The auditors have qualified their report for the financial year ended March 31, 2005 expressing their inability to form an opinion whether the going concern assumption used in the preparation of the financial statements is appropriate, in view of the accumulated losses being Rs 152.238 million, in excess of the share capital of Rs 136.115 million. The management believes that the company is a going concern and will continue to be so in the foreseeable future, having regard to the continuing support of the holding Company and the restructuring process initiated by the management.

The company has investments of Rs. 1174.72 lacs (as at 31.03.2005 : Rs. 1174.72 lacs), comprising 2,484,176 equity shares of Rs.10 each and 1,000,000 preference shares of s.100 each, in SNL Bearings Limited (SNL), a subsidiary company. The company has also granted to SNL advances and loans of Rs. 1250 lacs (as at 31.03.2005 : Rs. 1250.00 lacs). SNL has accumulated losses in excess of its share capital. This matter had been referred to by the statutory auditors as a subject matter of qualification in their audit report. In the opinion of the management, having regard to the long term prospects of SNL and the efforts being made to improve its financial position, no provision for the loss is considered necessary. During the year ended 31st March, 2005 the subsidiary company has made a net profit of Rs.35 lacs.