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Auditor Report of Birla Pacific Medspa Ltd.

Mar 31, 2013

Report on the Financial Statements

We have audited accompanying financial statements of BIRLA PACIFIC MEDSPA LIMITED ("the Company"), which comprise the Balance Sheet as at March 3 I, 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'' 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 subsection (3C) of section 21 I 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 auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by the management, as well as evaluating the overall presentation of the financial statements.

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

Basis for Qualified Opinion

Trade receivables, trade payables, loans & advances, other current assets and other current liabilities are subject to confirmation & reconciliation if any.

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 matters described in the Basis for Qualified Opinion 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 March 3 1,2013;

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

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

Emphasis of Matter

We draw attention to note no. 37 of the financial statements, regarding appointment of Company Secretary and Managing Director. Our opinion is not qualified in respect of this matter.

Report on other Legal and Regulatory Requirements

Subject to matters described in the Basis for Qualified Opinion paragraph, we report that

1. As required by the Companies (Auditor''s Report) Order, 2003,("the order") 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 Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

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

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

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

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

d) In our opinion, the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement comply with the Accounting Standards referred to in sub-section (3C) of Section 21 I of the Companies Act, 1956.

e) On the basis of the written representations received from the directors, as on March 31, 2013 and taken on record by the Board of Directors, we report that none of the directors is disqualified as on March 3 1,2013 from being appointed as a director in terms of clause (g) of sub-section (I) of Section 274 of the Companies Act, 1956.



ANNEXURE TO THE AUDITOR''S REPORT

(Referred to in paragraph I of Report on other Legal and Regulatory Requirements of our Report of even date on the accounts of Birla Pacific Medspa Limited for the period ended March 3 1,2013)

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

b. As explained to us, the company has not physically verified any of the fixed assets during the year. However, there is a phased programme of verification which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets.

c. There has been no disposal of substantial part of fixed assets during the period, which may affect the going concern status of the company.

(ii) a. As explained to us, inventories were physically verified during the period by the management at reasonable intervals.

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

c. In our opinion and according to the information and explanation given to us, the company has maintained proper records of its inventories and no material discrepancies were noticed on such physical verification.

(iii) a. The Company has granted unsecured loans to one company covered in the register maintained under section 301 of the Companies Act, l956.The maximum amount involved during the period is Rs. 2,00,000 and the period end balance is Rs. Nil.

b. In our opinion, interest and other terms and conditions on which loans have been given from parties listed in the register maintained under section 301 of the Companies Act, 1956 are not, prima facie, prejudicial to the interest of the Company;

c. In our opinion, principal amount and interest were received regularly as per the terms of the agreement except interest accrued & due but not received amounting to Rs. 385,169.

d. In our opinion, the Company has taken reasonable step to recover overdue amount.

e. The Company has taken interest free unsecured loans from one company covered in the register maintained under section 301 of the Companies Act, 1956The maximum amount involved during the period is Rs. 54,91,952 and the period end balance is Rs. 54,91,952.

f. In our opinion, the terms and conditions on which loans have been taken from parties listed in the register maintained under section 301 of the Companies Act, 1956 are not, prima facie, prejudicial to the interest of the Company;

g. In the absence of stipulations in respect of the terms of repayment of principal amount of the aforesaid loans, we are unable to comment whether payment of principal is regular.

(iv) In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business with regard to purchase of fixed assets and with regard to 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.

(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 needed to be entered into the register have been so entered.

b. In the absence of comparables in certain transactions, we are unable to comment whether the transactions made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and exceeding Rs.5,00,000/- in respect of each party during the period have been made at prices which are reasonable having regard to prevailing market price at the relevant time.

(vi) The Company has not accepted any deposits from the public within the meaning of the provisions of Section 58A and 58AA or any other relevant provisions of the Companies Act, 1956 and rules made thereunder. Hence, the clause (vi) of the order is not applicable.

(vii) In our opinion, the internal audit functions carried out during the year by a firm of Chartered Accountants appointed by the management have been commensurate with the size of the Company and nature of its business.

(viii) According to the information and explanations given to us, the Central Government has not prescribed maintenance of cost records under section 209 (I) (d) of the Companies Act, 1956 for any of the products of the Company and hence clause 4 (viiii) of the Order is not applicable to the Company.

(ix) (a) According to the information and explanations given to us and on the basis of records produced before us, the Company is generally regular in depositing with appropriate authorities undisputed statutory dues including provident fund, employees'' state insurance, income tax, sales tax, wealth tax, service tax, custom duty, excise duty, cess and other material statutory dues applicable to it.According to the information and explanations given to us, no undisputed arrears of statutory dues were outstanding as at March 31,2013 for a period of more than six months from the date they became payable.

(b) There are no cases of non deposit with appropriate authorities of disputed dues of sales tax / income tax / custom tax / wealth tax / service tax/ excise authorities.

(x) The Company has been registered for a period of less than five years and hence we are not required to comment on the accumulated losses.The company has not incurred cash losses in the current financial year but has incurred 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 a financial institution, bank or debenture holders.

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

(xiii) In our opinion, the provisions of any special statute applicable to Chit Fund, Nidhi or Mutual Benefit Fund/Societies are not applicable to the Company.

(xiv) In our opinion and according to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debentures and other investments other than temporary deployment hence the provisions of the clause 4(xiv) of the Companies (Auditor''s Report) Order, 2003 are not applicable to the Company.

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

(xvi) The Company has not taken any term loan during the period.

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

(xviii) The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Companies Act, 1956 during the period, hence the provisions of the clause 4(xviii) of the Companies (Auditor''s Report) Order, 2003 are not applicable to the Company.

(xix) The Company has not issued debentures during the period and hence, the question of creating securities in respect thereof does not arise.

(xx) In the absence of sufficient audit evidence we are unable to comment on end use of money raised by public issues as disclosed in the notes to the financial statements.

(xxi) On the basis of our examination and according to the information and explanation given to us, no fraud, on or by the Company, has been noticed or reported during the course of our audit.

For Kanu Doshi Associates

Chartered Accountants

Firm registration No. 104746W

Jayesh Parmar

Partner

Membership No.: 45375

Place: United Kingdom

Date : May 23, 2013


Mar 31, 2012

1. We have audited the attached Balance Sheet of Birla Pacific Medspa Limited as at March 31, 2012 and the Statement of Profit and Loss and also the Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on 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 (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, according to the information and explanations given to us during the course of the audit and on the basis of such checks as we considered appropriate, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

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

(i) 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;

(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 these books subject to our observation mentioned in paragraph (vi) below;

(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, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the Companies (Accounting Standards) rules, 2006 and / or Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 subject to our observation mentioned in paragraph (vi) below;

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

(vi) The Company has deferred the accumulated revenue expenditure of Rs. 89,755,020 (previous period Rs. 55,638,638 plus current period Rs. 34,116,382) being in the nature of Brand Building Expenses which is not in accordance with Accounting Standard 26 "Accounting for Intangibles". Due to the above, the loss as reported by the profit and loss account is understated by Rs. 34,116,382 and reserve of the company is overstated to the extent of Rs. 89,755,020. Our report for the earlier period contained similar observation;

(vii) In our opinion and to the best of our information and according to the explanations given to us, the said accounts, subject to our observation in paragraph (vi) above and the other notes thereon, 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 on March 31, 2012; and

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

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

ANNEXURE TO THE AUDITOR'S REPORT

(Referred to in paragraph 3 of our Report of even date on the accounts of Birla Pacific Medspa Limited for the period ended March 31, 2012)

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

b. As explained to us, the company has not physically verified any of the fixed assets during the year. However, there is a phased programme of verification which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets.

c. There has been no disposal of substantial part of fixed assets during the period, which may affect the going concern status of the Company.

(ii) a. As explained to us, inventories were physically verified during the period by the management at reasonable intervals.

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

c. In our opinion and according to the information and explanation given to us, the company has maintained proper records of its inventories and no material discrepancies were noticed on such physical verification.

(iii) a. The Company has granted unsecured loans to 7 companies covered in the register maintained under section 301 of the Companies

Act, 1956.The maximum amount involved during the period is Rs.211,750,000 and the period end balance is Rs.211,750,000.

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

c. In our opinion, principal amount and interest were received regularly as per the terms of the agreement except interest accrued & due but not received amounting to Rs.382,432.

d. In our opinion, the Company has taken reasonable steps to recover overdue amount.

e. The Company has taken interest free unsecured loans from two companies covered in the register maintained under section 301 of the Companies Act, 1956. The maximum amount involved during the period is Rs. 2,500,000 and the period end balance is Rs. 1,562,450.

f. In our opinion, the terms and conditions on which loans have been taken from parties listed in the register maintained under section 301 of the Companies Act, 1956 are not, prima facie, prejudicial to the interest of the Company;

g. In the absence of stipulations in respect of the terms of repayment of principal amount of the aforesaid loans, we are unable to comment whether payment of principal is regular.

(iv) In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business with regard to purchase of fixed assets and with regard to 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.

(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 needed to be entered into the register have been so entered.

b. In the absence of comparables in certain transactions, we are unable to comment whether the transactions made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and exceeding Rs.5,00,000/- in respect of each party during the period have been made at prices which are reasonable having regard to prevailing market price at the relevant time.

(vi) The Company has not accepted any deposits from the public within the meaning of the provisions of Section 58A and 58AA or any other relevant provisions of the Companies Act, 1956 and rules made thereunder. Hence, the clause (vi) of the order is not applicable.

(vii) The Company has no formal internal audit department as such. However, its control procedures ensure reasonable internal checking of its financial and other records.

(viii) We have been informed that the Central Government has not prescribed maintenance of cost records under section 209 (1) (d) of the Companies Act, 1956.

(ix) (a) According to the information and explanations given to us and on the basis of records produced before us, the Company is

generally regular in depositing with appropriate authorities undisputed statutory dues including provident fund, employees' state insurance, income tax, sales tax, wealth tax, service tax, custom duty, excise duty, cess and other material statutory dues applicable to it. According to the information and explanations given to us, no undisputed arrears of statutory dues were outstanding as at March 31, 2012 for a period of more than six months from the date they became payable.

(b) There are no cases of non deposit with appropriate authorities of disputed dues of sales tax / income tax / custom tax / wealth tax / service tax/ excise authorities.

(x) The Company has been registered for a period of less than five years and hence we are not required to comment on the accumulated losses. The company has incurred cash losses in the current financial period as well as the immediately preceding financial period.

(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 institution, bank or debenture holders.

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

(xiii) In our opinion, the provisions of any special statute applicable to Chit Fund, Nidhi or Mutual Benefit Fund/Societies are not applicable to the Company.

(xiv) In our opinion and according to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debentures and other investments other than temporary deployment hence the provisions of the clause 4(xiv) of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company.

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

(xvi) The Company has not taken any term loan during the period.

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

(xviii)The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Companies Act, 1956 during the period, hence the provisions of the clause 4(xviii) of the Companies (Auditor's report) Order, 2003 are not applicable to the Company.

(xix) The Company has not issued debentures during the period and hence, the question of creating securities in respect thereof does not arise.

(xx) We have verified the end use of money raised by public issues as disclosed in the notes to the financial statements. (See note 40)

(xxi) On the basis of our examination and according to the information and explanation given to us, no fraud, on or by the Company, has been noticed or reported during the course of our audit.

For Kanu Doshi Associates

Chartered Accountants

Place: Mumbai Jayesh Parmar

Date: May 25, 2012 Partner

Mem. No.: 45375 Firm registration No. 104746W

 
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