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Auditor Report of Birla Cotsyn (India) Ltd.

Mar 31, 2015

We have audited the accompanying standalone financial statements of BIRLA COTSYN (INDIA) LIMITED ("the Company") which comprise the Balance Sheet as at 31st M arch, 2015, 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 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 and presentation 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 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 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 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 qualified audit opinion on the standalone financial statements.

Basis for Qualified Opinion

1. With reference to note no. 7(B)(b) regarding inter corporate deposits of Rs. 17,96,88,787/- taken from various parties as at 31st March, 2015 in the absence of third party confirmation, reconciliation, if any and other supportive audit evidence, we are unable to comment upon such balances.

Further, few such parties have already filed winding up petition under section 271 and 272 of the Companies Act, 2013 ("the Act") against the Company for non-payment of dues (Section 433 & 434 of the Companies Act, 1956). These matters are sub- judice and the impact, if any, of the outcome is unascertainable of this stage.

2. With reference to note no. 7(B)(c) regarding dues to related parties of Rs. 9,15,49,878/- and note no. 8(A)(a) trade payables of Rs. 22,69,36,818/- as at 31st March, 2015, in the absence of third party confirmation, reconciliation, if any and other supportive audit evidence, we are unable to comment upon such balances.

3. No provision has been made in the current year for interest payable of Rs.37,73,961/- on loans taken from related parties by the Company and no provision has been made for interest receivable of Rs.1,89,20,004/- on loans given to related parties by the Company. Consequently the loss for the year is higher by Rs.1,51,46,043/-, Other Current Liabilities (Note No 8) is understated by Rs.37,73,961/- and Other Non-Current Assets (Note 13) is understated by Rs.1,89,20,004/-.

4. With reference to Fixed Deposits accepted by the Company, the Company has defaulted in repayment of dues of Rs. 4,33,29,363/- as at 31st March, 2015. However, on Company's petition / application under section 58A(9) of the Companies Act, 1956, the Hon'ble Company Law Board has passed an order dated 19th May, 2015 for rescheduling the repayment of the deposits for a specified period under section 58A(9) read with section 74(2) of the Companies Act, 2013.

5. With reference to note no 12(a) regarding capital advances of Rs.94,55,65,044/- as at 31st March, 2015 given to various parties, the Company has made a provision of Rs.94,32,23,851/-given to various equipment suppliers and other parties mainly towards implementing Weaving Project. The amount represents balances outstanding for more than five years in respect of projects of the Company which have not taken off. In the absence of third party confirmation, reconciliation, if any and other supportive audit evidence, we are unable to comment upon its recoverability in cash or kind, if any.

6. With reference to note no. 17(a) regarding loan of Rs.7,29,98,404/- given to one related party, which has incurred losses and also has negative net worth as at 31st March 2013, in the absence of latest audited accounts and detailed information of projected cash flows as at 31 March, 2015 or other supportive audit evidence, we are unable to comment upon its impairment, if any. With reference to note no.12(d) regarding loans given to other related parties of Rs.33,89,08,208/- as at 31st March, 2015, in the absence of third party confirmation, reconciliation if any and other supportive audit evidence, we are unable to comment upon such balances

7. With reference to note no. 10(D) regarding Plant & Machinery of Rs. Rs.37,35,48,883/- situated at one factory unit of the company has been generally operating at lower capacity. In the absence of future cash flow projection and information about the value in use, we are unable to comment upon its impairment provision, if any as per Accounting Standard 28 "Impairment of Assets".

Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matter described in the Basis for Qualified Opinion paragraph above and read with points mentioned in Emphasis of Matter paragraph, 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 31st March, 2015, and its loss and its cash flows for the year ended on that date.

Emphasis of Matter

1. We draw attention to the Note no. 3(e) in the financial Statements. The company has incurred net loss of Rs.1,64,41,10,595/- during the year ended 31st March, 2015 and as of that date, the Company's accumulated losses aggregate to Rs.345,55,84,162/- resulting in complete erosion of its net worth. Further, as of that date, company's current liabilities exceeded its current assets by Rs.3,91,88,56,757/- subject to the effects of matters described in the Basis for Qualified Opinion paragraph. These factors along with other matters as set forth in said note raise substantial doubt about the company's ability to continue as a going concern in the foreseeable future. However, the company's financial statement has been prepared on going concern basis as disclosed by management in said note. Our opinion is not qualified in respect of this matter.

2. We draw attention to Note no. 4A and 4B regarding notice issued by consortium of banks under section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act 2002 for non-payment of principal and interest thereon after the due date by the company and therefore all loans accounts became Non Performing Assets effective from respective dates mentioned in such notice. We are informed that the company is contesting the action taken under section 13(4) of SARFAESI Act and therefore the matter is sub-judice. These factors along with other matters as set forth in said notice raise substantial doubt about the company's ability to continue as a going concern in the foreseeable future. However, the company's financial statements have been prepared on going concern basis as disclosed by management in said note. Our opinion is not qualified in respect of this matter.

Other Matters

The company had given loan to three related parties in earlier years and the amount outstanding as at 31st March, 2015 Rs.44,47,33,111/- (including interest till 31st March, 2015) which is not in compliance with the requirements of section 185 of the Companies Act, 2013.

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 the matters Specified in paragraphs 3 and 4 of the Order.

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 except for the matter described in the Basis for Qualified Opinion Paragraph.

(b) In our opinion, proper books of accounts 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, Statement of Profit and Loss, and Cash Flow Statement dealt with by this Report are in agreement with the books of accounts.

(d) Except for the effects of the matters described in the Basis for Qualified Opinion paragraph, and read with points mentioned in Emphasis of Matter paragraph, 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 written representations received from the directors as on 31st March, 2015 taken on the record by the Board of Directors, none of the director is disqualified as on 31st 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 26 to the financial statements;

II. The Company does not have any long term contracts including derivative contracts; as such the question of commenting on any material foreseeable losses does not arise

III. There has not been an occasion in case of the Company during the year under report to transfer any sums to the Investor Education and Protection Fund. The question of delay in transferring such sums does not arise.

ANNEXURE TO THE INDEPENDENT AUDITOR'S REPORT

1 Fixed Assets:

1.1 The Company has maintained proper records showing full particulars including quantitative details and situation of fi xed assets.

1.2 The fi xed assets are physically verifi ed during the year by the Management in accordance with a regular program of verifi cation which, in our opinion is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verifi cation by the management between the book and physical verifi cation records.

2 Inventories:

2.1 As per the information given to us, inventory has been physically verifi ed by the Management during the year. In our opinion, the frequency of verifi cation is reasonable.

2.2 In our opinion and according to the information and explanations given to us, the procedures of physical verifi cation of such inventory followed by the Management are reasonable and adequate in relation to the size of the Company and the nature of its business

2.3 In our opinion and according to the information and explanations given to us, the Company is maintaining proper records of inventory and no major discrepancies were noticed on physical verifi cation.

3 Loans borrowed or given:

3.1 According to information and explanations given to us the Company has granted loans to three bodies corporate covered in the register maintained under section 189 of the Companies Act, 2013.

3.2 In the case of the loans granted to the bodies corporate listed in the register maintained under section 189 of the Act, since there are no terms for repayment of interest we cannot comment upon the regularity of the same. The terms of arrangements do not stipulate any repayment schedule and the loans are repayable on demand. Accordingly, paragraph 3(iii)(b) of the Order is not applicable to the Company in respect of repayment of the principal amount.

3.3 There are no overdue amounts of more than rupees one lakh in respect of the loans granted to the bodies corporate listed in the register maintained under section 189 of the Companies Act, 2013.

4 Internal Control System:

4.1 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 for the purchases of inventory and fi xed assets and for the sale of goods and services.

4.2 As regards purchase of fi xed assets and capitalization of work in progress, the Company needs to strengthen internal controls for keeping proper identifi cation of Assets.

5 Deposit from Public:

5.1 The Company has defaulted in repayment of dues of Rs. 4,33,29,363/- till 31st March, 2015. However, on Company's petition / application under section 58A(9) of the Companies Act, 1956, the Hon'ble Company Law Board has passed an order dated 19th May, 2015 for rescheduling the repayment of the deposits for a specifi ed period under section 58A(9) read with section 74(2) of the Companies Act, 2013.

6 Maintenance of Cost Records:

6.1 We have broadly reviewed the cost records maintained by the Company pursuant to the Companies (Cost Records and Audit) Rules, 2014, as amended, prescribed by the Central Government under sub-section (1) of section 148 of the Companies Act, 2013, and are of the opinion that, prima facie, the prescribed cost records have been made and maintained. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

7 Remittance of Statutory Dues:

7.1 Undisputed statutory dues including provident fund, investor education and protection fund, employees state insurance, income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty, cess have not been regularly deposited with the appropriate authorities and there has been signifi cant delay in the same.

7.2 According to the information and explanation given to us, no undisputed amounts payable in respect of provident fund, investor education and protection fund, employees state insurance, income tax, wealth tax, service tax, sales tax, custom duty, excise duty, cess and other undisputed statutory dues were outstanding at the end, for the period of more than six month from the date they became payable, except as stated below

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

Income Tax Dividend Distribution tax 1,93,32,677 2009-10

Income Tax TDS on Interest 20,68,460 2012-13

Income Tax TDS on FD Interest 2,76,279 2014-15

Name of the Statute Due Date Date of payment

Income Tax 04-10-2010 Not paid

Income Tax 01-04-2012 to Not Paid 31-12-2012

Income Tax 1-04-2014 to 30-09- Not Paid 2014

7.3 According to the information and explanations given to us and as per the records of the Company examined by us, there are no dues outstanding of sales tax, income tax, custom duty, wealth tax, service tax, excise duty and cess, which have not been deposited on account of any dispute.

7.4 The amounts 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 there under has been transferred to such fund within time.

8 Accumulated Losses:

8.1 In our opinion, the accumulated losses of the company are more than Fifty percent of its net worth. The Company has not incurred any cash losses during the fi nancial year covered by our audit and in the immediately preceding fi nancial year.

9 Dues to Bank and Financial Institutions

9.1 In our opinion, and according to the information and explanation given to us, the Company has defaulted in repayment of dues to fi nancial institutions and banks for principal amount of Rs. 232,43,04,243/- and interest amounting of Rs. 106,35,40,174/- since May 2012. The Company has received notice issued by consortium of banks under section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 for non- payment of principal and interest thereon after the due date by the Company and therefore all loans accounts became Non Performing Assets effective from respective dates mentioned in such notice. We are informed that the company is contesting the action taken under section 13(4) of SARFAESI Act and therefore the matter is sub-judice.

10 Guarantees given by the Division for Loans Taken by Others:

10.1 According to the information and explanations given to us and records produced, the Company has not given any guarantee for loans taken by others from banks or fi nancial institutions.

11 End Use of Term Loans raised:

11.1 The Company has not taken any term loans during the year under audit. Hence the question of application of term loans for the purposes for which they were obtained does not arise.

12 Frauds

12.1 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 explanation given to us, we have neither come across any instance of fraud on or by the Company, noticed or reported during the period, nor have been informed of any such case by the management.

For Samria & Co.,

Chartered Accountants

Firm Reg. No.: 109043W

(Adhar Samria)

Place: Mumbai Partner

Date : 29th May, 2015 M. No: 049174


Mar 31, 2014

We have audited the accompanying financial statements of Birla Cotsyn (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 period 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 Standards notified under the Companies Act, 1956 (which continues to be applicable in respect of Section 133 of the Companies Act, 2013 in terms of General Circular 15/2013 dated 13th September, 2013 of the Ministry of Corporate Affairs) 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 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 evidence about the amounts and disclosure in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risk 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 the accounting policies 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 basis for our qualified opinion.

Basis for Qualified Opinion

1) With reference to note no. 8(b) regarding inter corporate deposits of Rs.19,85,95,895/- taken from various parties as at 31 March, 2014 in the absence of 3rd party confirmation, reconciliation, if any and other supportive audit evidence, we are unable to comment upon such balances.

Further, few such parties have already filed winding up petition under section 433 and 434 of the Companies Act, 1956 (''the act") against the Company for non-payment of dues. These matters are sub-judice and the impact, if any, of the outcome is unascertainable of this stage.

2) With reference to note no. 8(d) regarding dues to related parties of Rs.9,29,69,145/- and note no. 9(a) trade payables of Rs.24,98,36,255/- as at 31 March, 2014, in the absence of third party confirmation, reconciliation, if any and other supportive audit evidence, we are unable to comment upon such balances.

3) With reference to note no. 13(a) regarding capital advances of Rs. 98,02,26,844/- as at 31 March, 2014 given to various parties, in the absence of third party confirmation, reconciliation, if any and other supportive audit evidence, we are unable to comment upon its recoverability in cash or kind, if any. The amounts represent balances outstanding for more than 5 years in respect of projects of the Company which have not taken off.

4) With reference to note no. 18(a) regarding loans of Rs. 7,29,98,404/- given to one related party, which has incurred losses and also has negative net worth as at 31 March, 2013, in the absence of the audited accounts and detailed information of projected cash flows as at 31 March, 2014 or other supportive audit evidence, we are unable to comment upon its impairment, if any.

5) With reference to note no. 16(a) regarding trade receivable of Rs.85,30,14,604/- as at 31 March, 2014, the company has made provision for doubtful debts of Rs.84,85,36,833/-, including provision of Rs.5,05,14,751/- for the current period. In the absence of third party confirmation, reconciliation, if any and other supportive audit evidence, we are unable to comment upon its balance recoverability, if any.

6) With reference to note no. 11(4) regarding Plant & Machinery of Rs. Rs.37,35,48,883/- situated at one factory unit of the company has been generally operating at lower capacity. In the absence of future cash flow projection and information about the value in use, we are unable to comment upon its impairment provision, if any as per Accounting Standard 28 "Impairment of Assets".

Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, subject to the effects of the matter described in the Basis for Qualified Opinion paragraph and read with points mentioned in Emphasis of Matter paragraph, 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 the statement of Profit and Loss, of the loss for the period ended on that date; and

(c) in the case of the Cash Flow statement, of the cash flows for the period ended on that date.

Emphasis of Matter

1. We draw attention to the note no. 3(e) in the financial Statements. The company has incurred net loss of Rs.54,54,76,827/- during the period ended 31st March, 2014 and, as of the date; the company''s current liabilities exceeded its current assets by Rs.2,87,00,90,359/- subject to the effects of matters described in the Basis for Qualified Opinion paragraph. These factors along with other matters as set forth in said note raise substantial doubt about the company''s ability to continue as a going concern in the foreseeable future. However, the company''s financial statement has been prepared on going concern basis as disclosed by management in said note.

2. With reference to note no. 4(a) regarding notice issued by consortium of banks under section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act 2002 for non-payment of installments and interest thereon after the due date by the company and therefore all loans accounts became Non Performing Assets with effective from respective dates mentioned in such notice. We are informed that the company is contesting the action taken under section 13(4) of SARFAESI Act and therefore the matter is sub judice. These factors along with other matters as set forth in said notice raise substantial doubt about the company''s ability to continue as a going concern in the foreseeable future. However, the company''s financial statements have been prepared on going concern basis as disclosed by management in said note.

other Matters

The company had given loan to three related parties in earlier years and the amount outstanding as at 31st March, 2014 Rs.42,02,79,268/- (including interest till 31st March, 2014) which is not in compliance with the requirements of section 295 of the Companies Act, 1956.

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 paragraph 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 audit except for the matter described in the Basis for Qualified Opinion Paragraph;

b. in our opinion proper books of accounts 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 accounts;

d. except for the effects of the matters described in the Basis for Qualified Opinion Paragraph, and read with points mentioned in emphasis of Matter paragraph in our opinion, the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement comply with the Accounting Standards notified under the Act (which continues to be applicable in respect of Section 133 of the Companies Act, 2013 in terms of General Circular 15/2013 dated 13th September, 2013 of the Ministry of Corporate Affairs);

e. on the basis of written representation received from the directors as on 31st March, 2014 and taken on record by the Board of Directors, none of the director 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 Companies Act, 1956.

ANNEXURE TO THE INDEPENDENT AUDITOR''S REPORT

[Referred to in paragraph 1 under ''Report on Other Legal and Regulatory Requirements'' in the Independent Auditors'' Report of even date to the members of Birla Cotsyn (India) Limited ("the Company") on the financial statements for the period ended 31st March, 2014]

1 Fixed Assets:

1.1 The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets on the basis of available information.

1.2 All the fixed assets have not been physically verified by the Management during the period but there is a regular programme of verification which, in our opinion, is reasonable having regard to the size of the company and the nature of its assets. No material discrepancies were noticed on such verification by the management between the book and physical verification records.

1.3 In our opinion and according to the information and explanations given to us, a substantial part of fixed assets has not been disposed off by the Company during the period. However, in the previous year the Company had taken advances for sale of factory land situated at two separate units of the Company and according to the information and explanation given to us , we are of the opinion that the future disposal of said part fixed assets will not affect the going concern status of the company.

2 Inventories:

2.1 As per the information given to us, Inventory has been physically verified by the management during the period. In our opinion, the frequency of verification is reasonable.

2.2 In our opinion and according to the information and explanation given to us, the procedures of physical verification of such inventory followed by the Management are reasonable and adequate in relation to the size of the Company and the nature of its business

2.3 The Company is maintaining records of inventory and no major discrepancies were noticed between physical stock and the book records at the end of the period.

3 Loans borrowed or given:

3.1 According to information and explanations given to us the Company has granted loan to three companies covered in the register maintained under section 301 of Companies Act 1956. The maximum amount involved during the period was Rs.42,02,79,268/- and the period-end balance of loan granted to such parties was Rs. Rs.42,02,79,268/- (including interest accrued till 31st March, 2014).

3.2 In our opinion and according to the information and explanation given to us, the rate of interest and other terms and conditions for such loans are not, prima facie, prejudicial to the interest of the Company.

3.3 The said loans (including interest thereon) are repayable on demand and there are no repayment schedules. Accordingly, the question of overdue amount does not arise.

3.4 As mentioned in point 3.3 above, in the absence of agreed repayment schedule, there is no overdue amount in excess of Rs. 1 Lakh in respect of loan granted to Companies listed in the Register maintained under 301 of the Companies Act 1956.

3.5 The Company has taken during the period fresh unsecured loan from Company covered in the register maintained under section 301 of the Act. The maximum amount involved during the period is Rs.10,64,18,008/- and the period end balance of such loan is Rs.10,41,13,524/-.

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

3.7 In respect of the aforesaid loans, since there are no terms for repayment of interest and principal amount, we cannot comment upon the regularity of the same.

4 Internal Control system:

4.1 In our opinion and according to the information and explanations given to us, there is adequate internal control procedure commensurate with the size of the Company and the nature of its business for the purchases of inventory and fixed assets and for the sale of goods and services.

4.2 As regards purchase of fixed assets and capitalization of work in progress, the Company needs to strengthen internal controls for keeping proper identification of Assets. During the year Rs.3,39,05,855/- of Capital Advances has been adjusted against Creditors as the materials were not supplied by them.

4.3 During the period under audit, the Company did not have any purchase or sale of traded goods.

5 Transactions covered u/s 301 of the Companies Act, 1956:

5.1 According to the information and explanation given to us, we are of opinion that the particulars of contract or arrangement referred to in section 301 of the Companies Act 1956 that need to be entered into the register maintained under section 301 have been so entered.

5.2 According to the information and explanation given to us, we are of opinion that the transaction made in pursuance of such contracts or arrangement exceeding the value of Rupee Five Lakh in respect of such parties during period have been made at a price which are reasonable having regards to prevailing market price at the relevant time.

6 Deposit from public:

6.1 The Company has defaulted in repayment of dues of Rs. 2,29,57,000 till 31st March, 2014

6.2 The Company has made fixed deposit which is lower than 15% of the principal amount of its deposits maturing during the period ending 31st March, 2014.

6.3 The Company has not made provision for penal interest as per the Companies (Acceptance of deposits) Rules 1975.

7 Internal audit systems:

7.1 The Company has appointed an external firm of Chartered Accountants as Internal Auditors of the Company. In our opinion, the scope of Internal Audit needs to be widened.

8 Maintenance of Cost Records:

8.1 We have been informed by the Management that proper records under clause (d) of sub -section 1 of section 209 of the Companies Act 1956 have been maintained.

9 remittance of statutory dues:

9.1 Undisputed statutory dues including provident fund, investor education and protection fund, employees state insurance, income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty, cess have not been regularly deposited with the appropriate authorities and there has been significant delay in the same.

9.2 According to the information and explanation given to us, no undisputed amounts payable in respect of provident fund, investor education and protection fund, employees state insurance, income tax, wealth tax, service tax, sales tax, custom duty, excise duty, cess and other undisputed statutory dues were outstanding at the end, for the period of more than six month from the date they became payable, except as stated below

Name of the Nature of dues Amount(Rs) period to which due date statute the Amount relates

Income Tax Dividend 1,93,32,677 2009-10 04-10-2010 Distribution tax

Income Tax TDS 20,68,460 2012-13 01-04-2012to 31-12-2012

Name of the statute date of payment

Income Tax Not paid

Income Tax Not Paid

9.3 According to the information and explanations given to us and as per the records of the Company examined by us, there are no dues outstanding of sales tax, income tax, custom duty, wealth tax, service tax, excise duty and cess, which have not been deposited on account of any dispute.

10 Accumulated Cash Losses:

10.1 In our opinion, the accumulated losses of the company are more than fifty percent of its net worth. The Company has not incurred any cash losses during the period and immediately preceding current period.

11 dues to Bank and Financial Institutions

11.1 In our opinion, and according to the information and explanation given to us, the Company has defaulted in repayment of dues to financial institutions and banks for principal amount of Rs.232,64,84,049/- and interest amounting of Rs.55,20,05,217/- since May 2012 and onwards. The Company has received notice issued by consortium of banks under section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act 2002 for non-payment of installments and interest thereon after the due date by the company and therefore all loans accounts became Non Performing Assets with effective from respective dates mentioned in such notice. We are informed that the company is contesting the action taken under section 13(4) of SARFAESI Act and therefore the matter is sub judice.

12 Loans and Advances against Securities:

12.1 According to the information and explanation given to us and based on the documents and records produced to us, the Company has not granted any loans and advances on the basis of securities by way of pledge of shares, debentures or other securities.

13 Provisions applicable to Nidhi and Chit Fund Companies:

13.1 The Company is not a Chit Fund or a Nidhi / mutual benefit fund / society. Therefore, clause 4(xiii) of the Order is not applicable to the Division.

14 Dealing in shares and securities

14.1 The Company is not dealing in or trading in shares, securities, debenture, and other investments. Therefore, clause 4(xiv) of the Order is not applicable to the Division.

15 Guarantees given by the division for Loans Taken by others:

15.1 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.

16 End use of term Loans raised:

16.1 The Company has not taken any term loans during the period under audit. Hence the question of application of term loans for the purposes for which they were obtained does not arise.

17 utilisation of short term Funds:

17.1 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 investments during the period under audit.

18 preferential Allotment of shares, security of debentures and public Issue

18.1 According to the information and explanations given to us, the Company has not made any preferential allotment of shares to parties covered in the register maintained under section 301 of the Act.

19 Issue of Debentures

19.1 The Company has not issued any secured debentures during the period covered by our report. Accordingly, provisions of clause (xix) of the Companies (Auditors Report) order, 2003 are not applicable.

20 public Issue

20.1 The company has not raised any money by public issues during the period covered by our report. Accordingly, provisions of clause (xx) of the Companies (Auditors Report) order, 2003 are not applicable

21 Frauds

21.1 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 explanation given to us, we have neither come across any instance of fraud on or by the Company, noticed or reported during the period, nor have been informed of any such case by the management.

For Samria & Co. Chartered Accountants FRN: 109043W

Adhar samria place: Mumbai (Partner) date: 1st June, 2014 M.No. 049174


Jun 30, 2013

Report on the Financial Statements

We have audited the accompanying financial statements of Birla Cotsyn (India) Limited ("the Company"), which comprise the Balance Sheet as at June 30, 2013, and the Statement of Profit and Loss and Cash Flow Statement for the period 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 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 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 procedures selected depend on the auditors'' 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 policies 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 basis for our qualified audit opinion.

Basis for Qualified Opinion

1. With reference to note number 8 (b) regarding Inter corporate deposits of Rs. 186,893,684 taken from various parties as at June 30, 2013, in the absence of third party confirmation, reconciliation, if any and other supportive audit evidence, we are unable to comment upon such balances.

Further, few such parties have already filed winding up petition under section 433 & 434 of the Companies Act, 1956 against the Company for non-payment of dues. These matters are sub-judice and the impact, if any, of the outcome is unascertainable at this stage.

2. With reference to note number 8 (b) regarding dues to related parties of Rs. 57,725,109 and note number 29 regarding trade payables of Rs. 294,331,451 as at June 30, 2013, in the absence of third party confirmation, reconciliation, if any and other supportive audit evidence, we are unable to comment upon such balances.

3. With reference to note number 13 (a) regarding capital advances of Rs. 928,391,624 as at June 30, 2013 given to various parties, in the absence of third party confirmation, reconciliation, if any and other supportive audit evidence, we are unable to comment upon its recoverability in cash or kind, if any.

4. With reference to note number 18 (a) regarding loan of Rs 72,998,404 given to one related party, which have incurred losses and also have negative net-worth as at June 30, 2013, in the absence of detail information of projected cash flows as at June 30, 2013 or other supportive evidence, we are unable to comment upon its impairment, if any.

5. With reference to note number 16 (a) regarding trade receivables of Rs. 929,652,317 as at June 30, 2013, the Company has made provision for doubtful debts of Rs. 798,022,082. In the absence of third party confirmation, reconciliation, if any and other supportive audit evidence, we are unable to comment upon its balance recoverability, if any.

6. With reference to note number 11 (3) regarding plant and machinery of Rs. 373,548,883 situated at one factory unit of the Company has been generally operating at lower capacity. In the absence of future cash flow projection and information about the value in use, we are unable to comment impairment provision, if any as per Accounting Standard 28 "Impairment of Assets".

Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, subject to the effects of the matter described in the Basis for Qualified Opinion paragraph and read with points mentioned in Emphasis of Matter paragraph, 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 June 30, 2013;

(b) in the case of the Statement of Profit and Loss, loss for the period ended on that date; and

(c) in the case of the Cash Flow Statement, of the cash flows for the period ended on that date.

Emphasis of Matter

1. We draw attention to note number 2(b) in the financial statements. The Company incurred net loss of Rs. 1,396,945,873 during the period ended June 30, 2013 and, as of that date; the Company''s current liabilities exceeded its current assets by Rs. 2,325,087,902 subject to the effects of matters described in the Basis for Qualified Opinion paragraph.. These factors along with other matters as set forth in said note raise substantial doubt about the Company''s ability to Continue as a going concern in the foreseeable future. However, the Company''s financial statement has been prepared on going concern basis as disclosed by management in said note.

2. With reference to note no 2(b) regarding notice issued by consortium of banks under section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 for nonpayment of installments and interest thereon after the due date by the Company and therefore all loan accounts became Non Performing Assets with effective from respective dates mentioned in such notice. We are informed that the Company has filed response against such notice and requested to restructure all loan accounts. These factors along with other matters as set forth in said note, raise substantial doubt about the Company''s ability to Continue as a going concern in the foreseeable future. However, the Company''s financial statements have been prepared on going concern basis as disclosed by management in said note.

Other matters

1. The Company has not appointed full time company secretary as per provisions of section 383A of the Companies Act, 1956 with effective from January 1, 2013. However, we are informed that management is under process of appointing company secretary in due course of time.

2. The Company has not appointed a managing director or manager as required by the provisions of section 269 of the Companies Act, 1956 with effective from April 1, 2013. However we are informed that Company has appointed managing director before the board meeting taken in place.

3. The Company has given loan to three related parties amounting to Rs. 392,106,843 as at June 30, 2013 (including interest till June 30, 2013) which falls under non-compliance of section 295 of the Companies Act, 1956.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditors'' 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 except for the matter described in the Basis for Qualified Opinion paragraph;

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. except for the effects of the matters described in the Basis for Qualified Opinion paragraph, and read with points mentioned in Emphasis of Matter paragraph 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;

e. on the basis of written representations received from the directors as on June 30, 2013, and taken on record by the Board of Directors, none of the directors is disqualified as on June 30, 2013, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

[Referred to in paragraph 1 under ''Report on Other Legal and Regulatory Requirements'' in the Independent Auditors'' Report of even date to the members of Birla Cotsyn (India) Limited ("the Company") on the financial statements for the period ended June 30, 2013]

(i) (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets except some plant and machineries acquired during the period of Rs 94,919,822 for which we have not been provided records and identification of such assets.

(b) All the fixed assets have not been physically verified by the management during the period but there is a regular programme 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.

(c) In our opinion and according to the information and explanations given to us, a substantial part of fixed assets has not been disposed off by the Company during the period. However, during the period the Company has taken advances for sale of factory lands situated at two separate units of the Company and according to the information and explanation given to us, we are of the opinion that the future disposal of said part fixed assets will not affect the going concern status of the Company.

(ii) (a) As explained to us, the inventory has been physically verified by the management during the period. In our opinion, the frequency of verification is reasonable.

(b) The procedures of physical verification of inventory 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 and no material discrepancies were noticed on physical verification carried out at the end of the period.

(iii) (a) According to information and explanations given to us the Company has granted loans to three companies which should be covered in the register maintained under section 301 of the Companies Act, 1956.The maximum amount involved during the period was Rs.392,106,843 and the period-end balance of loans granted to such parties was Rs. 392,106,843 (including interest accrued till June 30, 2013).

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

(c) The said loans (including interest thereon) are repayable on demand and there are no repayment schedules. Accordingly, the question of overdue amount does not arise.

(d) As mentioned in point (c) above, in the absence of agreed repayment schedule, there is no overdue amount in excess of Rs 1 lakh in respect of loans granted to Companies listed in register maintained under sec 301 of the Companies Act, 1956.

(e) The company has taken during the period fresh unsecured loan from Company covered in the register maintained under section 301 of the Act. The maximum amount involved during the period and the period end balance of such loan is Rs. 11,228,910.

(f) In our opinion the rate of interest and other terms and conditions of such loans are not prima facie prejudicial to the interest of the Company.

(g) In respect of the aforesaid loans, since there are no terms for repayment of interest and principal amount, we can not comment upon the regularity of the same.

(iv) In our opinion and according to the information and explanations given to us, there is an internal control system commensurate with the size of the Company and the nature of its business with regard to purchase of inventory.

As regards purchase fixed assets, the Company needs to strengthen internal controls for keeping proper identification of assets.

As regards sales and purchase of traded goods, we are represented that the Company directly authorize the sellers to transfer goods to the buyers'' destination. Accordingly, the Company neither maintains any stock of traded goods any time during the period nor keeps any records for goods inwards and outward confirmation from such parties. Further, in most of the cases we have noticed that the buyers'' and sellers'' accounts are settled through journal entries and we are represented that the Company directs the buyers to pay money on behalf of the Company to the creditors. Further, we have not been provided any settlement letters for such transactions. We are informed that the Company is in the process of formalizing the documentation in this regard. The system of obtaining independent confirmation of balances of parties requires to be given more emphasis.

(v) (a) According to the information and explanation given to us, we are of the opinion that the particulars of contracts or arrangements referred to in section 301 of the Companies Act, 1956 that need to be entered into the register maintained under section 301 have been so entered.

(b) According to the information and explanation given to us, we are of the opinion that the transactions made in pursuance of such contracts or arrangements exceeding the value of Rupees five lacs in respect of such parties during the period have been made at a price which are reasonable having regard to prevailing market price at the relevant time.

(vi) As per the information and explanation given to us and based on our audit procedures performed, we report that the Company has not complied the following provisions / directives issued by the Reserve Bank of India and the provisions of sections 58A, 58AA or any other relevant provisions of the Act and the rules framed there under, where applicable:

i) The Company has defaulted in repayment of dues of Rs.5,192,000 till June 30, 2013.

ii) The Company has made fixed deposit which is lower than 15% of the principal amount of its deposits maturing during the year ending March 31, 2014.

iii) We have not been provided fixed deposit register which shall be maintained at registered office of the Company, hence we are unable to comment upon its non-compliance, if any.

iv) The Company has not made applicable provision for penal interest as per the Companies (Acceptance of Deposits) Rules, 1975.

v) We are informed that the Company has not intimated to the Tribunal on monthly basis about the default in repayment as per Section 58 AA of the Company''s Act and also not furnished the requisite return as per the Companies (Acceptance of Deposits) Rules, 1975.

(vii) The Company does not have formal internal audit system.

(viii) We have been informed by the Management that proper cost records under clause (d) of sub-section 1 of section 209 of the Companies Act, 1956 have been maintained. And, for the said purpose we have relied upon the cost auditors'' certificate which has been provided to us by the management.

(ix) (a) Undisputed statutory dues including provident fund, investor education and protection fund, or employees'' state insurance, income- tax, sales-tax, wealth-tax, service tax customs duty, excise duty, cess have not been regularly deposited with the appropriate authorities and there has been a slight delay in few cases.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, investor education and protection fund, employees'' state insurance, income-tax, wealth-tax, service tax, sales-tax, customs duty, excise duty, cess and other undisputed statutory dues were outstanding, at the period end, for a period of more than six months from the date they became payable except as stated below.

Name of the Nature of dues Amount (RS.) * Period to which the Due Date Date of statute amount relates payment

Income Tax Act Dividend Distribution 19,332,677 2009-10 04-10-2010 Not Paid Tax

Income Tax Act TDS 1,553,593 2012-13 01-04-2012 to Not Paid 31-12-2012

(c) According to the information and explanations given to us and the records of the Company examined by us, there are no dues outstanding of income-tax, sales-tax, service tax, customs duty, wealth tax, excise duty and cess on account of any dispute.

(x) In our opinion, the accumulated losses of the Company are not more than fifty percent of its net worth except qualifications mentioned in Basis for Qualified Opinion Paragraph in our audit report. Further, the company has also incurred cash losses during the period of Rs 1,385,611,216 covered by our audit. There were no cash losses immediately preceding financial year.

(xi) In our opinion and according to the information and explanations given to us, the Company has defaulted in repayment of dues to financial institutions and banks for Principal amount of Rs. 211,663,000 and Interest amounting of Rs. 322,145,922 since May 2012.

(xii) According to information and explanation given to us and based on the documents and records produced to us, the company has not granted loans & advances on the basis of security by way of pledge of shares, debentures and other securities.

(xiii) 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 Companies (Auditor''s Report) Order, 2003 (as amended) are not applicable to the Company.

(xiv) In our opinion, the Company is not dealing or trading in shares, securities, debentures and other investments.

(xv) In our opinion and according to the information and explanations given to us, the Company has not given any guarantees for loans taken by others from banks or financial institutions during the period.

(xvi) To the best of our knowledge and belief and according to the information and explanations given to us, in our opinion, the term loans availed by the Company were, prima facie, applied by it during the period for the purpose for which the loans were raised.

(xvii) 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.

(xviii) According to the information and explanations given to us, the company has not made any preferential allotment of shares to parties covered in the Register maintained under Section 301 of the Act.

(xix) The Company has not issued any secured debentures during the period covered by our report. Accordingly, provisions of clause (xix) of the Companies (Auditor''s Report) Order; 2003 are not applicable.

(xx) The Company has not raised any money by public issues during the period.

(xxi) 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 fraud on or by the Company, noticed or reported during the period, nor have we been informed of any such case by the management.

For Kanu Doshi Associates

Chartered Accountants

Firm Registration No. 104746W



Manoj Kumar Pati

Partner

Membership No.504536

Place: Mumbai

Date: August 29, 2013.


Mar 31, 2012

1. We have audited the attached Balance Sheet of Birla Cotsyn (India) Limited ('the Company' ) as at March 31, 2012 and also the Statement of Profit and Loss and 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 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 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, issued by the Central Government of India in terms of sub-section (4A) of Section 227 of 'The Companies Act, 1956' of India (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, we give 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 paragraph 3 above, we report that:

i. 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;

ii. 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.

iii. 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.

iv. In our opinion, the balance sheet, Statement of Profit and Loss 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 Companies Act, 1956.

v. On the basis of the 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 (I) of section 274 of the Companies Act, 1956.

vi. Certain balances of Trade Receivables and Trade Payables are Subject to confirmation and reconciliation, if any.

vii. 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 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;

a) in the case of the balance sheet, of the state of affairs of the Company as at March 31, 2012;

b) in the case of the statement of profit and loss, of the profit for the year ended on that date; and

c) in the case of cash flow statement, of the cash flows for the year ended on that date.

ANNEXURE TO AUDITORS' REPORT

[Referred to in paragraph 3 of the Auditors' Report of even date to the members of Birla Cotsyn (India) Limited on the financial statements for the year ended 31st March 2012]

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

(b) All the fixed assets have not been physically verified by the management during the year but there is a regular programme 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.

(c) In our opinion and according to the information and explanations given to us, a substantial part of fixed assets has not been disposed off by the company during the year.

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

(b) The procedures of physical verification of inventory 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 and no material discrepancies were noticed on physical verification carried out at the end of the year.

(iii) (a) According to information and explanations given to us the company has not granted any loans, secured or unsecured, to or from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly, the sub-clauses (b), (c) and (d) of clause (iii) are not applicable to the company.

(e) The company has not taken during the year any fresh unsecured loans from company covered in the register maintained under section 301 of the Act but it has opening balance outstanding of loan taken from one company covered in the register maintained under section 301 of The Act. The maximum amount involved during the year and the year end balance of such loans aggregates to Rs. 23,09,44,047/- and Rs. NIL respectively.

(f) In our opinion the rate of interest and other terms and conditions of such loans are not prima facie prejudicial to the interest of the Company.

(g) In respect of the aforesaid loans, since there are no terms for repayment of interest and principal amount, we can not comment upon the regularity of the same.

(iv) 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 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.

(v) (a) In respect of transactions entered in the register maintained in pursuance of Section 301 of the Companies Act, 1956, to the best of our knowledge and belief and according to the information and explanations given to us, particulars of contracts or arrangements that needs to be entered into the register have been so entered.

(b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of the contracts or arrangements entered in the register maintained under Section 301 of the Companies Act, 1956 and exceeding the value of Rupees five lacs in respect of such party during the year have been made at a price which are reasonable having regard to prevailing market price at the relevant time.

(vi) The Company has complied with the directives issued by the Reserve Bank of India and the provisions of sections 58A, 58AA or any other relevant provisions of the Act and the rules framed there under, where applicable except with respect to one loan taken from an individual where the provisions of sections 58A, 58AA or any other relevant provisions of the Act and the rules framed there under have not been complied with. However the company has repaid the same during the year.

(vii) In our opinion, the company has an internal audit system but it needs to be strengthened both in terms of coverage and periodicity to be commensurate with the growth in size and nature of its business.

(viii) We have broadly reviewed the books of account maintained by the company in respect of 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 (I) of Section 209 of the Act and we are of the opinion that prima facie, the prescribed accounts and records have been made and maintained.

(ix) (a) The Company is generally regular in depositing with appropriate authorities undisputed statutory dues including provident fund, investor education and protection fund, employees' state insurance, income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty, cess and other material statutory dues applicable to it.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, investor education and protection fund, employees' state insurance, income-tax, wealth-tax, service tax, sales-tax, customs duty, excise duty, cess and other undisputed statutory dues were outstanding, at the year end, for a period of more than six months from the date they became payable except as stated below.

Name of the Nature of Amount Period to Due Date Date of statute dues (Rs in which the payment Lacs)* amount relates

Income Tax Dividend 1,20,28,236 2009-10 4-10-2010 Not paid Act, 1961 Distribu tion Tax

Income Tax Advance 92,25,000 2012-13 Sep 2011 Not Paid Act, 1961 Tax

* Excludes penalty or interest thereon, if any.

(c) According to the information and explanations given to us and the records of the Company examined by us, there are no dues outstanding of income-tax, sales-tax, service tax, customs duty, wealth tax, excise duty and cess on account of any dispute.

(x) The Company does not have accumulated losses at the end of the year and it has not incurred cash losses in the current year as well as in the immediately preceding financial year.

(xi) In our opinion and according to the information and explanations given to us, the Company has defaulted in repayment of dues to financial institutions and banks for Principal amount of Rs.5,01,86,776/- and Interest amount of Rs.4,04,I4,I0I/- since January 2012.

(xii) According to information and explanation given to us, we are of the opinion that the Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

(xiii) 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 Companies (Auditor' s Report) Order, 2003 (as amended) are not applicable to the Company.

(xiv) In our opinion, the Company is not dealing or trading in shares, securities, debentures and other investments.

(xv) In our opinion and according to the information and explanations given to us, the company has not given any guarantees for loans taken by others from banks or financial institutions during the year.

(xvi) To the best of our knowledge and belief and according to the information and explanations given to us, in our opinion, the term loans availed by the Company were, prima facie, applied by it during the year for the purpose for which the loans were raised.

(xvii) 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.

(xviii) According to the information and explanations given to us, the company has made preferential allotment of shares to two parties covered in the Register maintained under Section 30I of the Act. In our opinion, the price at which shares have been issued is not prejudicial to the interest of the company.

(xix) The Company has not issued any secured debentures during the period covered by our report. Accordingly, provisions of clause (xix) of the Companies (Auditor' s Report) Order; 2003 are not applicable.

(xx) The Company has not raised any money by public issues during the year.

(xxi) 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 fraud on or by the Company, noticed or reported during the year, nor have we been informed of any such case by the management.

For Kanu Doshi Associates

Chartered Accountants

FRN No. I04746W

Jayesh Parmar

Partner

Membership No.45375

Place: Mumbai

Date: May 29, 2012


Mar 31, 2011

1. We have audited the attached Balance Sheet of Birla Cotsyn (India) Limited ('the Company') as at March 3 1, 2011 and also the Profit and Loss account and 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 these financial statements based on our audit. The financial statements for the year ended March 31, 2010 have been audited by another firm of Chartered Accountants. We have relied on the same for the purpose of this report.

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 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, issued by the Central Government of India in terms of sub-section (4A) of Section 227 of The Companies Act, 1956' of India (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, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.Further to our comments in the paragraph 3 above, we report that:

i. 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;

ii. 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.

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 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 Companies Act, 1956.

iv. On the basis of the written representations received from the directors, as on March 3 1, 2011 and taken on record by the Board of Directors, we report that none of the directors is disqualified as on March 31, 2011 from being appointed as a director in terms of clause (g) of sub-section (I) of section 274 of the Companies Act, 1956.

v. 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 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;

a) in the case of the balance sheet, of the state of affairs of the Company as at March 3 1, 2011;

b) in the case of the profit and loss account, of the profit for the year ended on that date; and

c) in the case of cash flow statement, of the cash flows for the year ended on that date.

ANNEXURE TO AUDITORS' REPORT

[Referred to in paragraph 3 of the Auditors' Report of even date to the members of Birla Cotsyn (India) Limited on the financial statements for the year ended 3 1 st March 2011 ]

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

(b) All the fixed assets have not been physically verified by the management during the year but there is a regular programme 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.

(c) In our opinion and according to the information and explanations given to us, a substantial part of fixed assets has not been disposed off by the company during the year.

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

(b) The procedures of physical verification of inventory 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 and no material discrepancies were noticed on physical verification carried out at the end of the year.

(iii) (a) The company has granted unsecured interest free loan to one Company, covered in the register maintained under section 301 of the Act. The maximum amount involved during the year and the year end balance of such loans aggregates to Rs. 4,5 1,73,948/- and Rs. 4,5 1,73,948/- respectively.

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

(c) The above loan is receivable on demand hence the clause (iii) (c) of para 4 of the order is not applicable.

(d) Since the above loan is receivable on demand and interest free, clause (iii) (d) of para 4 of the order is not applicable.

(e) The company has taken unsecured loans, from three companies covered in the register maintained under section 301 of the Act. The maximum amount involved during the year and the year end balance of such loans aggregates to Rs. 42,44,71,466/- and Rs.23,09,44,047/- respectively.

(f) In our opinion the rate of interest and other terms and conditions of such loans are not prima facie prejudicial to the interest of the Company.

(g) In respect of the aforesaid loans, the Company is regular in repaying the principal amounts wherever stipulated and is also regular in payment of interest, where applicable.

(iv) 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 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.

(v) (a) In respect of transactions entered in the register maintained in pursuance of Section 301 of the Companies Act, 1956, to the best of our knowledge and belief and according to the information and explanations given to us, particulars of contracts or arrangements that needs to be entered into the register have been so entered.

(b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of the contracts or arrangements entered in the register maintained under Section 301 of the Companies Act, 1956 and exceeding the value of Rupees five lacs in respect of such party during the year have been made at a price which are reasonable having regard to prevailing market price at the relevant time.

(vi) The Company has complied with the directives issued by the Reserve Bank of India and the provisions of sections 58A, 58AA or any other relevant provisions of the Act and the rules framed there under, where applicable except with respect to one loan taken from an individual where the provisions of sections 58A, 58AA or any other relevant provisions of the Act and the rules framed there under have not been complied with.

(vii) In our opinion, the company has an internal audit system but it needs to be strengthened both in terms of coverage and periodicity to be commensurate with the growth in size and nature of its business.

(viii) We have broadly reviewed the books of account maintained by the company in respect of 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 (I) of Section 209 of the Act and we are of the opinion that prima facie, the prescribed accounts and records have been made and maintained.

(ix) (a) The Company is generally regular in depositing with appropriate authorities undisputed statutory dues including provident fund, investor education and protection fund, employees' state insurance, income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty, cess and other material statutory dues applicable to it.

Further, 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, no undisputed amounts payable in respect of provident fund, investor education and protection fund, employees' state insurance, income-tax, wealth-tax, service tax, sales-tax, customs duty, excise duty, cess and other undisputed statutory dues were outstanding, at the year end, for a period of more than six months from the date they became payable except as stated below.

Name of Nature Amount Period to Due Date Date of the of dues (Rs in which the payment statute Lacs)* amoun relates

Income Dividend 1,20,28,236 2009-10 4-10-2010 Not paid Tax Act, Distribu 1961 tion Tax

* Excludes penalty or interest thereon, if any.

(c) According to the information and explanations given to us and the records of the Company examined by us, there are no dues outstanding of income-tax, sales-tax, service tax, customs duty, wealth tax, excise duty and cess on account of any dispute.

(x) The Company does not have accumulated losses at the end of the year and it has not incurred cash losses in the current year as well as in the immediately preceding financial year.

(xi) In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to financial institutions, banks or debenture holders.

(xii) According to information and explanation given to us, we are of the opinion that the Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

(xiii) 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 Companies (Auditor's Report) Order, 2003 (as amended) are not applicable to the Company.

(xiv) In our opinion, the Company is not dealing or trading in shares, securities, debentures and other investments.

(xv) In our opinion and according to the information and explanations given to us, the company has not given any guarantees for loans taken by others from banks or financial institutions during the year.

(xvi) To the best of our knowledge and belief and according to the information and explanations given to us, in our opinion, the term loans availed by the Company were, prima facie, applied by it during the year for the purpose for which the loans were raised.

(xvii) 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.

(xviii) According to the information and explanations given to us, the company has made preferential allotment of shares to one party covered in the Register maintained under Section 301 of the Act. In our opinion, the price at which shares have been issued is not prejudicial to the interest of the company.

(xix) The Company has not issued any secured debentures during the period covered by our report. Accordingly, provisions of clause (xix) of the Companies (Auditor's Report) Order; 2003 are not applicable.

(xx) We have verified the end use of money raised by public issues as disclosed in the notes to the financial statements. (See Note (10A) and (10Q)-

(xxi) 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 fraud on or by the Company, noticed or reported during the year, nor have we been informed of any such case by the management.

For Kanu Doshi Associates Chartered Accountants FRN No. I04746W

Jayesh Parmar Partner Membership No.45375

Place : Mumbai Date : 23rd May, 2011


Mar 31, 2010

1. We have audited the attached Balance Sheet of Birla Cotsyn (india) Limited (the "Company") as at March 31, 2010, and the related Profit and Loss Account and 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 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 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 (Auditors Report) Order, 2003, as amended by the Companies (Auditors Report) (Amendment) Order, 2004 (together the "Order"), issued by the Central Government of india in terms of sub-section (4A) of Section 227 of The Companies Act, 1956 of india (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, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the 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 comply with the 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, 2010 and taken on record by the Board of Directors, 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;

(f) in our opinion and to the best of our information and according to the explanations given to us, the said financial statements together with the notes thereon and attached thereto give, in the prescribed manner, the information required by the Act, 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 the Cash Flow Statement, of the cash flows for the year ended on that date.

Annexure to Auditors Report Referred to in paragraph 3 of the Auditors Report of even date to the members of Birla Cotsyn (india) Limited on the financial statements for the year ended March 31, 2010

1. (a) The Company is maintaining proper records showing full particulars, including quantitative details and situation, of fixed assets.

(b) The fixed assets of the Company have been physically verified by the Management during the year and no material discrepancies between the book records and the physical inventory have been noticed. in our opinion, the frequency of verification is reasonable.

(c) in our opinion and according to the information and explanations given to us, a substantial part of fixed assets has not been disposed of by the Company during the year.

2. (a) The inventory (excluding stocks with third parties) has been physically verified by the Management during the year. in respect of

inventory lying with third parties, these have substantially been confirmed by them. in our opinion, the frequency of verification is reasonable.

(b) in our opinion, the procedures of physical verification of inventory followed by the Management are reasonable and adequate in relation to 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, the Company is maintaining proper records of inventory. The discrepancies noticed on physical verification of inventory as compared to book records were not material.

3. (a) The Company has not granted any loans, secured or unsecured, to companies, firms or other parties covered in the register maintained under Section 301 of the Act.

(b) The Company has taken unsecured loans, from two companies covered in the register maintained under Section 301 of the Act. The maximum amount involved during the year and the year-end balance of such loans aggregates to Rs.8,21,52,886 and Rs.6,73,00,000, respectively.

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

(d) in respect of the aforesaid loans, the Company is regular in repaying the principal amounts as stipulated and is also regular in payment of interest, where applicable.

4. 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 for the purchase of inventory, fixed assets and for the sale of goods and services. Further, on the basis of our examination of the books and records of the Company, and according to the information and explanations given to us, we have neither come across nor have been informed of any continuing failure to correct major weaknesses in the aforesaid internal control system.

5. (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 sto be maintained under that section.

(b) in our opinion and according to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangements and exceeding the value of Rupees Five Lakhs in respect of any party during the year have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

6. Except for a loan taken from an individual which is not in accordance with the provisions of Section 58A of the Act, the Company has not accepted any deposits from the public within the meaning of Sections 58A and 58AA of the Act and the rules framed there under. With respect to the loan from an individual referred to above the provisions of Sections 58A and 58AA of the Act and the rules framed there under have not been complied.

7. in our opinion, the Company has an internal audit system commensurate with its size and nature of its business.

8. We have broadly reviewed the books of account maintained by the Company in respect of 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 Act, and are of the opinion that prima facie, the prescribed accounts and records have been made and 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) According to the information and explanations given to us and the records of the Company examined by us, in our opinion,

the Company is generally regular in depositing the undisputed statutory dues including provident fund, investor education and protection fund, employees state insurance, income-tax, sales-tax, wealth tax, service tax, customs duty, excise duty, cess and other material statutory dues as applicable with the appropriate authorities.

Except for advance income tax aggregating Rs.86,26,480, there were no undisputed dues outstanding for more than six months as at March 31, 2010;

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

10. The Company does not have any accumulated losses as at March 31, 2010 and it has not incurred any cash losses in the financial year ended on that date or in the immediately preceding financial year.

11. According to the records of the Company examined by us and the information and explanation given to us, the Company has not defaulted in repayment of dues to any financial institution or bank or debenture holders as at the balance sheet date.

12. The Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

13. in view of the nature of business carried on by the Company, the provisions of any special statute applicable to chit fund / nidhi / mutual benefit fund/ societies are not applicable to the Company.

14. in our opinion, the Company is not a dealer or trader in shares, securities, debentures and other investments.

15. in our opinion and 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 during the year.

16. in our opinion, and according to the information and explanations given to us, on an overall basis, the term loans have been applied for the purposes for which they were obtained, other than temporary deployment pending utilization;

17. On the basis of an overall examination of the balance sheet of the Company, in our opinion and according to the information and explanations given to us, there are no funds raised on a short-term basis which have been used for long-term investment.

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 Act during the year.

19. The Company has not issued any secured debentures during the period covered by out report. Accordingly, provisions of clause (xix) of the Companies (Auditors Report) Order, 2003 are not applicable.

20. Money raised by the Company from Public issue on March 15, 2010 has been temporarily deployed in the current account with a bank pending application for the purpose for which it is raised. The same has been disclosed by the Company in the Note 9 ( c) of Schedule 21 to the Accounts for the 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 fraud on or by the Company, noticed or reported during the year, nor have we been informed of such case by the Management.

For and on behalf of

Dalal & Shah

Firm Registration Number 102021W

Chartered Accountants

S Venkatesh

Mumbai, Partner

August 10, 2010 Membership Number 037942

 
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