To,

Dated:
04.06.2011

The Branch Manager,

Indian Overseas Bank,
Hotel Neptune Building,
Panjim (Goa)

Sub: Enhancement/Renewal Proposal

Sub: Reply of Queries dated 03.06.2011

Dear Sir,

We hereby clarify queries as under:

1. As regard Dindanahalli mines, we hereby inform you that sanction of

mining lease was obtained during Aug. 2010 subject to the
necessary clearances like forest clearances under Forest
(Conservation) Act, 1980, Environmental clearance under
Environment Protection Act, 1986, Consent for Establishment /
Consent for operation from the KSPCB Company has full filed all the
condition and submitted proper document to Department of Mines.
After getting all the mentioned clearance mining lease agreement
was executed on 25.02.2011 between Company and Government of
Karnataka. Original Mining Lease has been submitted to your
branch on dated 23.05.2011 (Copy enclosed). As regard NOC form
State Government for complete the mortgage of mining lease is
expected to obtain upto ………., the very time mortgage facility for
this mine would be executed with the bank.

2. The job of external rating was assigned to CARE in July 2010. They
visited our plant and assigned provisional rating in Oct.2010 but we
denied this and asked them to review our rating. We expect receving
the final rating upto Sep.2011. We also request you to allow this time
limit and reverse the excess interest being charged by branch on our
credit facilities.

3. The sales performance is: (Amount in Lacs)

Financial Year Actual (Not Audited)

Projected (Year)
 2010 – 11 17007.92
16637.41

2011 - 12 3037.79
18090.23
(For Apr. & May 11)

The company has achieved more turnover than its projected

turnover of Rs. 16637.41 in the F.Y. 2010-11. The same way
having seen the sale performance of first two month of current
financial year, we are confident that our performance would be
better and we will achieve more than the projected turnover during
the F.Y. 2011-12 and the company will record good growth.

4. It is well known fact that the last two years were the worst in steel industry.
During that time, there was heavy slump in the market and all the steel
units were facing unethical competition. Consequently, the steel industry
was registered lower growth during last years’ but in the present scenario,
the steel industry is recovering and Government has also taken required
steps for the availability of Iron Ore. The steel market is now being on
stabilizing path.

The company has projected turnover of Rs. 16637.41 Lac during 2010-11
while company achieved 17007.92 Lacs which is more than projected
turnover and it will be increased to Rs. 18090.23 lacs in current year 2011-
12 by achieving growth of 8.50%. We are very sure to achieve this target
very easily because in the first two months of current financial year (2011-
12) we already achieved 17% of projected turnover.

Here, we would like to inform you that the average rate of Sponge Iron
and Billets have been increased by more than 15% in the last six months.
The details are as under:
(In Rs. PMT)
Avg. rates Present Percentage
during Qtr.-3 of average rates increase
2010-11
Sponge Iron 16700/- 19200/- 15%
Billets 25600/- 30000/- 17%
Hence, we are fully confident that we will achieve the projected turnover
during the FY 2011-12 and the company will record good growth.

Now, about 6 months have elapsed from the date of making the
application for the enhancement in working capital facilities. The company
is in urgent need of funds. The company is losing something everyday due
to lack of funds. Hence, you are requested to sanction the enhancement in
working capital facilities at the earliest.

Thanking You.

Yours Faithfully,
For Goa Sponge & Power Ltd.

Authorised Signatory