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Auditor Report of Bhagyanagar India Ltd.

Mar 31, 2015

We have audited the accompanying financial statements of Bhagyanagar India Limited ("the Company"), which comprise the Balance Sheet as at 31 March 2015, the Statement of Profit and Loss, 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

The Company's Board of Directors is responsible for the matters in section 134(5) of the Companies Act, 2013 ("the Act") with respect to 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 the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes the maintenance of adequate accounting records in accordance with the provision of the Act for safeguarding of the assets of the Company and for preventing and detecting the 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 internal financial control, 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 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 there under.

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.

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 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 control system over financial reporting and the operating effectiveness of such controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by the 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 basis for our audit opinion on the financial statements.

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, of the state of affairs of the Company as at March 31, 2015, and its profit and its cash flows for the year ended on that date.

Emphasis of Matter

We draw your attention to Note 2.26 of the financial statements wherein the management has disclosed the details of Claims against the company not acknowledged as debt in respect of matters under dispute with statutory authorities.

Our opinion is not modified in this matter.

Report on other Legal and Regulatory Requirements

1. 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 Act, we give in Annexure a statement on matters specified in paragraphs 3 and 4 of the Order to the extent applicable.

2. 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 Cash Flow Statement dealt with by this Report are in agreement with the books of account

d. In our opinion, the aforesaid 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 written representations received from the directors as on 31st 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. We are not required to report on clause (i) with respect to Internal Financial Controls over financial reporting and the operating effectiveness of the same for the Financial Year ending 31st March 2015, based on the Government of India notification dated October 14, 2014 on the same matter.

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

i. The Company has disclosed the impact of pending litigations on its financial position in its financial statements – Refer Note 2.26 to the financial statements and also included in the Emphasis of matter paragraph above;

ii. The Company has made provision, as required under the applicable law or accounting standards,

for material foreseeable losses, if any, on long term contracts including derivative contracts.

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

Re: Bhagyanagar India Limited

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

b) As explained to us, the fixed assets have been physically verified by the management according to the phased program designed to cover all the fixed assets over the year. In respect of fixed assets verified according to this program, which we consider reasonable, no material discrepancies were noticed on such verification.

ii. a) As explained to us, inventories have been physically verified during the year by the management. In our opinion, the frequency of verification is reasonable.

b) The procedures explained to us, which are followed by the management for physical verification of inventories, are in our opinion reasonable and adequate in relation to the size of the company and nature of its business.

c) The Company is maintaining proper records of inventory and no material discrepancies were noticed on physical verification.

iii. The Company has granted loans to six parties covered in the register maintained under section 189 of the Act. The maximum amount involved during the year is Rs, 1,316,999,108 and year end outstanding is Rs, 1,242,149,177.

a) In our opinion and as per the records examined by us, the payment of principal amount and interest thereon is regular. In respect of Interest due from subsidiaries the company has added the same to the principal since the sanction of loan to the subsidiary.

b) There are no overdue amounts in excess of Rs, 1 lakh in respect of loans granted to companies, firms or other parties listed in register maintained under section 189 of the Act.

iv. In our opinion and according to the information and explanations given to us, 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 for sale of goods and power. 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 from the public within the meaning of sections 73 to 76 or any other relevant provisions of the Act and rules framed there under.

vi. We have broadly reviewed the cost records maintained by the Company prescribed by the Central Government of India under Section 148(1) of the Act and are of the opinion that prima facie the prescribed accounts and records have been maintained. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

vii. a) The Company is regular in depositing undisputed statutory dues with appropriate authorities including provident fund, employees' state insurance, income tax, sales tax, wealth tax, service tax, duty of customs, duty of excise, value added tax, cess and any other statutory dues applicable to it.

b) According to the information and explanations given to us, no undisputed amounts payable in respect of income tax, sales tax, wealth tax, service tax, duty of customs, duty of excise, value added tax or cess were in arrears as at 31st March 2015 for a period more than six months from the date they became payable.

c) Details of dues of Duty of Excise, Duty of Customs and Income Tax which have not been deposited as on 31st March 2015 on account of disputes are given below:

Sl. Name of Statute Nature of Amount not paid/ (Amount No. Dues involved in dispute)

1 Central Excise Act, 1944 Excise Duty 25,69,007 (25,69,007)

NIL (20,00,000)

2 Customs Act, 1964 Custom Duty 1,00,00,000 (2,40,07,856)

3 Income Tax Act, 1961 Income Tax 13,91,515 (26,20,804)

8,79,93,920 (8,79,93,920)

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

Central Excise 2008-09 Appellate Additional Act,1944 Various Years Commissioner - Hyd

Customs Act,1964 2008-09 Supreme Court of India

Income Tax Act,1961 2008-09 ITAT - Hyd

2012-13 CIT Appeals

Figures in brackets are the amounts involved in dispute. The taxes paid against the above disputes at X 1,63,53,076 are shown under heads Taxes paid under protest in Long Term Advances and Income Tax Receivable under other current assets.

d) In our opinion, the amount required to be transferred to the investor education and protection fund in accordance with relevant provisions of the Companies Act, 1956 and rules made there under has been transferred to such fund within time.

viii. The Company has no accumulated losses at the end of the financial year and it has not incurred cash loss during the year covered by audit and in the immediately preceding financial year.

ix. According to the records of the Company examined by us and the information and explanations given to us, the company has not defaulted in repayment of dues to any financial institution or bank or debenture holders, as applicable, as at the Balance sheet date.

x. The Company has not given any guarantee for loans taken by others from bank or financial institutions.

xi. In our opinion and according to the information and explanations given to us, the term loans have been applied for the purposes for which they were obtained.

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

For Sekhar & Co.,

Chartered Accountants

FRN: 003695-S



G. Ganesh

Place : Secunderabad Partner

Date : 30-May-2015 M.No.: 211704


Mar 31, 2014

We have audited the accompanying Financial Statements of Bhagyanagar India Limited ("the Company"), which comprise the Balance Sheet as at 31st March 2014, and the Statement of Profit and Loss and 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

The Company''s 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 Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 ("the Act") read with the General Circular 15/2013 dated 13th September 2013 of the Ministry of Corporate Affairs in respect of Section 133 of Companies Act, 2013 and in accordance with the accounting principles generally accepted in India. 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 from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The proceduresselected 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 purposes of expressing an opinion on the effectiveness of the Company''s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by the 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 basis of our audit opinion.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the 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:

a) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March 2014

b) in the case of Statement of Profit and Loss, the PROFITof the Company for the year ended on that date; and

c) in the case of the Cash Flow Statement 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 (Auditor''s Report) Order, 2003 ("the Order") issued by the Central Government of India in terms of sub-section (4A) of section 227 of Act, we give in the Annexure 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 the 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, Statement of Profit and Loss, and Cash Flow Statement dealt with by this Report are in agreement with the books of account.

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

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

ANNEXURE TO THE INDEPENDENT AUDITORS'' REPORT

Annexure referred to in paragraph 1 of our report of even date

Re: Bhagyanagar India Limited

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

b) As Explained to us, a substantial portion of the fixed assets have been physically verified by the management during the year, which in our opinion is reasonable, having regard to the size of the company and nature of its assets. According to information and explanations given to us, no material discrepancies have been found on such verification.

c) In our opinion, the company has not disposed of a substantial part of its fixed assets during the year and the going concern status of the company is not effected.

ii. a) The inventories have been physically verified during the year by the management. In our opinion the frequency of such verification is reasonable.

b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the company and nature of its business.

c) The Company is maintaining proper records of inventory and no material discrepancies were noticed on physical verification.

iii. a) The Company has during the year granted loans to Six Companies covered in the register maintained under Section 301 of the Act. The maximum amount involved during the year is Rs. 123,94,81,400and year end outstanding is Rs. 121,41,13,110.

b) In our opinion and according to the information and explanations given to us, the rate of interest and other terms and conditions of such loans are not prima facie prejudicial to the interest of the company.

c) Theprincipal and interest wherever due have been paid and there are no outstanding amounts at the end of the year.

d) There are no overdue amounts in excess of Rs. 1 Lakh in respect of loans granted to companies, firms or other parties listed in the register maintained under section 301 of the Act.

e) The Company has not taken any loansduring the year from companies, firms or other parties covered under the register maintained under section 301 of the Act. Consequently the requirement of sub clauses 3(f) and (g) of paragarph 4 of the order are not applicable.

iv. In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and nature of its business with regards 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 audit.

v. a) According to the information and

explanations given to us, we are of the opinion that the particulars of all contracts or arrangements that need to be entered into the register maintained under section 301 of the Act have been so entered.

b) In respect of transactions made in pursuance of such contracts or arrangements exceeding the value of Rs. Five Lakhs entered into during the financial year, because of the unique and specialized nature of the items involved and absence of any comparable transactions, we are unable to comment whether the transactions were made at prevailing market prices at the relevant time.

vi. According to the information and explanations given to us the Company has not accepted any deposits from the public. Therefore, the provisions of clause (vi) of paragraph 4 of the order are not applicable to the Company.

vii. In our opinion, theCompany has an internal audit system commensurate with the size and nature its of business.

viii. We have broadly reviewed the cost records maintained by the Company pursuant to the Companies (Cost Accounting Records) Rules, 2011 prescribed by the Central Government under Section 209(1) (d) of the Act and are of the opinion that prima facie the prescribed accounts and records have been maintained. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

ix. a) The Company is generally regular in depositing with appropriate authoritiesundisputed statutory dues including provident fund, investor education and protection fund, employee''s state insurance, income tax, sales tax, wealth tax, service tax, custom duty, excise duty and any other material statutory dues applicable to it.

According to the information and explanations given to us, no undisputed amounts payable in respect of aforesaid dues in paragraph (a) above were in arrears as at 31st March 2014 for a period more than six months from the date they became payable.

b) Details of dues of Central Excise Duty, Custom Duty and Income Tax which have not been deposited as on 31st March 2014 on account of disputes are given below.

Sl. Name of Statute Nature of dues Amount not paid/ No. (Amount involved in dispute)

1 Central Excise Excise Duty 25,69,007 Act 1944 (25,69,007)

Excise Duty NIL (20,00,000)

2 Customs Act 1964 Custom Duty 1,00,00,000 (2,40,07,856)

3 Income Tax Act 1961 Income Tax 1,12,88,044 (1,12,88,044)

6,01,446 (58,30,735)

18,44,276 (49,44,276)

Sl. Period which it Forum where No. relates dispute is pending

1 2008-09 Appellate Additional Commissioner-Hyd

Various years 2 2008-09 Supreme Court of India

3 2007-08 CIT Appeals

2008-09 ITAT-Hyd

2009-10 ITAT-Hyd Figures in brackets are the amounts involved in dispute. The taxes paid against the above disputes at Rs. 2,43,37,345 are shown under heads Taxes Paid under protest in Long Term Advances and Income Tax Receivable under other current assets.

x. The Company has no accumulated losses at the end of the financial year and it has not incurred cash loss during the year covered by audit and in the immediately preceding financial year.

xi. According to the records of the Company examined by us and the information and explanations given to us, the company has not defaulted in repayment of dues to any financial institution or bank or debenture holders, as applicable, as at the Balance sheet date.

xii. Based on our examination of documents and records, we are of the opinion that the company has maintained adequate records, where the Company has granted loans and advances on the basis of security by way of pledge of shares and other securities.

xiii. The company is not a Chit Fund or a Nidhi Mutual benefit Fund/Society. Therefore the provisions of 4(xiii) of the Order are not applicable to the Company.

xiv. In our opinion and according to the information and explanations given to us the Company is not dealing in or trading in securities.

The Company has invested surplus funds in mutual funds. According to the information and explanations given to us, proper records have been made of the transactions and contracts and timely entries have been made therein. The investment in Mutual Funds have been held by the Company in its own name.

xv. 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.

xvi. In our opinion and according to the information and explanations givento us the term loans have been applied for the purposes or which they are obtained.

xvii. In our opinion and according to the information and explanations given to us, and on overall examination of the Balance Sheet and the Cash Flow of the Company, we report that no funds raised on short-term basis have been used for long term investment.

xviii. The Company has not made preferential allotment of shares to companies / firms parties covered in the register maintained under Section 301 of the Act.

xix. The Company has not issued any debentures or securities on which charge is to be created during the year.

xx. The Company has not raised any money by through public issue during the year.

xxi. We have not come across any instance of fraud on or by the company during the year during the course of our examination of the books and records of the Company, carried out in accordance with the Generally Accepted Accounting Practice in India and according to the information and explanations given to us.

For Sekhar & Co. Chartered Accountants Firm Registration No : 003695-S

G. Ganesh Place: Secunderabad (Partner) Date : 12th May, 2014 Membership No : 211704


Mar 31, 2013

Report on the Financial Statements

We have audited the accompanying financial statements of Bhagyanagar India Limited ("the Company"), which comprise the Balance sheet as at March 31, 2013, the Statement of Profit and Loss and Cash Flow for the year then ended and a summary of significant accounting policies and other explanatory information.

Management''s Responsibility for the Financial Statements

The management is responsible for preparation of these financial statement that give a true and fair view of the financial position, financial performance and cash flows of the company in accordance with Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956 (''the Act''). This responsibility includes 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 in 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 from 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 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 financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and 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 basis for our audit opinion.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the 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:

(a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2013;

(b) in the case of the Profit and Loss Account, of the profit for the year on that date; and

(c) 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 (Auditor''s Report) Order, 2003 ("the Order") issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Act, we give in the Annexure 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 purpose 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, Statement of Profit and Loss, and Cash Flow Statement dealt with by this Report are in agreement with the books of account

d. in our opinion, the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement comply with the Accounting Standards referred to in subsection (3C) of section 211 of the Companies Act, 1956;

e. on the basis of written representations received from the directors as on March 31, 2013, and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2013, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

The Annexure referred to in the Independent auditors'' report to the members of Bhagyanagar India Limited ("the Company"), on the financial statements for the period ended 31st March 2013, we report that:

1) Fixed Assets

a) The Company has maintained proper records showing full particulars, including quantitative details of fixed assets

b) The Company has conducted physical verification of fixed assets during the year. In our opinion, this physical verification is reasonable, having regard to the size of the Company and nature of its assets. No material discrepancies were noticed on such verification.

c) During the period, the Company has discarded certain items of its fixed assets. In our opinion and according the information and explanations given to us, the aforesaid disposal has not affected the going concern assumption.

2) Inventories

a) The inventories have been physically verified by the company during the period. In our opinion the frequency of such verification is reasonable.

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

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

3) Loans to and from Parties (Companies, firms or such other parties) listed in the register maintained under section 301 of the Act, hence forth referred to as parties, amounts in Rupees.

a) The company has granted loans which are not secured to "8" (Eight) parties during the year. The Maximum amount involved is Rs. 144,75,52,168 and the yearend outstanding is Rs. 1,00,90,98,326. The yearend outstanding of the loan includes interest accrued for the year under review Rs. 3,00,85,597.

b) The Loans to wholly owned subsidiaries are given free of interest and without any specific terms of repayment. Loans other than wholly owned subsidiaries carry Interest at the rates specified in Section 372A of Companies Act 1956, which is debited to loan account as stated in ''a'' above. However keeping in view the investment and amount involved we are of opinion, the rate of interest and other terms and conditions of such loan are not, prima facie, prejudicial to the interest of the Company.

c) There is no stipulation of repayment of principal is payable on commencement of commercial activity by the subsidiary, while interest is payable annually at the discretion of the Company, pending which it has been added to principal.

d) In respect of the said loans and interest thereon, there are no overdue accounts.

e) The company has not taken any loan from parties listed in the register maintained under section 301 of the Act. Hence we have nothing to report on sub-clauses (e) to (g) of clause 3 of the order.

4) Internal Control: In our opinion and according to the information and explanations given to us, there is adequate internal control system commensurate with the size of the company and 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 audit.

5) Arrangement & Transactions with parties covered under Section 301 of the Act.

a) In our opinion and according to the information and explanations given to us, the particulars of contracts or arrangements referred to in section 301 of the act have been entered in the register required to be maintained under that section.

b) In our opinion and according to the information and explanations given to us, the transactions in pursuance of contracts and arrangements referred to in (a) above and exceeding the value of Rs. 5 Lakhs, for goods and services for which suitable alternative sources are not available to obtain comparable quotations. Hence it is not possible for us to comment whether above contracts and arrangements have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

6) Deposits from Public: In our opinion, and according to the information and explanations given to us, the company has not accepted any deposits covered under Section 58A and 58AA of the Act.

7) Internal Audit: In our opinion the Company has an internal audit system commensurate with the size and nature of its business.

8) Cost Records: We have broadly reviewed the books of account maintained by the company pursuant to the rules prescribed by the Central Government for maintenance of cost records under Section 209(1) (d) of the Act in respect of products sold by the Company and are of the opinion that prima facie, the prescribed accounts and records have been maintained. However, we have not made a detailed examination of the records.

9) Statutory Dues:

a) According to the information and explanations given to us and on the basis 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, Customs Duty, Excise duty, Investor Education and Protection Fund, Service tax, Cess and material statutory dues have been deposited regularly but for some minor delays during the year by the company with the appropriate authorities.

There were no dues on account of Cess under Section 441A of the Act since the aforesaid Section comes into force has not yet been notified by the Central Government.

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, Custom duty, Excise duty, Investor Education and Protection Fund, Service Tax, Cess and other material statutory dues which were in arrears as at March 31, 2013 for a period more than six months from the date they became payable.

b) According to the information and explanations give to us, there are no dues in respect of Income Tax, Sales Tax, Service Tax, Excise Duty and such other taxes as detailed have not been deposited with appropriate authorities on account of disputes. According to the information and explanations given to us there are no other amounts not deposited with appropriate authorities on account of dispute.

10) Accumulated Losses & Cash Loss: As on date of Balance Sheet there are no accumulated Losses and the company has not incurred any cash loss during the year or the immediately preceding financial year.

11) Dues to Banks and Financial Institutions:

In our opinion and according to the information and explanations given to us, the company has not defaulted in repayment of dues to its bankers or to any financial institutions. The Company did not have any outstanding debentures at the end of the year.

12) Loans on Security of Shares, debentures and other Securities: The Company has maintained adequate records for the loans granted loans and advances on the basis of security of shares and properties.

13) Nidhi chit fund Companies: In our opinion and according to the information and explanations given to us the company is not a nidhi / mutual benefit fund / society.

14) Dealing in / Trading in Securities: According to the information and explanations given to us, the company is not dealing or trading in shares, securities, debentures and other investments.

15) Guarantees on behalf of others: In our opinion, the terms and conditions on which the company has given guarantee for loans taken by others from banks or financial institutions are not prejudicial to the interest of the company.

16) Usage of Term Loans: In our opinion the term loans raised during the year are applied for the purpose they are raise.

17) Usage of Short Term Funds: According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we report that funds raised on short term basis have not been used for long term investment.

18) Preferential allotments: The Company has not made any preferential allotment of shares to companies / firms / parties covered in the register maintained under Section 301 of the Act.

19) Debentures: The Company did not have any outstanding debentures during the year.

20) Public Issue: The Company has not raised any money by public issues during the year.

21) Fraud: According to the information and explanations given to us, the company has noticed and reported a fraud amounting to Rs. 22,61,464 by a customer. Investigation relating to this case is under progress. According to the information and explanations given to us, and during the course of examination of the books and records of the Company, carried out in accordance with the Generally Accepted Auditing Practice in India, no fraud by the Company has been noticed or reported during the year.

For Sekhar & Co.

Chartered Accountants

Firm Registration No: 003695-S

G. Ganesh

Place :Secunderabad (Partner)

Date : 06.05.2013 Membership No: 211704


Mar 31, 2012

1. We have audited the attached Balance Sheet of Bhagyanagar India Limited as at March 31,2012, the Profit and Loss Account and the Cash flow statement for the year ended on that date and annexed thereto. These Financial Statements are the responsibility of the Management. Our Responsibility is to express an opinion on these financial statements based on our audit.

2. We have conducted our audit in accordance with the 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 from 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 management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor's Report) Order, 2003 (hence forth referred to as the "Order" issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, (hence forth referred to as the "Act", we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

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

d. in our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in compliance with Accounting Standards referred to in sub-section (3C) of Section 211 of the "Act".

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

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 thereon 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 case of Balance Sheet, of the state of affairs of the Company as at March 31, 2012;

ii. in case of Profit and Loss Account, the profit / loss for the year ended on that date; and

iii. in case of Cash Flow Statement, of the cash flows for the year ended on that date.

ANNEXURE TO THE AUDITORS' REPORT

The Annexure referred to in the auditors' report to the members of Bhagyanagar India Limited Limited ("the Company"), on the financial statements for the period ended 31st March 2012, we report that:

1) Fixed Assets

a) The Company has maintained proper records showing full particulars, including quantitative details of fixed assets

b) The Company has conducted physical verification of fixed assets during the year. In our opinion, this physical verification is reasonable, having regard to the size of the Company and nature of its assets. No material discrepancies were noticed on such verification.

c) During the period, the Company has discarded certain items of its fixed assets. In our opinion and according the information and explanations given to us, the aforesaid disposal has not affected the going concern assumption.

2) Inventories

a) The inventories have been physically verified by the company during the period. In our opinion the frequency of such verification is reasonable.

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

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

3) Loans to and from Parties (Companies, firms or such other parties) listed in the register maintained under section 301 of the Act, hence forth referred to as "parties", amounts in Lakhs of Rupees.

a) The company has granted loans which are not secured to 9 parties comprising

of "4" subsidiaries, "3" Associate Companies "2" group companies, during. The Maximum amount involved and the year end outstanding are Rs. 121.64 Crores, which includes interest accrued of Rs. 7.95 Crores

b) In our opinion, the rate of interest and other terms and conditions of such loan are not, prima facie, prejudicial to the interest of the Company.

c) In Case of 2 subsidiaries and 1 associate the interest amounting to Rs. 7.95 Crores which has become due and is at the year end, this has been added to the principal. The loans are given without any specific term of repayment of principal. In respect of others interest has been received.

d) The Loans are not due for repayment, having been given without any specific terms of repayment as stated above the question of overdue principal does not arise. In respect of 3 parties interest aggregating to Rs. 7.95 Crores was due and outstanding at year end has been added to the principal on accrual.

e) In respect of Loans taken by the company from 2 parties the maximum amount involved and the year end outstanding are Rs. 5.92 Lacs and Rs. Nil respectively.

f) In our opinion the terms of interest and other terms and conditions on which the loan has been taken from such parties are not prima facie prejudicial to the interest of the Company.

g) The Loan being interest free the matter of payment of interest does not arise and the Loan has been repaid in full during the year.

4) Internal Control : In our opinion and according to the information and explanations given to us, there is adequate internal control system commensurate with the size of the company and 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 audit.

5) Arrangement &/ Transactions with parties covered under Section 301 of the Act.

a) In our opinion and according to the information and explanations given to us, the particulars of contracts or arrangements referred to in section 301 of the act have been entered in the register required to be maintained under that section.

b) In respect of transactions made in pursuance of such contracts or arrangements exceeding the value of Rupees five lakhs entered into during the financial year, because of the unique and specialized nature of the items involved and absence of comparable prices, we are unable to comment whether the transactions were made at prevailing market prices at relevant time.

6) Deposits from Public : In our opinion, and according to the information and explanations given to us, the company has not accepted any deposits covered under Section 58A and 58AA of the Act.

7) Internal Audit : In our opinion the Company has an internal audit system commensurate with the size and nature of its business.

8) Cost Records : We have broadly reviewed the books of account maintained by the company pursuant to the rules prescribed by the Central Government for maintenance of cost records under Section 209(1) (d) of the Act in respect of products sold by the Company and are of the opinion that prima facie, the prescribed accounts and records have been maintained. However, we have not made a detailed examination of the records.

9) Statutory Dues :

a) According to the information and explanations given to us and on the basis 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, Customs Duty, Excise duty, Investor Education and Protection Fund, Service tax, Cess and material statutory dues have been deposited regularly but for some minor delays during the year by the company with the appropriate authorities.

b) 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, Custom duty, Excise duty, Investor Education and Protection Fund, Service Tax, Cess and other material statutory dues which were in arrears as at March 31, 2012 for a period more than six months from the date they became payable.

c) According to the information and explanations give to us, the dues set out in "Appendix - I" in respect of Income Tax, Sales Tax, Service Tax, Excise Duty and such other taxes as detailed have not been deposited with appropriate authorities on account of disputes. According to the information and explanations given to us there are no other amounts not deposited with appropriate authorities on account of dispute.

10) Accumulated Losses & Cash Loss : As on date of Balance Sheet there are no accumulated Losses and the company has not incurred any cash loss during the year or the immediately preceding financial year.

11) Dues to Banks and Financial Institutions :

In our opinion and according to the information and explanations given to us, the company has not defaulted in repayment of dues to its bankers or to any financial institutions. The Company did not have any outstanding debentures at the end of the year.

12) Loans on Security of Shares, debentures and other Securities : The Company has maintained adequate records for the loans granted loans and advances on the basis of security of shares and properties.

13) Nidhi chit fund Companies : In our opinion and according to the information and explanations given to us the company is not a nidhi / mutual benefit fund / society.

14) Dealing in / Trading in Securities :

According to the information and explanations given to us, the company is not dealing or trading in shares, securities, debentures and other investments.

15) Guarantees on behalf of others : In our opinion, the terms and conditions on which the company has given guarantee for loans taken by others from banks or financial institutions are not prejudicial to the interest of the company.

16) Usage of Term Loans : In our opinion the term loans raised during the year are applied for the purpose they are raise.

17) Usage of Short Term Funds : According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we report that funds raised on short term basis have not been used for long term investment.

18) Preferential allotments : The Company has not made any preferential allotment of shares to companies / firms / parties covered in the register maintained under Section 301 of the Act.

19) Debentures : The Company did not have any outstanding debentures during the year.

20) Public Issue : The Company has not raised any money by public issues during the year.

21) Fraud : According to the information and explanations given to us, no material fraud on the Company has been noticed or reported during the course of the Audit.



APPENDIX-I as referred to in Para ix(c) of Auditors Report of Bhagyanagar India Limited

Name of the Nature of the Amount Period to dues which Forum where the Statute in Rs. it relates dispute is pending

Income Tax Income Tax 49,44,276 2009-10 CIT Appeals HYD Act 1956

Custom and Excise Duty on Excise Duty valuation of CDMA Phones 2,00,00,000 2004-05 Supreme court of India

-do- Duty of JFTC Cables 2,90,000 2006-07 CESTAT Mumbai

-do- Valuation of Job Works 25,69,007 2007-08 Adl.Commr III Hyd



For Sekhar & Co.

Chartered Accountants

Firm Regn No : 003695-S

G. Ganesh

Place: Secunderabad Partner

Date : April 30, 2012 Mem. No: 211704


Mar 31, 2011

1. We have audited the attached Balance Sheet of Bhagyanagar India Limited as at 31st March 2011, the Profit and Loss Account and also the Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on theses financial statements based on our audit.

2. We conduct our audit in accordance with the 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 also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor's Report) Order,2003 as amended by the Companies (Auditor's Report) (Amendment) Order, 2004 (Together henceforth referred to as the 'Order' issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act 1956 (henceforth referred to as the 'Act') is given below.

A. Fixed Assets : Clause 4(i) of the Order

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

ii. We are informed that management has conducted verification of significant part fixed assets during the course of the year. As per the information and explanations given to us the discrepancies found on such verification are not material.

iii. The fixed assets disposed of during the year, in our opinion do not constitute substantial part of the fixed assets of the Company and such disposal in our opinion, has not affected the going concern status of the company.

B. Inventories : Clause 4(ii) of the Order

i. The inventory has been physically verified during the year by the management. In our opinion the frequency of verification is reasonable.

ii. The procedures of physical verification followed by the management are reasonable and adequate in relation to the size of the Company and nature of its business.

iii. The Company is maintaining proper records of inventory. The discrepancies noticed on verification between physical stocks and books records were not material.

C. Loans and Advances & Loans against Pledge of Securities (Clauses 4(iii) of 4 (xii) of the Order.

i. The Company has granted loans to '2' Group Companies, '1' Wholly Owned Subsidiary, '3' Subsidiaries,'4' Associate Companies. The aggregate of Maximum amount Involved Rs.10,208.55 Lacs and year end outstanding Rs.9,939.13 Lacs.

ii. In our opinion the terms of interest and other terms and conditions of the loans given by the company are not 'prima facie' prejudicial to the interest of the Company.

iii. The parties are regular in payment of interest wherever due as per the terms and conditions of sanction of loans

iv. There are no overdue amounts in excess of Rs.1 Lakh in respect of loans granted, to Companies, firms or other parties in the register maintained under section 301 of the Act.

v. The Company has not taken any loans from Companies / Parties and other firms covered under section 301 of the Act. Hence we have not reported on sub- claused f & g of this clause of the 'Order'.

vi. We are of the opinion that the Company is maintaining adequate records where the Company has granted loans against security of shares, debentures and other securities.

D. Transactions with parties under section 301 of the Act. Clause 4(v) of the Order :

i. On the basis of our examination of relevant records and on the basis of representation of the management , we are of the opinion that the particulars of all contracts or arrangements that need to be entered into the register maintained under section 301 of the 'Act' have been so entered.

ii. The transactions made in pursuance of such contracts or arrangements have been made at prices reasonable having to the prevailing market prices at the relevant point of time.

E. Internal Control : Clause 4(iv) of the order

In our opinion and according to the information and explanations given to us, there exists an adequate internal control system commensurate with the size of the Company and nature of its business with regard to purchase of fixed assets and with regard to sale of services. During the course of our audit, we have not observed any continuing failure to correct weakness in internal control system of the company.

F. Deposits -Clause 4(vi) of the Order.

During the year the company has not accepted any deposits within the meaning of section 58A and section 58AA of the 'Act'.

G. Internal Audit - Clause 4(vii) of the Order.

In our opinion, the Company's internal audit system is commensurate with the size and nature of its business.

H. Cost Records - Clause 4(viii) of the Order

We are informed that the Central Government has not prescribed maintenance of cost records under section 209(1)d of the 'Act', for the manufacturing activities carried on by the Company during the year.

I. Statutory Payments - Clause 4(ix) of the Order.

i. According to the records of the Company, apart from the certain instances of delays in depositing undisputed income tax deducted at source, Employee's State Insurance, Provident Fund and Sales tax, the Company has been regular in depositing undisputed statutory dues including Provident Fund, Employee State Insurance, Income Tax, Sales Tax, Service Tax, Custom Duty, Excise Duty, Cess and other statutory dues with appropriate authorities. Based on our audit procedures and according to the information and explanations given to us, there are no arrears of statutory dues which has remained outstanding as at 31st March 2011 for a period of more than six months from the date they became payable. ii. According to the information and explanations given to us and records of the company the dues of sales tax / income tax / customs duty / wealth tax / service tax / excise duty / cess, which have not been deposited on account of any dispute are as follows.

Nature of Dues/ Amount Forum where Financial Year to in Rs dispute is which dispute is pending related to

Custom Duty 200 Lacs Supreme Court 2004-05 of India

Excise Duty 2.90 Lacs CESTAT 2006-07 Mumbai

Excise Duty 25.69 Lacs Asst 2005-08 Commissioner III Hyd

J. Losses : Clause 4(x) of the order

The Company does not have any accumulated losses as at 31st March 2011. The Company has not incurred any cash losses during the financial year covered by our audit and the immediately preceding financial year.

K. Utilisation of Funds : Clause 4(xi), (xvi) & (xvii)

i. The Company has not obtained any term loan during the year.

ii. On the basis of review of utilisation of funds, which is based on overall examination of the Balance Sheet of the Company, related information made available to us and as represented to us by the management, funds raised on short term basis have not been used for long term investments.

iii. In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to a financial institution, bank or debenture holders.

L. Miscellaneous : Clauses 4(xiii) to (xv) and (xviii) to (xxi)

i. The Company has not given any Guarantees for loans taken by others from Banks or Financial Institutions.

ii. The Company is not a chit fund, nidhi / mutual benefit fund and therefore, requirements to such class of Companies are not applicable.

iii. The Company is not dealing in or trading in shares, securities debentures and other investments.

iv. The Company has not made any preferential allotment of shares during under Section 301 of the 'Act'.

v. The Company has not issued any debentures during the year.

vi. The Company has not raised any money by way of public issue during the year

vii. Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements as the information, representation and explanations given by the management, we report that no fraud on or by the company has been noticed or reported during the course of our audit.

4. Further to our comments above :

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

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

iii. The Balance Sheet, Profit and Loss Account and Cash flow statement dealt with by this report are in agreement with the Books of Account.

iv. In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with Accounting Standards referred to in Section 211(3C) of the 'Act'.

v. On the basis of written representations received from the Directors, as on 31st March 2011 and taken on record by the Board of Directors, we report that none of the Directors are disqualified as on 31st March 2011 from being appointed as a Director in terms of Section 274(1)(g) of the 'Act'.

vi. Without qualifying we invite your attention to:

1. Note 3 : Notes to Accounts wherein it is stated that the Company has a commitment towards the remaining FCCB bondholders to pay 8% half yearly compounded yield-to-maturity (YTM), in case the option of conversion is not exercised by them, within 5 years from the date of issue of the Bonds. The YTM accrues to the Bond-holders only at the time of repayment. Contingent liability on account of YTM is Rs 2063.63 lacs as on 31.03.2011 including withholding Tax @ 10%. This will undergo a change in accordance to the currency conversion rates and Income tax rates prevailing on the date of repayment if it is made on non-conversion

2. Note 13 Notes to Accounts : During the year 2009-10, the Company paid an advance of Rs 214.22 lacs to M/s United International Shipping Agent (T) Ltd, Tanzania, towards part payment for cost of Copper cathode which is principal raw material for the copper manufacturing units. The payment thus made was disclosed as advances to suppliers under Schedule-11 of "Loans & Advances". However, Copper was stolen and replaced with worthless material on the sea-way. The Company lodged claims with Insurance Company and the shipping agent. The Insurance Company has rejected the claim during the year in the month of October 2010. On the basis of legal opinion received and on the recommendations of the Board of Directors the amount is written off as irrecoverable business loss.

vii. In our opinion and to the best of our information and according to the explanations given to us, the said accounts, together with the Notes thereon and attached thereto, give in the prescribed manner, the information required by the 'Act' , and also give a true and fair view in conformity with accounting principles generally accepted in India.

1. In the case of Balance Sheet, the state of affairs of the Company as at 31st March 2011.

2. In the case of Profit and Loss account the 'Profit' for the year ended on that date.

3. In the case of cash flow statement the Cash flows for the year ended on that date.

For Sekhar & Co.

Chartered Accountants

Firm Regn No : 003695-S

G. Ganesh

Place: Secunderabad Partner

Date : April 29, 2011 Mem. No: 211704




Mar 31, 2010

1. We have audited the attached Balance Sheet of Bhagyanagar India Limited as at March 31, 2010 and also the Profit & Loss Account and the Cash Flow Statement for the year ended on that date annexed thereto which we have signed under reference to this report. These financial statements are the responsibility of the Companys 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. These 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 test basis, evidence supporting the amounts as disclosures in the financial statements. An audit also 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 management as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by Companies (Auditors Report) Order, 2003 (as amended) (henceforth referred to as the Order) issued by the Central Government of India in terms of sub-section (4A) of section 227, of the Companies Act,1956, (henceforth referred to as the Act), we enclose in the annexure a statement on the matters specified in paragraphs 4 and 5 of the said order.

4. Further to our comments in the annexure referred to 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 as far as appears from our examination of those books. The Balance Sheet , Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account and with the returns from the branches ;

c. In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of section 211 of the Act.

d. On the basis of the written representation received from the directors, as on March 31 ,2010 and taken on record by the Board of Directors, we report that none of the Directors is disqualified as on March 31, 2010 from being appointed as a director in terms of clause(g) of sub- section (1) of section 274 of the Act.

e. Without qualifying our opinion, we draw your attention of shareholders and stakeholders to the following :

i. Note 3 of Schedule 21 B - Notes to Accounts to the Financial Statements: The management is of the view that the liability to pay premium on redemption is contingent, the ultimate outcome of that matter cannot be presently determined and no provision for any liability that may result in future including creation of Reserve for redemption has been made in financial statements. These bonds are due for repayment in October 2011 at a premium as per the terms of issue of bonds.

ii. Note 17 of Schedule 21 B : Sundry Debtors and other Balances: Advances to suppliers under Schedule - 11 "Loans & Advances" include Rs.214.22 Lakhs Paid to M/s. United International Shipping Agent (T) Ltd, towards Cost of copper Cathode. However, copper was stolen and replaced with worthless material on the sea-way. The company has lodged claim with Insurance Company which is under process. As the Management is confident of recovering the entire amount from the Insurance Company/ Shipping Agent, no provision for loss of goods has been made in the books of account.

f. In our opinion and to the best of our information and according to the explanations given to us, the said accounts 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 March 31, 2010;

ii. In the case of the Profit and Loss Account, of the profit for the year ended on that date; and

iii. In the case of Cash Flow Statement, of the cash flows for the year ended on that date

Annexure referred to in paragraph [3] of our report of even date Re: Bhagyanagar India Limited

1. a. The Company has maintained adequate records showing full particulars, including quantitative details of fixed assets.

b. All fixed assets have not been physically verified during the year but 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 assets. As informed, no material discrepancies were noticed on such verification. The company had disposed certain Plant and machinery and infrastructural assets however this does not effect the going concern concept of the company.

c. In our opinion, there have been no significant disposals of fixed assets during the year which affect the going concern assumption.

2. a. The Inventory has been physically verified during

the year by the management. In our opinion, the frequency of verification is reasonable.

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

c. The company is maintaining proper records of inventory. The discrepancies notices on verification between the physical stocks and the book records were not material.

3. a. The Company has granted loans to companies

which are wholly / partly owned subsidiaries, associates and a group company covered in the register maintained under section 301 of the Act. It involves 1 Wholly owned subsidiary, 1 Group Company, 2 Partly owned subsidiary, and 6 associate companies. The Maximum amount of Loan involved is Rs.12,574.74 Lakhs and year end balance is Rs.10,979.80 Lakhs

b. In our opinion and according to the information and explanation given to us, the rate of interest, where applicable and other terms and conditions are not prima facie prejudicial to the interest of the company.

c. The principal and interest wherever due as per the respect of loans granted to companies, firms or other parties listed in the register maintained under section 301 of the act.

d. As on 31st March 2010 there are no overdue amounts in excess of Rs.1 Lakh in respect of loans granted to companies, firms or other parties listed in the register maintained under section 301 of Companies Act, 1956.

e. The company has not taken any loans from companies covered in the register maintained under section 301 of the Act. Hence we are not required to report on sub-clauses f and g of this clause of the Order.

4. In our opinion and according to the information and explanations given to us, there exists adequate internal control system commensurate with the size of the company and the nature of its business with regard to purchase of inventory, fixed assets and with regard to the sale of goods and services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal control system of the company.

5. a. According to the information and explanations

given to us, by the management, we are of the opinion that the particulars of all contracts or arrangements that need to be entered into the register maintained under section 301 of the Act, have been so entered.

b. In our opinion and according to the information and explanations given to us, the transactions made in pursuance to contracts or arrangements entered in the register maintained under section 301 of the Act, and exceeding rupees five lakhs in respect of any party the maintenance of Cost during the year have been made at prices which are reasonable having regard to prevailing market prices at the relevant time.

6. The Company has not accepted deposits which fall under section 58A and 58AA of the Act and the rules made there under from the public, hence we have not reported on the relevant reporting requirements of the Order.

7. An outside firm of Chartered Accountants has carried out the Internal Audit of the Company. In our opinion the system of Internal Audit is commensurate to nature and size of the company and the nature of its business.

8. We have broadly reviewed the books of account relating to materials, labour and other items of cost maintained by the company pursuant to the Rules made by the Central Government for the maintenance of Cost records maintained under section 209(1) (d) of the Act, and are of the opinion that prima facie the prescribed accounts and records are maintained. We have not, however,made a detailed examination of the records with a view to determine whether they are accurate or complete.

9. a. The Company is regular in depositing with appropriate authorities undisputed statutory dues including provident fund, investor education protection fund, employees state insurance, income tax, sales tax, wealth tax, service tax, custom duty, excise duty and other material statutory dues applicable to it.

Further, since Central Government has till date not prescribed the amount of Cess payable under section 441A of the Act, 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 produced before us and examined by us, there are no dues of wealth tax, service tax, excise duty and Cess, which have not been deposited on account of any dispute. The particulars of sales tax, & Customs duty as at 31st March 2010, which has not been deposited on account of dispute are as follows.

Name of Nature Amount under Accounting Forum where Year to the Statue of Dues Dispute yet which Amount dispute is to be deposited relates contested

Central Levy of Rs.240.07 2004-05 Supreme excise and Duty Lakhs Court Customs Act on certain Incl : Penalty of India products and Interest

Central Levy of Rs.24.00 Lakhs 2005-2006 CESTAT Mumbai excise and Duty Customs Act on certain products

Total Rs.264.07 Lakhs

10. The company has no accumulated losses at the end of the financial year and it has not incurred cash losses in the current and 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 dues to a financial institution, bank or debenture holders.

12. We are of the opinion that the company has maintained adequate records where the company has granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

13. In our opinion, the company is not a chit fund or a nidhi/mutual benefit fund/society. Therefore the provisions of clause 4(xiii) of the Order are not applicable to the company.

14. In our opinion, the company is not dealing in or trading in shares, securities debentures and other investments. Accordingly the provisions of the clause 4(xiv) of the Order are not applicable to the company.

15. According to the information and explanations given to us, the company has not given guarantees for loans taken by others from bank or financial institutions, the terms and conditions whereof in our opinion are prima- facie prejudicial to the interest of the company.

16. Based on information and explanations given to us by the management, term loans were applied for the purpose for which the loans were obtained.

17. According to the information and explanations given to us and on an overall examination of the Balance Sheet of the company, we report that no funds raised on short term basis have been used for long term investment.

18. The company has not made preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Companies Act, 1956.

19. The Company has not issued any debentures during the year.

20. We have verified that the end use of money raised by issue of Zero Coupon Convertible Bonds due 2011 is as disclosed in the notes to the financial statements. (Refer note 4 of schedule 20 B to financial statements).

21. Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the information, representations and explanations given by the management, we report that no fraud on or by the company has been noticed or reported during the course of our audit.

For Sekhar & Co.

Chartered Accountants

Firm Regn No : 003695-S

G. Ganesh

Place: Secunderabad Partner

Date: May 29, 2010 Mem. No: 211704



 
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