audit commensurate with the size of the Company and the nature of its business.

xvi) The Central Government has not prescribed maintenance of cost records under section 209(1)(d) of the Companies Act, 1956 for any of the products of the Company.

xvii) According to the records of the Company, the Company is generally regular in depositing the Provident Fund dues and wherever applicable, the dues under the Employees State Insurance Scheme with the appropriate authorities.

xviii) There are no amounts outstanding on the last day of the year, in respect of undisputed Income-tax, Wealth-tax, Sales-tax, Customs duty and Excise duty which was due for more than six months from the date it became payable.

xix) During the course of our examination of the books of accounts carried out in accordance with the generally accepted auditing practices, we have not come across any personal expenses other than those payable under contractual obligations or in accordance with generally accepted business practices which have been charged to Profit and Loss Account nor have been informed of such case by the management.

xx) In our opinion, the company is a sick industrial company within the meaning of section 3(1)(o) of the Sick industrial Companies (Special Provisions) Act, 1985.

                                                    For KORKE & RAVAL
                                                Chartered Accountants

                                                          J. C. Raval
                                                              Partner