Khandwala Securities - Limited Review For The Quarter Ended Sep 30, 2007

Khandwala Securities Ltd has informed that in the limited review report of the Company for the quarter ended September 30, 2007, the Auditors of the Company have made the following observations:

1. The basic earnings per share of Rs 1.94, as disclosed in the Statement have been calculated in the manner specified in Accounting Standard AS- 20 - Earning per Share.

2. The Company has not disclosed in the statement, the impact if any, on the interim financial information, of the following qualifications made in the last audited accounts of the Company;

(a) Share application money valued at Rs 216.69 lacs advanced by the Company for the purchase of shares (Rs 216.69 lacs as on June 30, 2007), of which management confirms that it has initiated legal proceedings against the party for the recovery of Rs 216.69 lacs

(b) Rs 100.00 lacs being short term deposits taken from companies together with Interest accrued of Rs 99.41 lacs, and Rs 530.00 lacs being deposits placed by the Company together with interest thereon of Rs 135.80 which were subject to confirmation, subsequent adjustments and reconciliation, if any.

The Managements reply to the Auditors Qualification for the Limited Review for the quarter ended September 30, 2007:

Reply against Qualification under Item No. 2 (a)

- The Company had invested Rs 314 Lacs towards purchase of shares of the investee Company in the FY 2001-02. The Company has neither been allotted shares nor refunded the said amount. Out of aforesaid amount the management have received Rs 97.31 lacs. After deducting aforesaid amount balance recoverable is Rs 216.69 lacs. The Company has initiated legal proceedings against the investee company by filing criminal & civil case u/s 138 of the Negotiable Instrument Act to recover the application money.