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Auditor Report of Alkem Laboratories Ltd.

Mar 31, 2015

We have audited the accompanying standalone financial statements of Alkem Laboratories Limited ("the Company"), which comprise of the Balance Sheet as at 31 March 2015, the Statement of Profit and Loss and the Cash Flow Statement for the year then ended and a summary of the significant accounting policies and other explanatory information.

Management's Responsibility for the Standalone Financial Statements

The Company's Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these standalone financial statements based on our audit.

We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made thereunder.

We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

Independent Auditors' Report (Continued)

Alkem Laboratories Limited

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company's preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on whether the Company has in place an adequate internal financial controls system over financial reporting and the operating effectiveness of such controls. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company's Directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at 31 March, 2015, and its profits and its cash flows for the year ended on that date.

Report on Other Legal and Regulatory Requirements

As required by the Companies (Auditor's Report) Order, 2015 ("the Order"), issued by the Central Government of India in terms of sub-section (11) of section 143 of the Companies Act, 2015, we give in the Annexure a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.

As required by Section 143 (3) of the Act, we report that:

(a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.

(b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books.

(c) The Balance Sheet, the Statement of Profit and Loss, and the Cash Flow Statement dealt with by this Report are in agreement with the books of account.

(d) In our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

(e) On the basis of the written representations received from the directors as on 31 March, 2015 taken on record by the Board of Directors, none of the directors is disqualified as on 31 March, 2015 from being appointed as a director in terms of Section 164 (2) of the Act.

(f) With respect to the other matters to be included in the Auditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financial position in its financial statements – Refer Note 2.27(a) to the financial statements;

ii. The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses.

iii. There were no amounts outstanding as on balance sheet date which were required to be transferred to the Investor Education and Protection Fund by the Company.

Annexure to the Independent Auditors' Report - 31 March 2015

(Referred to in our report of even date)

(i) (a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets.

(b) The Company has a regular program of physical verification of its fixed assets by which all fixed assets are verified in a phased manner over a period of three years. In accordance with the program, certain fixed assets were verified during this year and no material discrepancies were noticed on such verification. In our opinion, this periodicity of physical verification is reasonable having regard to the size of the Company and the nature of its assets.

(ii) (a) The inventory, except goods-in-transit, has been physically verified by the management during the year. In our opinion, the frequency of such verification is reasonable. For stocks lying with third parties at the year-end, written confirmations have been obtained.

(b) The procedures for the physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) The Company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book records were not material.

(iii) The Company has not granted any loans, secured or unsecured, to companies, firms or other parties covered in the register maintained under Section 189 of the Act.

(iv) In our opinion and according to the information and explanations given to us, and having regard to the explanation that purchase of certain item of inventories are for the Company's specialized requirements, and similarly certain goods sold and services rendered are for specialized requirements of the buyers and suitable alternative sources are not available to obtain comparable quotations, there is an adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchase of inventories and fixed assets and with regard to sale of goods and services. We have not observed any major weakness in the internal control system during the course of the audit.

(v) The Company has not accepted any deposits during the year from the public in accordance with the provisions of sections 73 to 76 of the Act and the rules framed there under.

(vi) We have broadly reviewed the records maintained by the Company pursuant to the rules prescribed by the Central Government for maintenance of cost records under sub-section 1 of Section 148 of the Act and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. However we have not made a detailed examination of the records.

(vii) (a) According to the information and explanations given to us and on the basis of our examination of the records of the Company, amounts deducted/accrued in the books of account in respect of undisputed statutory dues including provident fund, employees' state insurance, income tax, sales-tax, wealth tax, service tax, duty of customs, duty of excise, value added tax and any other material statutory dues have been generally regularly deposited during the year by the Company with the appropriate authorities.

According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, employees' state insurance, income tax, sales- tax, wealth tax, service tax, duty of customs, duty of excise, value added tax and any other material statutory dues were in arrears as at 31 March 2015 for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us, there are no dues of income tax, sales tax, duty of customs, duty of excise and value added tax which have not been deposited with the appropriate authorities on account of any dispute other than those mentioned in Annexure II to this report.

(c) According to the information and explanations given to us and on the basis of our examination of the records of the Company, there are no amounts which are required to be transferred to Investor Education and Protection Fund in accordance with the relevant provisions of the Companies Act, 1956 (1 of 1956) and rules made thereunder.

(viii) The Company does not have any accumulated losses at the end of the year and has not incurred cash losses during the current financial year and in the immediately preceding financial year.

(ix) In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to its banks. The Company did not have any outstanding dues to any financial institution or debenture holders during the year.

(x) According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions.

(xi) In our opinion and according to the information and explanations given to us, the Company has not taken any term loan during the year.

(xii) According to the information and explanations given to us, no material fraud on or by the Company has been noticed or reported during the course of our audit

For B S R & Co. LLP

Chartered Accountants

Firm's Registration No: 101248W/W - 100022



Sadashiv Shetty

Mumbai Partner

29 June 2015 Membership No: 048648


Mar 31, 2014

We have audited the accompanying financial statements of Alkem Laboratories Limited ('the Company') which comprise the Balance Sheet as at 31st March, 2014, the Statement of Profit and Loss and the Cash Flow Statement for the year then ended and a summary of significant accounting policies and other explanatory information.

Management's Responsibility for the financial statements:

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India including Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956 ('the Act') read with General Circular 15/2013 dated 13th September,2013 of the ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility:

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's Internal Control . An audit also includes evaluating the appropriateness of accounting principles used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a base for our audit opinion.

Opinion:

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(i) In the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2014;

(ii) In the case of the Statement of Profit and Loss, of the Profit for the year ended on that date; and

(iii) In the case of the Cash Flow Statement, of the Cash Flows for the year ended on that date.

Report on Other Legal and Regulatory Requirements:

1. As required by the Companies (Auditors' Report) Order, 2003 ('the Order'), as amended, issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Act, we give in the Annexure hereto a statement on the matters specified in paragraphs 4 and 5 of the order.

2. As required by Section 227 (3) of the Act, we report that:

a. We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit;

b. In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books;

c. The Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statement dealt with by this Report are in agreement with the books of account;

d. In our opinion, the Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statement comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Act read with General Circular 15/2013 dated 13th September,2013 of the ministry of Corporate Affairs in respect of Section 133 of the Companies Act,2013;

e. On the basis of the written representations received from the directors as on 31st March, 2014, and taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2014, from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Act.

Re: Alkem Laboratories Limited (Referred to in Paragraph 1 under the heading of "Report on Other Legal and Regulatory Requirements" of our Report of even date)

1. In respect of its fixed assets:

(a) The Company has maintained proper records showing full particulars, including quantitative details and situation of its fixed assets on the basis of available information.

(b) As explained to us, certain items of fixed assets have been physically verified by the management during the year, and there is a regular program of verification in a phased periodical manner, which in our opinion is reasonable, having regard to the size of the Company and the nature of its fixed assets. According to the information and explanations given to us, no material discrepancies have been noticed on such verification.

(c) The fixed assets disposed off during the year, in our opinion, do not constitute a substantial part of the fixed assets of the Company and such disposal has, in our opinion, not affected the going concern status of the Company.

2. In respect of its inventories:

(a) As explained to us, the inventories (excluding goods-in-transit) have been physically verified by the management at reasonable regular intervals during the year. In respect of inventories which are not physically verified being goods in transit, they are not material. In our opinion, the frequency of verification is reasonable.

(b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventory followed by the management are reasonable and adequate considering the size of the Company and the nature of its business.

(c) The Company has maintained proper records of inventories. As explained to us, there was no material discrepancy noticed on physical verification of inventories as compared to the book records.

3. In respect of the loans, secured or unsecured, granted or taken by the Company to / from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956:

(a) The Company has granted loans to its eight subsidiaries covered in the register maintained under Section 301 of the Act. The maximum amount outstanding at any time during the year was Rs. 12444.72 lakhs and the year end balances of such loan amounted to Rs. 8580.26 lakhs. Other than above, the Company has not granted any loan, secured or unsecured, to Companies, Firms or parties covered in the register maintained under Section 301 of Act.

(b) In our opinion, the rate of interest and other terms and conditions on which these loans have been granted to the subsidiaries covered in the register maintained under Section 301 of the Act are not, prima facie, prejudicial to the interest of the Company.

(c) The Company is regular in receipt of interest and principal amount of unsecured loans wherever applicable and there is no default.

(d) There are no overdue amounts of more than Rupees One Lakh in respect of the loans granted to the subsidiaries listed in the register maintained under Section 301 of the Act.

(e) The Company has taken unsecured loans from 31 parties covered in the register maintained under Section 301 of the Companies Act, 1956 being directors, their relatives and subsidiary company. The aggregate of the year end balances of such loans is Rs. 7042.48 Lakhs and the maximum amount involved during the year was Rs. 7414.07 Lakhs from these parties.

(f) The rate of interest, wherever applicable and other terms and conditions of such loans are, in our opinion, prima facie not prejudicial to the interest of the Company.

(g) The Company is regular in repayment of interest and principal amount of unsecured loans wherever applicable and there is no default.

4. In our opinion, and according to the information and explanations given to us and having regard to the explanation that purchases of certain items of inventories are for the Company's specialized requirements and similarly certain goods sold are for the specialized requirements of the buyers and suitable alternative sources are not available to obtain comparable quotations, there is an adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchase of inventory and fixed assets and also for sale of goods and services. Further, on the basis of our examination of the books and records of the Company, we have not observed any continuing failure to correct major weaknesses in the aforesaid internal control procedures.

5. In respect of the contracts or arrangements referred to in Section 301 of the Companies Act, 1956:

(a) In our opinion, and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements, that needed to be entered into a register in pursuance of Section 301 of the Companies Act, 1956, have been so entered.

(b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements referred to in point (a) above and exceeding the value of Rs. 5 lakhs with any party during the year, have been made at prices which are prima facie reasonable having regard to the prevailing market prices at the relevant time, except that reasonableness could not be ascertained where comparable quotations are not available having regards to the specialized nature of some of the transactions of the Company as mentioned in paragraph 4 hereinabove. However, on the basis of the information and explanation provided the same appears to be reasonable.

6. The Company has not invited any deposit from public as such but has accepted unsecured loans from its directors, shareholders and their relatives and also trade deposits from stockiest and agents which are in the nature of deposits defined under the provisions of section 58A and 58AA of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975. In our opinion, and according to the information and explanations given to us, the Company has complied with the directives issued by the Reserve Bank of India, the provisions of Section 58A and Section 58AA of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 with regard to the deposits so accepted, to the extent applicable. We are informed by the management that no order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal, relevant to sections 58A, 58AA or other relevant provisions of the Act upon the Company.

7. In our opinion, the Company has an internal audit system being carried out by the firms of Chartered Accountants and also by its own internal audit department during the year, which in our opinion is commensurate with its size and the nature of its business.

8. We have broadly reviewed, the books of accounts and records maintained by the Company in respect of the products where, pursuant to the Rules made by the Central Government of India, the maintenance of cost records has been prescribed under clause (d) of sub-section (1) of Section 209 of the Companies Act, 1956, and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. We have, however, not made a detailed examination of the records with a view to determine whether they are accurate or complete.

9. In respect of statutory dues:

(a) According to the information and explanations given to us and the records of the Company examined by us, in our opinion, the Company is regular in depositing undisputed statutory dues including provident fund, employees' state insurance, income-tax, sales-tax, service-tax, wealth tax, custom duty, excise duty, cess and other material statutory dues during the year as applicable with the appropriate authorities in India. According to the information and explanations given to us and the records of the Company examined by us, no undisputed amount is payable in respect of provident fund, employees' state insurance, income-tax, sales-tax, service-tax, wealth tax, custom duty, excise duty, cess which were outstanding as on 31st March, 2014 for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us and the records of the Company examined by us, there are no dues on account of customs duty, wealth-tax, service-tax and cess which have not been deposited on account of any dispute. The particulars of dues of sales tax, excise duty and income tax as at 31st March, 2014 which have not been deposited on account of dispute, are as under:

Name of the Nature of Amount Period to Forum where dispute Statute Dues Rupees which the is pending (In Lakhs) amount relates

Central Excise Duty 37.24 2002 to 2005 Additional Commissioner of Excise Act, 1944 Central Excise

Excise Duty 44.73 2007 to 2012 Additional Commissioner of Central Excise

Excise Duty 63.10 2006 to 2011 Commissioner of Central Penalty 2.13 2010 to 2011 Excise (Appeals)

Excise Duty 149.25 Central Excise & Service Tax

Penalty 234.45 2003 to 2011 Appellate Tribunal

Excise Duty 12.12 2005 to 2012 Deputy Commissioner of Central Excise

Mahara shtra Value Added 50.78 2003-04 Deputy Commis- sioner of Sales VAT Act, Tax Tax (Appeals) 2002

Mahara shtra Value Added 56.54 2004-05 Joint Commis sioner of Sales VAT Act, Tax Tax (Appeals) 2002

West Bengal Value Added 8.75 2006-2007 Additional Commissioner of VAT Act, Tax 3.37 2007-2008 Commercial Taxes 2003 (Appeal)

Uttar Value Added 31.38 2012-2013 Additional Commissioner of Pradesh VAT Tax Commercial Taxes Act 2008 (Appeal)

Bihar VAT Value Added 38.49 2010-2011 Joint Commis- sioner of Act, 2005 Tax 62.99 2011-2012 Commercial Taxes (Appeals)

Income Tax Income Tax 8.89 2008-09 Commissioner of Income Tax Act, 1961 45.01 2009-10 (Appeal)

10. In our opinion and according to the information and explanations given to us, the Company does not have any accumulated losses as at the end of the financial year and has not incurred any cash loss in the financial year ended on that date or in the immediately preceding financial year.

11. In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of any dues to any bank or any debenture holder during the year. The Company has not taken any financial assistance from any financial institution and does not have any debenture outstanding as on the balance sheet date.

12. In our opinion and according to the explanations given to us and based on the information available, the Company has not granted any loan or advance on the basis of security by way of pledge of shares, debentures and other securities.

13. The provisions of any special statute applicable to a chit fund / nidhi / mutual benefit fund / societies are not applicable to the Company and therefore the requirements of clause (xiii) of paragraph 4 of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company for the current year.

14. In our opinion and according to the information and explanations given to us, the Company is not a dealer or trader in shares, securities, debentures and other investments as such. However, the Company has made certain investments in shares, securities, debentures, bonds and/or mutual funds for which proper records are maintained in respect of transactions and contracts and timely entries have been made therein. All investments are held by the Company in its own name.

15. The Company has given guarantee for loan taken by one of its subsidiary company from the banks. According to the information and explanations given to us, we are of the opinion that the terms and conditions thereof are not prima facie prejudicial to the interest of the Company.

16. In our opinion and according to the information and explanations given to us, the external commercial borrowing (ECB) loan taken be the Company, which is in the nature of term loan, has been applied for the purpose for which it was raised.

17. According to the cash-flow statement and other records examined by us and the information and explanations given to us on an overall basis, we are of the opinion that there is no direct utilization of the funds raised on a short term basis during the year for long term investments.

18. The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Companies Act, 1956 during the year and therefore the requirements of clause (xviii) of paragraph 4 of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company for the current year.

19. The Company has not issued any secured debentures and therefore the requirements of clause (xix) of paragraph 4 of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company for the current year.

20. The Company has not raised any money by public issues during the year and therefore the requirements of clause (xx) of paragraph 4 of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company for the current year.

21. During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of material fraud on or by the Company, noticed or reported during the year, nor have been informed of such case by the management.

For R.S.SANGHAI & ASSOCIATES

Chartered Accountants

Registration No. 109094W

SD/-

R.S.SANGHAI

Partner

Membership No.: 036931

Mumbai: 7th July, 2014


Mar 31, 2013

We have audited the accompanying financial statements of ALKEM LABORATORIES LIMITED ('the Company') which comprise the Balance Sheet as at 31st March, 2013, the Statement of Profit and Loss Account and the Cash Flow 'Statement for the year then ended and a summary of significant accounting policies and other explanatory information,

Management's Responsibility for the financial statements :

Managements is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India including Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956 ('the Act'). This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statement that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility:

Our responsibility is to express an opinion on these financial statements based on our audit We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error In making those risk assessments, the auditor considers internal control relevant to the Company's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting principles used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a base for our audit opinion.

Opinion:

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(i) In the case of the Balance Sheet, of the state of affairs of the Company as at 31s1 March, 2013;

(ii) In the case of the Statement of Profit and Loss of the Profit of the Company for the year ended on that date; and

(iii) In the case of the Cash Flow Statement, of the Cash Flows of the Company for the year ended on that date.

Report on Other Legal and Regulatory Requirements:

1. As required by the Companies (Auditors' Report) Order, 2003 {'the Order'), as amended, issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Act, we give in the Annexure hereto a statement on the matters specified in paragraphs 4 and 5 of the order.

2. As required by Section 227 (3) of the Act, we report that.

a. We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit;

b. In our opinion, proper books of account as required by law have been kept by the company so far as appears from our examination of those books;

c. The Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statement dealt with by this report are in agreement with the books of account;

d. In our opinion, the Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statement comply with the Accounting Standards referred to in sub-section (3C) of Section 211 Act.

e. On the basis of written representations received from the directors, as on 31sl March, 2013, and taken on record by the Board of Directors, none of the directors is disqualified as on 31s1 March, 2013 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Act.

Re: Alkem Laboratories Limited (Referred to in Paragraph 1 under the heading of "Report on other Legal and Regulatory Requirements" of Dur Report of even date)

1 In respect of its fixed assets;

(a) The company has maintained proper records showing full particulars, including quantitative details and situation of its fixed assets on the basis at available information.

(b) As explained to us, certain items of fixed assets have been physically verified by the management during the year, and there is a regular program of verification, in a phased periodical manner, which in our opinion is reasonable, having regard to the size of the Company and the nature of its fixed assets According to the information and explanations given to us, no material discrepancies have been noticed on such verification

(c) The fixed assets disposed off during the year, in our opinion, do not constitute a substantial part of the fixed assets of the Company and such disposal has, in our opinion, not affected the going concern status of the Company

2 In respect of its inventories:

(a) As explained to us, the inventories (excluding goods-in-transit) have been physically verified by the management at reasonable regular intervals during the year In respect of inventories which are not physically verified being goods in transit, they are not material In our opinion, the frequency of verification is reasonable,

(b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventory followed by the management are reasonable and adequate considering the size of the Company and the nature of its business

(c) The Company has maintained proper records of inventories As explained to us, there was no material discrepancy noticed on physical verification of inventories as compared to the book records.

3 In respect of the loans, secured or unsecured, granted or taken by the Company to / from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956:

(a) The Company has granted loans to its eight subsidiaries covered in the register maintained under Section 301 of the Act, The maximum amount outstanding at any time during the year was Rs 7500 00 lakhs and the yearend year end balances of such loan amounted to Rs 4775.24 lakhs Other than above, the Company has not granted any loan, secured or unsecured, to Companies, Firms or parties covered in the register maintained under Section 301 of Act

(b) In our opinion, the rate of interest and other terms and conditions on which these loans have been granted to the subsidiaries covered in the register maintained under Section 301 of the Act are not, prima fancies, prejudicial to the interest of the Company.

(c) The Company is regular in receipt of interest and principal amount of unsecured loans wherever applicable and there is no default..

(d) There are no overdue amounts of more than Rupees One Lakh in respect of the loans granted to the subsidiaries listed in the register maintained under Section 301 of the Act.

(e) The Company has taken unsecured loans from 33 parties covered in the register maintained under Section 301 of the Companies Act, 1956 being directors and their relatives, The aggregate of the year end balances of such loans is Rs 4610.99 Lakhs and the maximum amount involved during the year was Rs 4855 04 Lakhs from these parties.

(f) The rate of interest, wherever applicable and other terms and conditions of such loan are, in our opinion, prima facie not prejudicial to the interest of the Company.

(g) The company is regular in repayment of interest and principal amount of unsecured loans and there is no default.

4. In our opinion, and according to the information and explanations given to us and having regard to the explanation that purchases of certain item of inventories are for the Company's specialized requirements and similarly certain goods sold are for the specialized requirements of the buyers and suitable alternative sources are not available to obtain comparable quotations, there is an adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchase of inventory and fixed assets and also for sale of goods and services Further, on the basis of our examination of the books and records of the Company, we have not observed any continuing failure to correct major weaknesses in the aforesaid internal control procedures.

5 In respect of the contracts or arrangements referred to in Section 301 of the Companies Act, 1956:

(a) In our opinion, and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements, that needed to be entered into a register in pursuance of Section 301 of the Companies Act, 1956, have been so entered

(b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements referred to in point (a) above and exceeding the value of Rs 5 lakhs with any party during the year, have been made at prices which are prima facie reasonable having regard to the prevailing market prices at the relevant time, except that reasonableness could not be ascertained where comparable quotations are not available having regards to the specialized nature of some of the transactions of the Company as mentioned in paragraph 4 hereinabove However, on the basis of the information and explanation provided the same appears to be reasonable

6. The company has not invited any deposit from public as such but has accepted unsecured loans From its directors, shareholders and their relatives and also trade deposits from stockiest and agents which are in the nature of deposits defined under the provisions of section 58A and 58AA of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975. In our opinion, and according to the information and explanations given to us, the company has complied with the directives issued by the Reserve Bank of India, the provisions of section 5BAand 58AAof the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 with regard to the deposits so accepted, to the extent applicable We are informed by the management that no order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal, relevant to sections 58A, 58AA or other relevant provisions of the Act upon the Company.

7. In our opinion, the company has an internal audit system being carried out by firms of Chartered Accountants and also by its own internal audit department during the year, which in our opinion is commensurate with its size and the nature of its business.

B. We have broadly reviewed, the books of accounts and records maintained by the company in respect of the products where, pursuant to the Rules made by the Central Government of India, the maintenance of cost records has been prescribed under clause (d) of sub- section (1) of Section 209 of the Companies Act, 1956, and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained We have, however, not made a detailed examination of the records with a view to determine whether they are accurate or complete.

9. In respect of statutory dues:

(a) According to the information and explanations given to us and the records of the company examined by us. in our opinion, the Company is regular in depositing the undisputed statutory dues including provident fund, employees' state insurance, income-tax. sales-tax, service-tax, wealth tax, custom duty, excise duty, cess and other material statutory dues during the year as applicable with the appropriate authorities in India. According to the information and explanations given to us and the records of the Company examined by us, no undisputed amount is payable in respect of provident fund, employees' state insurance, income-tax, sales-tax. service-tax, wealth tax. custom duty, excise duty, cess which were outstanding as on 31st March, 2013 for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us and the records of the company examined by us, there are no dues on account of customs duty, wealth-tax, service-tax and cess which have not been deposited on account of any dispute The particulars of dues of sales-tax, excise duty and income-tax, as at 31s1 March, 2013 which have not been deposited on account of dispute, are as under:

Name of the Nature of Dues Amount Rupees Period to which the where the Statute (In Lakhs) amount relates

Central Excise Duty 37.24 2002 to 2005 Excise Act 1944 Excise Duty 44.73 2007 to 2012

Excise Duty 63.10 2006 to 2011

Penalty 2.13 2010 to 2011

Excise Duty 149.25 2003 to 2011

Penalty 234.45

Excise Duty 12.12 2005 to 2012

Maharastra Sales Tax 50.78 2003 - 2004 VAT Act, 2002

Maharastra Sales Tax 56.54 2004 - 2005 Act,2002

West Bengal Value Added 8.75 2006 - 2007 VAT Act, 2003 Tax 3.37 2007 - 2008

Uttar Pradesh Value-added 31.38 2012-2013 VAT Act, 2008 Tax

Bihar VAT Value-added 38.49 2010 - 2011 Act, 2005 Tax 62.99 2011-2012

Income Tax Income Tax 8.89 FY 2008-2009 Act, 1961 AY 2009-2010

Name of the Forum where the Statute dispute is pending

Central Additional Commissioner of Excise Act Central Excise 1944 Additional Commissioner of Central Excise

Commissioner of Central Excise (Appeals)

Central Excise & Service Tax Appellate Tribunal

Deputy Commissioner of

Maharastra Deputy Commissioner of Sales VAT Act, 2002 Tax (Appeals)

Maharastra Joint Commissioner of Sales Act,2002 Tax (Appeals)

West Bengal Additional Commissioner of VAT Act, 2003 Commercial Taxes (Appeals)

Uttar Pradesh Additional Commissioner of VAT Act, 2008 Commercial Taxes (Appeals)

BiharVAT Joint Commissioned Act, 2005 Commercial Taxes (Appeals)

Income Tax Commercial of Income Tax Act, 1961 (Appeals

10 In our opinion and according to the information and explanations given to us, the Company does not have any accumulated losses as at the end of the financial year and has not incurred any cash loss in the financial year ended on that date or in the immediately preceding financial year

11 In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of any dues to any bank or any debenture holder during the year. The Company has not taken any financial assistance from any financial institution and does not have any debenture outstanding as on the balance sheet data*

12 In our opinion and according to the explanations given to us and based on the information available, the Company has not granted any loan or advance on the basis of security by way of pledge of shares, debentures and other securities.

13. The provisions of any special statute applicable to a chit fund / nidhi / mutual benefit fund / societies are not applicable to the Company and therefore the requirements of clause (xiii) of paragraph 4 of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company for the current year.

14. In our opinion and according to the information and explanations given to us, the company is not a dealer or trader in shares, securities, debentures and other investments as such However, the Company has made certain investments in shares, securities, debentures, bonds and / or mutual funds for which proper records are maintained in respect of transactions and contracts and timely entries have been made therein All investments are held by the Company in its own name.

15 The Company has given guarantee for loan taken by its subsidiary Company from the banks. According to the information and explanations given to us, we are of the opinion that the terms and conditions thereof are not prima facie prejudicial to the interest of the Company.

16. In our opinion and according to the information and explanations given to us, the external commercial borrowing (ECB) loan taken by the Company, which is in the nature of term loan, has been applied for the purpose for which it was raised.

17 According to the cash-flow statement and other records examined by us and the information and explanations given to us on an overall basis, we are of the opinion that there is no direct utilization of the funds raised on a short term basis during the year for long term investments.

18.. The company has not made any preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Companies Act, 1956 during the year and therefore the requirements of clause (xviii) of paragraph 4 of the Companies (Auditor's Report) Order, 2003 are not applicable to the company for the current year.

19 The company has not issued any secured debentures and therefore the requirements of clause (xix) of paragraph 4 of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company for the current year

20 The Company has not raised any money by public issues during the year and therefore the requirements of clause (xx) of paragraph 4 of the Companies (Auditor's Report) Order, 2003 are not applicable to the company for the current year.

21 During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of material fraud on or by the company, noticed or reported during the year, nor have been informed of such case by the management.

For R.S.SANGHAI & ASSOCIATES

Chartered Accountants

Registration No. 109094W



R.S.SANGHAI

Partner

Membership No : 36931

Mumbai, 12th June, 2013


Mar 31, 2012

1. We have audited the attached Balance Sheet of ALKEM LABORATORIES LIMITED ('the Company') as at 31st March, 2012, the Statement of Profit and Loss Account and the Cash Flow Statement (together known as 'financial statements') of the Company for the year ended or that date all annexed thereto, which we have signed under reference to this report. These financial statements are the responsibility of the Company's Management Our responsibility is to express an opinion on these financial statements based on our audit

2 We conducted our audit in accordance with auditing standards generally accepted In India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement An audit includes examining, on a test basis evidence supporting the amounts and disclosures in the financial statements An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall presentation of the financial statement. We believe that our audit provides a reasonable basis for our opinion.

3 As required by the Companies (Auditors' Report) Order, 2003 ('the CARO Order1) issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956 ('the Act') and on the basis of such checks of the books and records of the Company as we considered appropriate and according to the information and explanations given to us during the course of our audit, we enclose in the Annexure hereto a statement on the matters specified in paragraphs 4 and 5 of the said order to the extent applicable

4. Further to our comments in the Annexure referred to in paragraph 3 above, we report that:

a. We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit;

b. In our opinion, proper books of account as required by law have been kept by the company so far as appears from our examination of those books;

c. The Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statement dealt with by this report are in agreement with the books of account;

d. In our opinion, the Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956 read with Companies (Accounting Standard) Rules, 2006, to the extent applicable;

e. On the basis of written representations received from the directors, as on 31st March. 2012, and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March, 2012 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956; and

f. In our opinion and to the best of our information and according to the explanations given to us, the said accounts, read together with the Significant Accounting Policies, and Notes there on give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(i) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2012;

(ii) in the case of the Statement of Profit and Loss of the Profit of the Company for the year ended on that date; and

(iii) in the case of the Cash Flow Statement, of the Cash Flows of the Company for the year ended on that date

Re: Alkem Laboratories Limited (Referred to in Paragraph 3 of our Report of even date on the financial statements of the Company for the year ended 31st March, 2012)

1 In respect of its fixed assets:

(a) The company has maintained proper records showing full particulars, including quantitative details and situation of its fixed assets

(b) As examined to us certain items of fixed assets has been physically verified by the management during the year, and there is a regular program of verification, in a phased periodical manner, which in our opinion is responsible, having regard to the size of the Company and the nature of its fixed assets. According to the on and explanations given to us. no material discrepant have been noticed on such verification.

(c) The fixed assets disposed off during the year, in our opinion, do not constitute a substantial part of the fixed assets of the Company and such disposal has, in our opinion, not affected the going concern status of the Company.

2 In respect of its inventories:

(a) As explained to us, the inventories (excluding goods-in-transit) have been physically verified by the management at reasonable regular intervals during the year. In respect of inventories which are not physically verified being goods in transit, they are not material. In our opinion, the frequency of verification is reasonable.

(b) In our opinion and according to the information and explanations given to us, the procedure of physical verification of inventory followed by the management were reasonable and adequate considering the size of the company and the nature of its business.

(c) On the basis of examination of the inventory record, in our opinion and according to the information and explanation given to us, the company is maintaining proper records of inventory. discrepancies noticed on physical verification of inventory as compared to book records which have been properly dealt with in the books of account were not material .

3 In respect of the loans, secured or unsecured, granted or taken by the Company to I from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956.

(a) The company has not granted any loan, secured or unsecured to companies. firm or other parties listed in the register maintained under section 301 of the companies Ac, 1956 and accordingly, the requirements of sub- clauses (a) to (d) of clause (iii) of perhaps 4 of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company for the current year.

(b) The company has take unsecured loans from 23 parties covered in the register maintained under section 301 of the companies Act, 1956 being directors and their relatives. The aggregate of the year end balances of such loans is Rs. 3471,89 Lakhs and the maximum amount involved during the year was Rs 3827 8 Lakhs from these parties.

(c) The rate of interest, wherever applicable and other terms and conditions of such loans are, in our opinion, prima face not prejudicial to the interest of the Company.

(d) The company is regular in repayment of interest and principal amount of unsecured loans and there is no default.

4. In our opinion, and according to the information and explanation given to us, and having regard to the explanation that purchases of certain items of inventories are for the company' specialized requirements and generally certain goods sold are for the specialized requirements of the buyers and suitable alternative sources are not available to obtain comparable quotations there is an adequate internal control system commensurate with the size of the company and the nature of its business with regard to purchase of inventory and fixed assets and also for sales of goods and services Future, on the basis of our examination of the book and records of the company. We have not observed any continuing future to correct major weakness in the aforesaid internal control procedures.

5 In respect of the contracts or arrangements referred to in Section 301 of the Companies Act, 1956:

(a) In our opinion, and according to the information and explanations given " arrangements, that needed to be entered into a register in pursuance of Section 301 of the Company

(b) In our opinion and according to the information and explanations given to us, that transaction made in pursuance of the contracts arrangements referred to in point (a) above and exceeding the value of Rs. 5 Lakhs with any party during the year have been made at prices which are puma tape reasonable having regard to the prevailing market prices at the relevant time. Except that reasonableness could not be ascertained where comparable quotations are not available having regards to the specialised nature of some of the transactions of the Company as mentioned in paragraph 4 here in above. However on the basis of the information and explanation provided the same appears to be reasonable.

6 The company has not invited any deposit from public as such but has accepted unsecured loans from its directors, shareholders and their relatives and also trade deposits from stockiest and agents which are in the nature of deposits defined under the provisions of section 58A and 58AA of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 In out on' 3rd according to the information and explanations given to us, the company has complied with the director issued by the Resent Bank of India the provisions of section 58A and 58AA of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules 1975 with regard to the deposits accepted, to the extent applicable We are informed by the management that no order has bee passed by the Company Law Board or National Company Law Tribunal or Resent Bank of India or any Court or any other Tribunal, relevant to sections 58A, 58AA or other relevant provisions of the Act upon the Company

7. In our opinion, the company has an internal audit system being carried out by firms of Chartered Accountants and also by its own internal audit department during the year, which in our opinion is commensurate with its size and the nature of its business.

8. We have broadly reviewed, the books of accounts and records maintained by true company to the Rules made by the Central Government of India. the maintenance of cost records has Been company by under clause section (1) of Section 209 of the Companies Act. 1956. and are of the opinion that puma facie, the prescribed accounts and records have been made and maintained. We have, however, not trade a detailed examination of the records with a view to determine whether they are accurate or complete.

9. In respect of statutory dues

(a) According to 'he information and explanations given to us and the records of the company examined by . in out opinion. the ESS up to in depositing the statutory dues Mud* prudent fund, employees' state insurance. income tax sales-tax. service tax. wealth tax custom duty, excise duty cess and other material statutory dues during the year with the appropriate authorised India. According to the information and explanations given to us and the records of the Company examined by us no undisputed amount a payable in respect of provident land. employees state insurance tax sale tax, service tax, wealth tax custom duty, excise duty, cess which were outstanding as on 31- March. 2012 for a period of more than six months thorn the date they became payable Since the Central Government has till date net prescribed the 31 cost payable under Section of the Companies Act 1956 we are not in a position to comment upon the require or otherwise of the Company m depositing the same.

(b) According to the information and explanations given to us and the records of the company examined dues on account of customs duty, income-tax. wealth-tax, service-tax and cess which have not been deposited on account of any dispute. The particulars of dues sales-tax and excise duty as at 31- March. 2012 which have not been deposited on account of are as under

Name of the Nature of Dues Amount Rupees Statute (In Lakhs)

Central Excise Duty 17.93 Excise Act 1944 Excise Duty 57.99 Penalty 45.60

Excise Duty 19.30

Penalty on 19.88 Excise Duty

Excise Duty 89.07

Penalty 23.90

Excise Duty 61.47

Excise Duty 94.62 Penalty 142.51

Maharashtra Sales Tax 50.78 VAT Act, 2002

Punjab VAT Sales Tax 21.98 Act, 2005 Penalty 7.80

Bihar VAT Sales Tax 9.03 Act 2005 10.87

Name of the Period to which the Forum where the Statute amount relates dispute is pending

Central Excise 2004 to 2005 Additional Commissioner of Act, 1944 Central Excise

2003 to 2005 Central Excise & Service tax Appellate Tribunal

2002 to 2004 Additional Commissioner of Central Excise

2009 Central Excise & Service Tax Appellate Tribunal

2005 to 2012 Deputy Commissioner of Central Excise

2008 to 2010 Commissioner of Central Excise (Appeals)

2006 to 2010 Commissioner of Central Excise (Appeals)

2007 to 2012 Central Excise & Service Tax Appellate Tribunal

Maharashtra VAT 2003-2004 Deputy Commissioner of Sales Act, 2002 2004-2005 Tax (Appeals)

Panjab VAT 2010-2011 Joint Director (Enforcement) Act,2005

Bihar VAT 2002-2003 Commercial Taxes Tribunal 2003-2004

10 In our opinion and according to the information and explanations given to us, the Company does not have any accumulated fosses as at the end of the financial year and has not incurred any cash loss in the financial year ended on that date or in the immediately preceding financial year

11 In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of any dues to any bank or any debenture holder during the year. The Company has not taken any financial assistance from any financial institution and does not have any debenture outstanding as on the balance sheet date

12 In our opinion and according to the explanations given to us and based on the information available, the Company has not granted any loan or advance on the basis of security by way of pledge of shares, debentures and other securities.

13 The provisions of any special statute applicable to a chit fund / nidhi / mutual benefit fund /societies are not applicable to the Company and therefore the requirements of clause (xiii) of paragraph 4 of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company for the current year.

14 In our opinion and according to the information and explanations given to us, the company is not a dealer or trader in shares, securities, debentures and other investments as such However, the Company has carried on transactions on account of investment and trading in shares, securities, debentures, bonds and mutual funds for which proper records are maintained in respect of transactions and contracts and timely entries have been made therein All the investments are held by the Company in its own name

15 The Company has given guarantee for loan taken by it's subsidiary Company from the bank. According to the information and explanations given to us, we are of the opinion that the terms and conditions thereof are not prima fade prejudicial to interest of the Company.

16 In our opinion and according to the information and explanations given to us, the external commercial borrowing (ECB) loan taken by the Company, which is in the nature of term loan, has been applied for the purpose for which it was raised.

17 According to the cash-flow statement and other records examined by us and the information and explanations given to us on an overall basis, we are of the opinion that there is no direct utilization of the funds raised on a short term basis during the year for long term investments

18 The company has not made any preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Companies Act, 1956 during the year and therefore the requirements of clause (xviii) of paragraph 4 of the Companies (Auditor's Report) Order, 2003 are not applicable to the company for the current year.

19 The company has not issued any secured debentures and therefore the requirements of clause (xix) of paragraph 4 of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company for the current year.

20 The Company has not raised any money by public issues during the year and therefore the requirements of clause (xx) of paragraph 4 of the Companies (Auditor's Report) Order, 2003 are not applicable to the company for the current year.

21 During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of material fraud on or by the company, noticed or reported during the year, nor have been informed of such case by the management.

For R.S.SANGHAI & ASSOCIATES

Chartered Accountants

Registration No. 109094W

R.S.SANGHAI

Proprietor

Membership No.: 36931

Mumbai, 25th May. 2012


Mar 31, 2011

1. We have audited the attached Balance Sheet of ALKEM LABORATORIES LIMITED ("the Company') as at 32st March 2011,and the related Profit and Loss Account and the Cash Flow Statement (together knows as "financial statements') of the company for the year ended on that date annexed thereto, which we have signed under reference to this report. These financial statements based on our audit.

2.We conducted our audit in accordance with Auditing Standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting puritanical statement. We believe that our audit provides a reasonable basis for our opinion.

3.As required by the Companies(Auditors' Report)Order,2003("the CARO Order')Issued by the Central Movement of India in terms of sub-section(4A)of Section 227 of the Companies Act,1956("the Act')and on the basis of such checks of the books and record of the company as we considered and according to the information and explanations given to us during the course of our audit, we enclose in the annexure hereto a statement on the matters specified in paragraphs 4nad 5 of the said order to the extent applicable.

4. Further to our comments in the Annexure referred to in paragraph 3 above, we report that:

a. We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit;

b. in our opinion, proper books of account as required by law have been kept by the company so far as appears from our examination of those books;

c. The Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report are in agreement with the books of account;

d. In our opinion, the balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report comply with the mandatory Accounting Standards referred to in sub-Section(3C)of Section 211 of the Companies Act1956 read with Companies (Accounting Standard) Rules, 2006, to the extent applicable,

e. On the basis of written representations received from the directors as on 30st March,2011 and taken on record by the Board of Directors, we report that none of the Directors is disqualified as on 31st March,2011 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Compan.es Act, 1956, and

f. In our opinion and to the best of our information and according to the explanations given to us the said accounts read together with the significant Accounting Policies, Other Notes and Schedules annexed thereto, view in conformity with the accounting principles generally accepted in Indian:

(i) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2011;

(ii) in the case of the Profit and Loss Account, of the Profit of the Company for the year ended on that date; and

(iii) in the case of the Cash Flow Statement, of the Cash Flows for the year ended on that date

Re: Alkem Laboratories Limited (Referred to in Paragraph 3of even date on the financial statement of the Company of the Company for the year ended 31st March,2011

1 (a) The Company has maintained proper records Showing full Particulars. including quantitative details and situation of its assets.

(b) As explained to us, certain items of fixed assets have been physically verified by the management during the year, and there is a regular program of verification, which in our opinion is reasonable, having regard to the size of the company and the nature of its fixed assets. According to the ,information and explanations given to us, no material discrepancies have been noticed on such verification

(c) No Substantial part of the fixed assets has been disposed of by the company during the year and therefore in our opinion and according to the information and explanations given to us the going concern concept is not affected.

2 (a) As Explained to us, the inventories(excluding goods-in transit)have been physically verified by the management at reasonable regular intervals during the year. In respect on inventories which are not physically verified being goods in transit, they are not material in our opinion, the frequency of verification is reasonable.

(b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventory followed by the management were reasonable and adequate considering the size of the company and the nature of its business.

(c) On the basis of our examination of the inventory records. in our opinion and according to the information and explanations given to us, the company is maintaining proper records of inventory. The discrepancies noticed on physical verification of inventory as compared to book records which have been properly dealt with in the books of account and were not material.

3 (a) The company has not granted any loan in the nature of loan as such (other than advances in the normal course of its business),secured or unsecured, to companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act,1956.Therefore,the requirements of clauses(iii-a), (iii-c) and (iii-d) of paragraph 4 of the companies(Auditor's Report) Order,2003 are not applicable to the company for the current year.

(b) The Company has not granted any loan in the nature of loan from 24 parties covered in the register maintained under Section 301 of the Companies Act,1956 being director and their relatives. The aggregate of the year end balances of such loans is Rs.2925.26 Lakhs and the maximum amount involved during the year was Rs.4211.12Lakhs from these parties.

(c) The rate of interest ,wherever applicable and other terms and conditions are ,in our opinion, prima facie not prejudicial to the interest of the company.

(d) The company is regular in repayment of interest and principal amount of unsecured loans and there is no default.

4, In our opinion, and according to the information and explanations given to us and having regard to the explanation that purchases of certain items of inventories are for the company's Specialized requirements and similarly certain goods sold are for the Specialized requirements of the buyers and suitable alternative sources are not available to obtain comparable quotations, there is an adequate internal control procedures commensurate with the size of the Company and the nature of its business for purchase of inventory and fixed assets and also for sale of goods and services. further, on the basis of our examinations of the books and records of the company, and according to the information and explanations given to us, we have not observed any continuing failure to correct major weaknesses in the aforesaid internal control procedures.

5 (a) In Our opinion, and according to the information and explanations to us, the transactions made in pursuance contracts or arrangements, that needed to be entered in to a register in pursuance of Sectarian 301 of the Companies Act,1956,have been so entered,

(b) In our opinion and according to the information and explanations given to us, these contracts or arrangements have been made at prices which are prima facie reasonable having regard to the prevailing market prices at the relevant time, except that reasonable could not be ascertained where comparable quotations are not available having regards to the specialized nature of some of the transactions of the company as mentioned in Para 4 hereinabove. However, On the basis of the information and explanation provided the same appears to be reasonable.

6. The company has not invited any deposit from public as such but has accepted unsecured loans from its directors, shareholders and their relatives and also trade deposits from stockiest and agents which are in the nature of deposits defined under the provisions of section 58Aand 58AAof the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975. In our opinion, and according to the information and explanations given to us, the company has complied with the directives issued by the Reserve Bank of India, the provisions of section 58Aand 58AA of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 with regard to the deposits accepted, to the extent applicable. We are informed by the management that no order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal, relevant to sections 58A, 58AA or other relevant provisions of the Act upon the Company.

7. In our opinion, the company has an internal audit system being carried out by firms of Chartered Accountants and also by its own internal audit department during the year, which in our opinion is commensurate with its size and the nature of its business.

8. We have broadly reviewed, the books of accounts and records maintained by the company in respect of the products where, pursuant to the Rules made by the Central Government of India, the maintenance of cost records has been prescribed under clause (d) of sub- section (1) of Section 209 of the Companies Act, 1956, and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. We have, however, not made a detailed examination of the records with a view to determine whether they are accurate or complete.

9. (a) According to the information and explanations given to us and the records of the company examined by us, in our opinion, the company is regular in depositing the undisputed statutory dues including provident fund, employees' state insurance, income-tax, sales-tax, service-tax, wealth tax, custom duty, excise duty, cess and other material statutory dues during the year as applicable with the appropriate authorities in India. According to the information and explanations given to us and the records of the company examined by us, no undisputed amount is payable in respect of provident fund, employees' state insurance, income-tax, sales-tax, service-tax, wealth tax, custom duty, excise duty, cess which were outstanding as on 31s1 March, 2011 for a period of more than six months from the date they became payable. Since the Central Government has till date not prescribed the amount of cess payable under Section 441A of the Companies Act, 1956, we are not in a position to comment upon the regularity or otherwise of the company in depositing the same.

(b) According to the information and explanations given to us and the records of the company examined by us, there are no dues of customs duty, income-tax, wealth-tax, service-tax and cess which have not been deposited on account of any dispute. The particulars of dues of sales-tax and excise duty as at 31st March, 2011 which have not been deposited on account of dispute, are as follows-

Name of the Nature of Dues Amount Period to which the Statute Rs. (In Lakhs) amount relates

Central Excise Excise Duty 17.93 2004 to 2005

Act and 309.88 2003'to 2009 Penalty thereon 16.12 2007 to 2009

Various States Sales-Tax & 50.78 2003 - 2004

Sales Tax/VAT Penalty 56.54 2004 - 2005

Acts thereon 21.21 2008 - 2009

3.83 2009 - 2010

29.78 2010 - 2011

19.90 2002 - 2004 Name of the Forum where the Statute dispute is pending

Central Supreme Court of India Act Central Excise & Service tax Appellate Tribunal Commissioner of Central Excise (Appeals)

Various States Joint Sales Commissioner/Deputy Commissioner / Commissioner of Sales Tax (Appeals) of the respective states Sales Tax Appellate Tribunal

10 In our opinion and according to the information and explanations given to us, the company does not have any accumulated losses as at the end of the financial year and has not incurred any cash loss in the financial year ended on that date or in the immediately preceding financial year.

11 In our opinion and according to the information and explanations given to us, the company has not defaulted in repayment of any dues to any bank or any debenture holder during the year. The company has not taken any financial assistance from any financial institution and does not have any debenture outstanding as on the balance sheet date.

12. In our opinion and according to the explanations given to us and based on the information available, the company has not granted any loan or advance on the basis of security by way of pledge of shares, debentures and other securities.

13 The provisions of any special statute applicable to a chit fund / nidhi / mutual benefit fund / societies are not applicable to the company and therefore the requirements of clause (xiii) of paragraph 4 of the Companies (Auditor's Report) Order, 2003 are not applicable to the company for the current year.

14 In our opinion and according to the information and explanations given to us, the company is not a dealer or trader in shares, securities, debentures and other investments as such. However, the company has carried on transactions on account of investment and trading in shares, securities, debentures, bonds and mutual funds for which proper records are maintained in respect of transactions and contracts and timely entries have been made therein. All the investments are held by the company in its own name.

15. The Company has given guarantee for loan taken by others from the bank. According to the information and explanations given to us, we are of the opinion that the terms and conditions thereof are not prima facie prejudicial to interest of the Company.

16. The company has not taken any term loan and therefore the requirements of clause (xvi) of paragraph 4 of the Companies (Auditor's Report) Order, 2003 are not applicable to the company for the current year.

17 According to the cash-flow statement and other records examined by us and the information and explanations given to us on an overall basis, we are of the opinion that there is no direct utilization of the funds raised on a short term basis during the year for long term investments.

18 The company has not made any preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Companies Act, 1956 during the year and therefore the requirements of clause (xviii) of paragraph 4 of the Companies (Auditor's Report) Order, 2003 are not applicable to the company for the current year.

19. The company has not issued any secured debentures and therefore the requirements of clause (xix) of paragraph 4 of the Companies (Auditor's Report) Order, 2003 are not applicable to the company for the current year.

20. The company has not raised any money by public issues during the year and therefore the requirements of clause (xx) of paragraph 4 of the Companies (Auditor's Report) Order, 2003 are not applicable to the company for the current year.

21 During the course of our examination of the books and records of the company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of material fraud on or by the company, noticed or reported during the year, nor have been informed of such case by the management.

For R.S.SANGHAI & ASSOCIATES

Chartered Accountants

Registration No.109094W



SD/-

R.S.SANGHAI

Proprietor

Membership No.: 36931

Mumbai, 14th June, 2011

 
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