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To,Dated:

04.06.2011

The Branch Manager,

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

Sub: Enhancement/Renewal ProposalSub: 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 thenecessary 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 thecondition and submitted proper document to Department of Mines.After getting all the mentioned clearance mining lease agreementwas 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 formState Government for complete the mortgage of mining lease isexpected 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. Theyvisited our plant and assigned provisional rating in Oct.2010 but wedenied this and asked them to review our rating. We expect recevingthe 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)

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2010 – 11 17007.9216637.41

2011 - 12 3037.7918090.23

(For Apr. & May 11)

The company has achieved more turnover than its projectedturnover of Rs. 16637.41 in the F.Y. 2010-11. The same wayhaving seen the sale performance of first two month of currentfinancial year, we are confident that our performance would bebetter and we will achieve more than the projected turnover duringthe 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

during Qtr.-3 of 

2010-11

Present

average rates

Percentage

increase

Sponge Iron 16700/- 19200/- 15%

Billets 25600/- 30000/- 17%

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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