1. We have audited the acCompanying standalone financial statements of Euro Ceramics Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2015, the Statement of Profit and Loss, the Cash Flow Statement for the year then ended, and a summary of the significant accounting policies and other explanatory information.

Management's Responsibility for the standalone financial statements

2. The Company's Board of Directors is responsible for the matters stated in section 134(5) of the Companies Act, 2013 ('the Act) with respect to the preparation of these standalone financial statements to give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under section 133 of the Act, read with rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, 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.

Auditors' Responsibility

3. Our responsibility is to express an opinion on these standalone financial statements based on our audit.

4. We have taken into account the provisions of the Act and the Rules made there under including the Accounting Standards and matters which are required to be included in the audit report.

5. We have conducted our audit in accordance with the Standards on Auditing specified under section 143(10) of the Act and other applicable authoritative pronouncements issued by the Institute of Chartered Accountants of India. Those Standards and pronouncements require that we comply with the ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

6. An audit involves performing procedures to obtain audit evidence about the amounts and the 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 the internal financial control relevant to the Company's preparation of the financial statements that give a true and fair view, in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on whether the Company has in place an adequate internal financial controls system over the financial reporting and the operating effectiveness of such controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by the Company's Directors, as well as evaluating the overall presentation of the financial statements.

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

Qualified Opinion

8. In our opinion and to the best of our information and according to the explanations given to us, except for the matters illustrated and described in the Basis for Qualified Opinion herein below, the aforesaid standalone 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, of the state of affairs of the Company as at March 31, 2015, and its loss and its cash flows for the year ended on that date.

Basis for Qualified Opinion

1. The attention is invited to note no.33 to the financial statements, towards the fact that the Company's financial facilities/arrangements including Term Loans, Working Capital Facilities and Non Fund Based Credit Facilities have expired and the accounts with the Banks have turned into Non Performing Assets since more than 2 years.

The Company is unable to renegotiate, restructure or obtain replacement of financing arrangements and the banks have initiated legal proceedings for the recovery from the Company u/s. 19 of the Debt Recovery Tribunal (DRT), u/s. 13(2) of the Securitization & Reconstruction of Financial Assets & Enforcement of Security (Second) Interest (SARFAESI) Act, 2002 and winding up petition at Mumbai High Court. In addition to this, the Group has been continuously incurring substantial losses since past few years and as on March 31, 2015, the Company's current liabilities exceed its current assets by Rs. 43,777.81 lacs. Further, the networth of the Company has fully eroded and the Company has filed for registration u/s. 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985, before the Hon'ble Board for Industrial & Financial Reconstruction.

All the above events indicate a material uncertainty that casts a significant doubt on the Company's ability to continue as a going concern and therefore it may be unable to realize its assets and discharge its liabilities in the normal course of business. The financial results do not disclose the fact that the fundamental accounting assumption of going concern has not been followed.

2. Further attention is also invited to note no.34 to the financial statements, the Company on the basis of registration filed u/s. 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985, before the Hon'ble Board for Industrial & Financial Reconstruction, and the hearings for which are in process for determination of sickness; has not provided for interest on financing facilities amounting to Rs. 8,758.47 lacs for the year ending March 31, 2015, subject to reconciliation with banks. Had the same been provided, the loss for the year ending March 31, 2015, would have increased by Rs. 8,758.47 lacs. The corresponding liabilities would also have increased by Rs. 8,758.47 lacs as at March 31, 2015.

3. The Company has not provided for impairment or diminishing value of its assets/investment as per 'Accounting Standard 28 - Accounting for Impairment of Assets' as notified under the Companies (Accounting Standards) Rules, 2006 read with the General Circular 15/2013 dated September 30, 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013. The effect of such Impairment or diminishing value has not been quantified by the management and hence the same is not ascertainable.

Report on other legal and regulatory requirements

9. As required by 'the Companies (Auditor's Report) Order, 2015', issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act (hereinafter referred to as 'the Order'), 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 3 and 4 of the Order.

10. As required by Section 143(3) of the Act, we report that:

a) We have sought and 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, Statement of Profit and Loss, and the Cash Flow Statement dealt with by this Report are in agreement with the books of account;

d) In our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under section 133 of the Act, read with rule 7 of the Companies (Accounts) Rules, 2014, except for as stated in basis for qualifications above.

e) On the basis of the written representations received from the directors as on March 31, 2015 taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2015 from being appointed as director in terms of section 164 (2) of the Act.

f) With respect to the other matters to be included in the Auditor's Report in accordance with rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our knowledge and belief and according to the information and explanations given to us:

i) The Company has disclosed the impact, if any, of pending litigations as at March 31, 2015, on its financial position in its standalone financial statements except as stated in basis for qualifications above;

ii) The Company has made provision as at March 31, 2015 as required under the applicable law or Accounting Standards for material foreseeable losses, if any, on long-term contracts including derivative contracts except as stated in basis for qualifications above;

iii) There has been delay in transferring unclaimed dividend amounting to Rs. 25,303/- pertaining to financial year 2006-07 into the Investor Education and Protection Fund, by the Company during the year ended March 31, 2015.

(Referred to in paragraph 9 of the Independent Auditors' Report of even date to the members of Euro Ceramics Limited on the standalone financial statements as of and for the year ended March 31, 2015)

(1) In respect of Fixed Assets:

a) The Company has maintained proper records showing full particulars including quantitative details and situation of its fixed assets.

b) As explained to us, all the fixed assets have been physically verified by the management in a phased periodical manner, which in our opinion is reasonable, having regards to the size of the Company and nature of its assets. No material discrepancies were noticed on such physical verification.

(2) In respect of its Inventories:

a) The inventories have been physically verified during the year by the management. In our opinion, the frequency of such verification is reasonable.

b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories followed by the Management are reasonable and adequate in relation to the size of the respective entities and the nature of their businesses.

c) In our opinion and according to the information and explanations given to us, the Company has maintained proper records of its inventories. The discrepancies noticed on verification between the physical stocks and the book records were not material.

(3) In respect of loans, secured or unsecured, granted by the Company to companies, firms or other parties covered in the register maintained under section 189 of the Act:

a) According to the information and explanation given to us, the Company has granted loan to party covered in the register maintained under section 189 of the Act.

b) In our opinion and according to the information and explanations given to us, there are no stipulations made regarding repayment of principal amount and interest. Hence we are unable to comment as to regularity of repayments of principal and interest amount.

(4) In our opinion and according to the information and explanations given to us, there are adequate internal control systems commensurate with the size of the respective entities and the nature of their businesses with regards to purchases of inventory, fixed assets and with regards to the sale of goods and services. Further, on the basis of our examination of the books and records of the Company, and according to the information and explanations given to us, we have neither come across, nor have been informed of, any continuing failure to correct major weakness in the aforesaid internal control system.

(5) In our opinion and according to the information and explanations given to us, the Company during the year has not accepted any deposits from the public within the meaning of section 73 & 76 of the Act and the Rules framed there under to the extent notified. Further in respect of deposits accepted by the Company before the commencement of this Act, within the meaning of section 74 & 75 of the Act and the Rules framed there under to the extent notified, the principal amount of such deposits and interest due thereon remained unpaid even after expiry of one year from such commencement. However, the Company duly filed an application within the meaning of section 74(2) with the Company Law Board requesting to allow further time for compliance. However the final decision of the Tribunal as required under section 75 (1) of the Act is still awaited.

(6) The Central Government of India has not specified the maintenance of cost records under sub-section (1) of section 148 of the Act for any of the products of the Company.

(7) In respect of Statutory Dues:

a) According to the information and explanation given to us and the records of the Company examined by us, in our opinion the Company has been facing liquidity stress since past few years due to which there were delays in depositing various undisputed statutory dues with appropriate authorities including provident fund, employee's state insurance, income tax, sales tax, wealth tax, service tax, duty of customs, duty of excise, value added tax, cess and other material statutory dues, as applicable to it and there are no arrears of outstanding statutory dues as at the yearend for a period of more than six months from the date they became payable except service tax payable amounting to Rs. 9.81 lacs.

b) According to the information and explanation given to us and the records of the Company examined by us, there are no dues of sales tax, wealth tax, service tax, duty of customs, duty of excise, value added tax, as at March 31, 2015, which have not been deposited on account of any dispute. However there are dues of income tax which have not been deposited on account of a dispute which are as under:

                                    Amount     Period to   Forum 
Name of the     Nature of Dues
Statute                             Rs.        which the   where the
                                               amount      dispute is
                                               relates     pending

Income Tax      Demand arisen       207.76     Financial   Assessing
                pursuant to         lacs       Year        officer
                assessment                     2011-12

(8) The Company has accumulated losses at the end of financial year and also had the same at the end of the immediately preceding financial year. However the Company has not incurred cash loss during the financial year covered by our audit but had incurred cash losses in the immediately preceding financial year. The accumulated losses of the Company have exceeded its net worth.

(9) In our opinion and according to the information and explanations given to us the Company has defaulted in repayment of loans and interests dues to the banks and financial institution. The principal outstanding of Term Loans and Cash Credit facilities amounts to Rs. 45,453.37 lacs and overdue interest (not provided) calculated based on last sanction letters amounts to Rs. 18,044.93 lacs as at March 31, 2015, subject to reconciliation with the banks. The period of default is more than 2 years.

(10)According to the information and explanations given to us, the Company has given the guarantee for loans taken by its subsidiary from bank. The terms and conditions of the same are not prejudicial to the interest of the Company. However in our opinion the said subsidiary has been continuously incurring losses and its net worth has been fully eroded and there is substantial doubt whether the said subsidiary would be able to repay its liabilities or realize its assets.

(11)In our opinion, the term loans are being applied for the purpose for which they were obtained.

(12)According to the information and explanations given to us, no material fraud on or by the Company has been noticed or reported during the course of our audit.

                                               For Deepak Maru & Co.

                                              Chartered Accountants 

                                 ICAI Firm Registration No. 115678W

                                                     Jaymin P. Shah

Place: Mumbai                                 Membership No. 118113

Date: May 30, 2015                                          Partner