INDEPENDENT AUDITORS' REPORT

TO THE MEMBERS OF JAYASWAL NECO INDUSTRIES LIMITED INDEPENDENT AUDITORS' REPORT Report on e Standalone Financial Statements We have audited e accompanying andalone financial atements of JAYASWAL NECO INDUSTRIES LIMITED ( e Company ), which comprise e Balance Sheet as at 31 March, 2016, e Statement of Profit and Loss, e Cash Flow Statement for e year en ended, and a summary of significant accounting policies and oer explanatory information. Management's Responsibility for e Standalone Financial Statements The Company's Board of Directors is responsible for e matters ated in Section 134(5) of e Companies Act, 2013 ( e Act ) wi respect to e preparation of ese andalone financial atements at give a true and fair view of e financial position, financial performance and cash flows of e Company in accordance wi e accounting principles generally accepted in India including e Accounting Standards specified under Section 133 of e Act, as applicable. This responsibility also includes maintenance of adequate accounting records in accordance wi e provisions of e Act for safeguarding e assets of e Company and for preventing and detecting frauds and oer irregularities; selection and application of appropriate accounting policies; making judgments and eimates at are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, at were operating effectively for ensuring e accuracy and completeness of e accounting records, relevant to e preparation and presentation of e financial atements at give a true and fair view and are free from material misatement, wheer due to fraud or error. Auditors' Responsibility Our responsibility is to express an opinion on ese andalone financial atements based on our audit. We have taken into account e provisions of e Act, e accounting and auditing andards and matters which are required to be included in e audit report under e provisions of e Act and e Rules made ereunder and e Order under section 143 (11) of e Act. We conducted our audit of e andalone financial atements in accordance wi e Standards on Auditing specified under Section 143(10) of e Act. Those Standards require at we comply wi eical requirements and plan and perform e audit to obtain reasonable assurance about wheer e financial atements are free from material misatement. An audit involves performing procedures to obtain audit evidence about e amounts and disclosures in e financial atements. The procedures selected depend on e auditor's judgment, including e assessment of e risks of material misatement of e financial atements, wheer due to fraud or error. In making ose risk assessments, e auditor considers internal financial control relevant to e Company's preparation of e financial atements at give a true and fair view in order to design audit procedures at are appropriate in e circumances. An audit also includes evaluating e appropriateness of accounting policies used and e reasonableness of e accounting eimates made by e Company's directors, as well as evaluating e overall presentation of e financial atements. We believe at e audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on e andalone financial atements. Opinion In our opinion and to e be of our information and according to e explanations given to us, e aforesaid andalone financial atements give e information required by e Act in e manner so required and give a true and fair view in conformity wi e accounting principles generally accepted in India, of e ate of affairs of e Company as at 31 March, 2016 and its loss and its cash flows for e year ended on at date. 58 43rd Annual Report 2015-2016

Jayaswal Neco Induries Limited Report on Oer Legal and Regulatory Requirements 1. As required by Section 143 (3) of e Act, we report at: a. We have sought and obtained all e information and explanations, which to e be of our knowledge and belief were necessary for e purposes of our audit; b. In our opinion, proper books of account as required by law have been kept by e Company, so far as appears from our examination of ose books; c. The Balance Sheet, e Statement of Profit and Loss and e Cash Flow Statement dealt wi by is Report are in agreement wi e books of account; d. In our opinion, e aforesaid andalone financial atements comply wi e Accounting Standards specified under Section 133 of e Act, as applicable; e. On e basis of e written representations received from e directors as on 31 March, 2016 and taken on record by e Board of Directors, none of e directors is disqualified as on 31 March, 2016 from being appointed as a director in terms of Section 164 (2) of e Act. f. Wi respect to e adequacy of e internal financial controls over financial reporting of e company and e operating effectiveness of such controls, refer to our separate Report in Annexure A g. Wi respect to e oer matters to be included in e Auditor's Report in accordance wi Rule 11 of e Companies (Audit and Auditors) Rules, 2014, in our opinion and to e be of our information and according to e explanations given to us: i. The Company has disclosed e impact of pending litigations on its financial position in its financial atements as referred to in Note 12.08, 12.09, 12.10, 31(A), 31(B), 31(C) and 44 to e andalone financial atements. ii. The Company has made provision, as required under e applicable law or accounting andards, for material foreseeable losses, if any, on long-term contracts including derivative contracts. iii. There were no amounts which were required to be transferred to e Inveor Education and Protection Fund by e Company. 2. As required by e Companies (Auditor's Report) Order, 2016 ( e Order ) issued by e Central Government of India in terms of sub-section (11) of section 143 of e Act, we give in Annexure B a atement on e matters specified in paragraphs 3 and 4 of e Order. For Chaturvedi & Shah For Agrawal Chhallani & Co. (Firm Regiration No. - 101720W) (Regiration No. : 100125W) R Koria S. R. Chhallani Membership No. - 35629 Membership No. - 30154 Place: Mumbai Place: Nagpur Date : 27 May, 2016 Date : 27 May, 2016 43rd Annual Report 2015-2016 59

ANNEXURE A TO INDEPENDENT AUDITORS' REPORT (Referred to in paragraph 1 (f) under 'Report on Oer Legal and Regulatory Requirements' of our report of even date to e members of Jayaswal Neco Induries Limited on e andalone financial atements for e year ended 31 March, 2016) Report on e Internal Financial Controls Over Financial Reporting under Clause (i) of Sub-section 3 of Section 143 of e Companies Act, 2013 ( e Act ) We have audited e internal financial controls over financial reporting of Jayaswal Neco Induries Limited ( e Company ) as of 31 March, 2016 in conjunction wi our audit of e andalone financial atements of e Company for e year ended on at date. Management's Responsibility for Internal Financial Controls The Company's management is responsible for eablishing and maintaining internal financial controls based on e internal control over financial reporting criteria eablished by e Company considering e essential components of internal control ated in e Guidance Note on Audit of Internal Financial Controls over Financial Reporting (e Guidance Note ) issued by e Initute of of India. These responsibilities include e design, implementation and maintenance of adequate internal financial controls at were operating effectively for ensuring e orderly and efficient conduct of its business, including adherence to company's policies, e safeguarding of its assets, e prevention and detection of frauds and errors, e accuracy and completeness of e accounting records, and e timely preparation of reliable financial information, as required under e Act. Auditors' Responsibility Our responsibility is to express an opinion on e Company's internal financial controls over financial reporting based on our audit. We conducted our audit in accordance wi e Guidance Note and e Standards on Auditing prescribed under Section 143(10) of e Act, to e extent applicable to an audit of internal financial controls. Those Standards and e Guidance Note require at we comply wi eical requirements and plan and perform e audit to obtain reasonable assurance about wheer adequate internal financial controls over financial reporting was eablished and maintained and if such controls operated effectively in all material respects. Our audit involves performing procedures to obtain audit evidence about e adequacy of e internal financial controls syem over financial reporting and eir operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an underanding of internal financial controls over financial reporting, assessing e risk at a material weakness exis, and teing and evaluating e design and operating effectiveness of internal control based on e assessed risk. The procedures selected depend on e auditor's judgment, including e assessment of e risks of material misatement of e financial atements, wheer due to fraud or error. We believe at e audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion on e Company's internal financial controls syem over financial reporting. Meaning of Internal Financial Controls over Financial Reporting A company's internal financial control over financial reporting is a process designed to provide reasonable assurance regarding e reliability of financial reporting and e preparation of financial atements for external purposes in accordance wi generally accepted accounting principles. A company's internal financial control over financial reporting includes ose policies and procedures at (1) pertain to e maintenance of records at, in reasonable detail, accurately and fairly reflect e transactions and dispositions of e assets of e company; (2) provide reasonable assurance at transactions are recorded as necessary to permit preparation of financial atements in accordance wi generally accepted accounting principles, and at receipts and expenditures of e company are being made only in accordance wi auorisations of management and directors of e company; and (3) provide reasonable assurance regarding prevention or timely detection of unauorised acquisition, use, or disposition of e company's assets at could have a material effect on e financial atements. 60 43rd Annual Report 2015-2016

Jayaswal Neco Induries Limited Inherent Limitations of Internal Financial Controls over Financial Reporting Because of e inherent limitations of internal financial controls over financial reporting, including e possibility of collusion or improper management override of controls, material misatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of e internal financial controls over financial reporting to future periods are subject to e risk at e internal financial control over financial reporting may become inadequate because of changes in conditions, or at e degree of compliance wi e policies or procedures may deteriorate. Qualified Opinion According to e information and explanations given to us and based on our audit, e following material weaknesses have been identified in e operating effectiveness of e company's internal financial control over financial reporting as on 31 March, 2016 in respect of: a) Monitoring of EPC contract for projects under implementation, which could potentially result in excess advances to contractors and related monitoring issues. b) The information technology used by e company does not have ringent controls in respect of modification / editing of transactions, which may lead to incorrect reporting of information. A 'material weakness' is a deficiency, or a combination of deficiencies, in internal financial control over financial reporting, such at ere is a reasonable possibility at a material misatement of e company's annual or interim financial atements will not be prevented or detected on a timely basis. In our opinion, except for e effects/possible effects of e material weaknesses described above on e achievement of e objectives of e control criteria, e Company has maintained, in all material respects, adequate internal financial controls over financial reporting and such internal financial controls over financial reporting were operating effectively as of 31 March, 2016 based on e internal control over financial reporting criteria eablished by e Company considering e essential components of internal control ated in e Guidance Note. We have considered e material weaknesses identified and reported above in determining e nature, timing, and extent of audit tes applied in our audit of e 31 march, 2016 andalone financial atements of e Company, and ese material weaknesses does not affect our opinion on e andalone financial atements of e Company. For Chaturvedi & Shah For Agrawal Chhallani & Co. (Firm Regiration No. - 101720W) (Regiration No. : 100125W) R Koria S. R. Chhallani Membership No. - 35629 Membership No. - 30154 Place: Mumbai Place: Nagpur Date : 27 May, 2016 Date : 27 May, 2016 43rd Annual Report 2015-2016 61

ANNEXURE B TO INDEPENDENT AUDITORS' REPORT (Referred to in paragraph 2 under e heading Report on Oer Legal and Regulatory Requirements of our report of even date to e members of Jayaswal Neco Induries Limited on e andalone financial atements for e year ended 31 March, 2016) i. In respect of its fixed assets: a. The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets on e basis of available information. b. As explained to us, e Company has physically verified certain assets, in accordance wi a phased program of verification, which in our opinion is reasonable, having regard to e size of e Company and nature of its assets. No material discrepancies were noticed on such physical verification as compared wi e available records. c. According to e information and explanations given to us, e title deeds of immovable properties are generally in e name of e Company except in respect of 5 immovable properties at Raipur having e aggregate value of Rs. 31 lacs in respect of which e documents are not regiered in e name of e company wi e concerned Government Auority and also in case of properties acquired by e entities or unit at have since been amalgamated/merged wi e company in pursuance to e scheme of amalgamation / demerger / arrangement approved by Hon'ble High Court and details of which are as under. Sr. Particulars of e Leasehold / Gross Block as at Net Block as at Remarks (give reasons No. land and building Freehold/ Building 31 March, 2016 31 March, 2016 for e exception) 1 4 immovable properties Leasehold Land 1790.13 1601.25 2 title deeds are in e land at Raipur name of Corpoarte Ispat (1 agreement equitable Alloys Limited, from where mortgage wi e e unit demerge and lenders) acquired by e Company and 2 title deeds are in e name of Nagpur Alloy Caings Limited erwhile Company at were amalgamated wi e Company under e Companies Act, 1956 2 7 immovable properties Free hold land 106.56 73.07 The title deeds are in e (land / building) at /building name of Jayaswal Neco Nagpur / Kolkata / Limited (earlier known as Mumbai (4 agreements Jayaswal Chemical Private equitable mortgage wi limited) erwhile Company e lenders) at were amalgamated wi e Company under e Companies Act, 1956 ii. As informed to us, in respect of 59 immovable properties having e aggregate value of Rs. 795.21 lacs e original title deeds have been equitable mortgage wi e lenders as security, we have been produced photocopies of documents for ose immovable properties and based on such documents, e title deeds are held in e name of e Company except 5 immovable properties as disclosed above. In respect of its inventories: As explained to us, inventories have been physically verified during e year by e management except for inventories in transit for which management confirmation has been received. In our opinion e frequency of verification is reasonable. Discrepancies noticed on physical verification of e inventories between e physical 62 43rd Annual Report 2015-2016

Jayaswal Neco Induries Limited iii. iv. inventories and book records were not material, having regard to e size of e operations of e Company, and e same have been properly dealt wi. In respect of loans, secured or unsecured, granted by e company to companies, firms, limited liability ships or oer parties covered in e regier maintained under section 189 of e Act: a) In e earlier years e Company had granted unsecured loan to e subsidiary company and e terms and conditions on which is loan had been granted were not, prima facie, prejudicial to e intere of e Company. b) The terms of repayment of principal and payment of intere have been ipulated and e principal and intere were not due for payment during e year. c) As e repayment of e loan and intere is not due, e queion of overdue amount does not arise, however in view of e reasons as mentioned in note no. 43 (i) b to e andalone financial atements e above loan and intere receivables has been fully provided for in e financial atements as on 31 March 2016. In our opinion and according to e information and explanations given to us, e Company has complied wi e provisions of Sections 185 and 186 of e Act in respect of grant of loans, making invements and providing guarantees. v. According to e information and explanations given to us, e Company has not accepted any deposit from e public. Therefore, e provisions of Clause (v) of paragraph 3 of e Order are not applicable to e Company. vi. vii. We have broadly reviewed e co records maintained by e Company pursuant to e Companies (Co Records and Audit) Rules, 2014 prescribed by e Central Government under Section 148(1) (d) of e Companies Act, 2013, as applicable and are of e opinion at, prima facie, e prescribed accounts and records have been maintained. We have, however, not made a detailed examination of e co records wi a view to determine wheer ey are accurate or complete. According to e information and explanations given to us, in respect of atutory dues: a. The company has generally been regular in depositing undisputed atutory dues, including Provident Fund, Employees' State Insurance, Income tax, Sales tax, Service tax, Cuoms Duty, Excise Duty, Value Added Tax, Cess and any oer atutory dues wi e appropriate auorities during e year except in certain cases. According to e information and explanations given to us, no undisputed amounts payable in respect of such atutory dues were outanding as at 31 March, 2016 for a period of more an six mons from e date ey became payable. b. Details of dues of Duty of Cuom, Duty of Excise, Service Tax, Sales Tax and Value Added Tax aggregating to Rs.3,080.65 Lacs at have not been deposited on account of disputed matters pending before appropriate auorities are as under: Name of e Statutes Nature of e Period to which Amounts Forum where e dispute is Dues it relates (Rs. in Lacs)(*) pending The Cuom Act, 1962 Cuom Duty 2004-05 100 CESTAT The Central Excise Act, 1944 Excise Duty 2001-11 1247.81 CESTAT 2009-10 37.91 Additional Commissioner Finance Act, 1994 Service Tax 2005-09 171.68 CESTAT 2009-10 60.61 Commissioner The Central Sales Tax Act, Sales Tax / VAT 2006-07 200.61 Commercial tax Tribunal 1956 and Sales Tax Acts of 1993-94, 1995-97, 1,128.62 Joint Commissioner various ates 2002-03 & 2004-05 (*) Net of amount deposited under prote 2007-11 119.79 Additional Commissioner 1996-97, 2002-03 13.62 Deputy Commissioner (A) Total 3,080.65 43rd Annual Report 2015-2016 63

viii. Based on our audit procedures and according to e information and explanations given by e management, we are of e opinion at as on 31 March, 2016 e Company has defaulted in repayment of dues to banks aggregating to Rs. 1,777.60 Lacs. Lender wise details of such default is as under: (Rs. in Lacs) Sr. No. Bank Principal amount of default Period of default as at e balance sheet date 1 IDBI Bank 261.12 Below 90 days 2 ICICI Bank 91.67 Below 90 days 3 Union Bank of India 114.83 Below 90 days Union Bank of India (Working Capital) 1,036.67 Below 90 days 4 UCO Bank 224.62 Below 90 days 5 State Bank of India 48.69 Below 90 days According to e information and explanations given to us, e following banks have classified e credit facilities given to e Company as Non Performing Asset (NPA) as on 31 March 2016 in eir Books of Account due to non-achievement of Date of Commencement of Commercial Operations (DCCO) for its projects by e Company. Sr. No. Bank Term Loan Principal Fund Based Working Capital (Incl. SLOC & CC) 1 Andhra Bank 4,852.00-4,852.00 2 Bank of India 9,433.00-9,433.00 3 Bank of Maharashtra 9,432.31-9,432.31 4 Indian Overseas Bank 14,575.00-14,575.00 5 Punjab National Bank 71,359.00 8,735.76 80,094.76 6 State Bank of Patiala 3,900.00-3,900.00 7 State Bank of Bikaner & Jaipur 18,866.00 1,751.37 20,617.37 8 State Bank of Hyderabad 16,036.00-16,036.00 9 State Bank of India 39,235.93 35,355.27 74,591.20 10 State Bank of Travancore 19,482.22 3,133.34 22,615.56 11 UCO Bank 3,144.75-3,144.75 12 Union Bank of India 47,951.12 5,904.16 53,855.28 13 Oriental Bank of Commerce 14,149.00 2,432.88 16,581.88 ix. Total 1,777.60 Total 272416.33 57,312.78 329729.11 According to e information and explanations given to us, during e year e Company has not raised any money by way of initial public offer or furer public offer (including debt inruments). The term loans raised during e year have, prima facie, been applied for e purpose for which ey are raised.. x. Based on our audit procedures performed for e purpose of reporting e true and fair view of e financial atements and on e basis of information and explanations given by e management, no fraud by e Company or on e Company by its officers or employees has been noticed or reported during e year. xi. xii. In our opinion, according to e information and explanations given to us, e Company has paid or provided managerial remuneration in accordance wi e provisions of requisite approvals mandated by e provision of section 197 read wi Schedule V to e Act (read wi General Circular no. 07/2015 dated 10 April, 2015). In our opinion, e Company is not a Nidhi Company. Therefore, e provisions of Clause (xii) of paragraph 3 of e Order are not applicable to e Company. Total 64 43rd Annual Report 2015-2016

Jayaswal Neco Induries Limited xiii. xiv. xv. xvi. According to e information and explanations given to us, all transactions wi e related parties are in compliance wi section 177 and 188 of e Act where applicable and details of such transactions have been disclosed in e financial atements etc. as required by e applicable accounting andards. According to e information and explanations give to us and based on our examination of e records of e Company, during e year, e company has not raised any money by preferential allotment or private placement of share or debentures. Therefore, e provisions of Clause (xiv) of paragraph 3 of e Order are not applicable to e Company. According to e information and explanations given to us, during e year e company has not entered into any non-cash transactions wi directors or persons connected wi him, Therefore, e provisions of Clause (xv) of paragraph 3 of e Order are not applicable to e Company. In our opinion and according to information and explanations provided to us, e Company is not required to be regiered under section 45-IA of e Reserve Bank of India Act, 1934. For Chaturvedi & Shah For Agrawal Chhallani & Co. (Firm Regiration No. - 101720W) (Regiration No. : 100125W) R Koria S. R. Chhallani Membership No. - 35629 Membership No. - 30154 Place: Mumbai Place: Nagpur Date : 27 May, 2016 Date : 27 May, 2016 43rd Annual Report 2015-2016 65