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Auditor Report of D B Realty Ltd.

Mar 31, 2014

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

Management''s Responsibility for the Financial Statements

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting 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.

Auditors'' 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, but not for the purpose of expressing an opinion on the effectiveness of the company''s internal control. An audit also includes evaluating the appropriateness of accounting 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 audit opinion.

Opinion

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

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

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

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

Emphasis of Matter

Attention is invited to:

1. Note No. 11.4 of the financial statements regarding return on the investments of Rs. 14,276,960,804 in preference shares of an entity. As explained by the Management, investments in this entity is considered strategic and long term in nature and the current market value and future prospects of these investments are significantly in excess of company''s investment in this entity.

2. Note No. 12.2 of the financial statements regarding security deposits of Rs. 3,575,000,000 given to various related parties for acquisition of development rights. As explained by management, the Company is in process of obtaining necessary approvals with regard to such properties and that the current market values of such properties are significantly in excess of their carrying values and are expected to achieve adequate profitability on substantial completion of their projects.

3. Note No. 12.4 of the financial statements regarding non availability of contract documents in respect of project advances of Rs. 781,945,000 provided by the Company to its two Associate Companies.

4. Note No. 15 of the financial statements regarding the status of the projects and the opinion framed by the Company regarding realizable value of the cost incurred, being a technical matter, relied upon by us.

5. Note No. 21 of the financial statements which includes share of losses (net) from investment in two partnership firms and LLPs (the ''Firms'') aggregating Rs. 11,245,491 and investments in these Firms aggregating Rs. 1,455,037,477 (Refer Note 11 & 14). These are based on financial statements of the firms as audited by other auditors, whose reports have been furnished to us and which have been relied upon by us.

6. Note No. 21.1 of the financial statements regarding share of loss from partnership firms which includes Rs. 1,525,214, which is based on the accounts as approved by only the Company, in its capacity as one of the partners of the firm. These financial statements have not yet been approved by other two partners.

7. Note No. 27 of the financial statements regarding guarantees issued and securities of Rs. 28,973,772,400 provided by the Company to banks and financial institutions on behalf of various entities, which are significant in relation to the net worth of the Company. In the opinion of the Company, these are not expected to result into any financial liability on the Company.

8. The following disclosures in audited financial statements in respect of a partnership firm viz. Dynamix Realty (''Dynamix'') where the Company is one of the partners:

I. Recoverability of debtors, loans granted and interest receivable aggregating Rs. 285,340,266, out of which unsecured loan of Rs. 87,150,000 granted to Companies in which Directors of the Company are interested. (Refer Note 28A (i))

These amounts are considered as good and recoverable as stated in the Note.

II. Allegations made by the Central Bureau of Investigation (CBI) relating to the 2G Spectrum case {Refer Note 28A (ii)} This matter is sub-judice and the impact, if any, of the outcome is unascertainable at this stage.

9. Note No. 29 to 31 of the financial statements regarding matters which are sub-judice. Based on the company''s assessment of the outcome, no adjustments are considered necessary in respect of recoverability of balances as at March 31, 2014 for loans and advances aggregating Rs. 1,657,901,131 and investments of Rs. 312,018,720.

10. Note No. 32 (b) of the financial statements regarding MAT Credit Entitlement of Rs. 37,500,000, which is based on the judgment of management.

11. Note No. 33 of the financial statements regarding the company''s investments aggregating Rs. 408,054,120 in and loans & advances aggregating Rs. 2,625,383,640 to certain subsidiaries, jointly controlled entities and associates, which have incurred losses and also have negative net worth. As explained in the Note, investments in these entities are considered strategic and long term in nature, the entities are in early stage of real estate development and in the opinion of the Company, have current market values of certain properties significantly in excess of carrying values and are expected to achieve adequate profitability on substantial completion of their projects.

12. Note No. 40 of the financial statements regarding attachment order issued by adjudicating authority under Prevention of Money Laundering Act (PML Act), by which the company''s assets amounting to Rs. 521,621,696 have been attached on August 30, 2011. Out of these assets, adjudication authority has taken over the bank balance of Rs. 6,892,967. This matter is sub-judice and the impact, if any, of the outcome is unascertainable at this stage.

13. Note No. 43 of the financial statements regarding manner of recognition of the company''s share in Association of Persons. Our opinion is not qualified in respect of the above matters.

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;

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

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

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

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

ANNEXURE TO AUDITORS'' REPORT

[Referred to in paragraph 1 under ''Report on Other Legal and Regulatory Requirements'' of the Independent Auditors'' Report of even date to the members of DB Realty Limited on the financial statements for the year ended on 31st March, 2014]

(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, no substantial part of fixed assets has been disposed off by the Company during the year.

(ii) (a) Inventories comprise of expenditure incurred on acquisition of plot of lands and tenancy rights, development rights

and other expenditure on construction and development thereof. 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, except for records in respect of payments to tenants, where documentation needs to be considerably strengthened by the Company. No material discrepancies were noticed on physical verification carried out at the end of the year.

(iii) (a) The Company has granted loan to sixteen Companies covered in the register maintained under section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs. 5,529,351,993 and the year- end balance was Rs. 3,971,649,275.

(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, prima facie, not prejudicial to the interest of the Company. Attention is also invited to Para

11 of Emphasis of Matter in the Auditors'' Report of even date.

(c) These loans (including interest thereon) are repayable on demand and there are no repayment schedules. As informed, the Company has not demanded repayment of any such loans and interest during the year, thus, there has been no default on the part of the parties to whom the money has been lent.

(d) There is no overdue amount of loans granted to Companies, Firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956.

(e) The Company had taken loans from three Companies covered in the register maintained under section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs. 967,141,669 and the year-end balance of loans taken from such parties was Rs. 717,034,789.

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

(g) Since these loans (including interest thereon) are repayable on demand and there is no repayment schedule, the question of repayment being regular, does not arise.

(iv) In our opinion and according to the information and explanations given to us, having regard to the explanation that prelaunch advances of Rs. 44,143,700 from prospective buyers where the Company is in the process of finalizing the term sheets/ agreements, supporting receipts are in accordance with general industry practice; 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. As regards project inventory, the Company needs to strengthen internal controls for (a) tenancy payments/ compensation and (b) project contracting (including proper documentation for comparative quotations and machinery/mobilization advances) to be commensurate with the size of the Company and the nature of its business. During the course of our audit, we have not observed any continuing failure to correct major weakness in internal control system of the Company.

(v) (a) According to the information and explanations 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) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangements exceeding value of Rs. five lakhs have been entered into during the financial year at prices which are reasonable having regard to the prevailing market prices at the relevant time. However, in respect of an investment of Rs. 5,054,256,000 made during the year in shares in an entity, due to the nature of such transaction, we are unable to comment upon the prevailing market price.

(vij In our opinion and according to the information and explanations given to us, 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.

(vii) The Company has appointed internal auditors for the financial year 2013-14 on 14thApril, 2014. Their report is not yet received.

(viii) We have been informed by the Management that the Company has maintained the cost records and accounts, pursuant to the Rules made by the Central Government of India, under clause (d) of sub-section (1) of Section 209 of the Act. However, these records have not been provided to us for our verification.

(ix) (a) Undisputed statutory dues including provident fund, investor education and protection fund, employees'' state insurance,

income-tax, sales-tax, service tax, 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, 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. The details of such outstandings in respect of service tax are as follows:

Name of the Nature of the dues Amount Period to which the statute (Rs ) amount relates

Finance Act, Service Tax 455,163 2010 to 2012 1994 Liability and interest thereon

Name of the Due Date Date of statute Payment

Finance Act, Various Not paid 1994 Periods

(c) According to the information and explanation given to 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.

(x) The Company does not have accumulated losses at the end of the financial year. However, the Company has incurred cash losses during the current financial year. It has not incurred cash losses during the 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 and banks or debenture holders except for an interest of Rs. 172,808 due for payment on 31st March 2014.

(xii) According to the information and explanations 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 (xiii) of paragraph 4 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 in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause (xiv) of paragraph 4 of the Companies (Auditor''s Report) Order, 2003 (as amended) are not applicable to the Company.

(xv) In our opinion and according to the information and explanations given to us, the terms and conditions of the guarantees of Rs. 25,673,772,400 given by the Company, for loans taken by others from banks or financial institutions, are prejudicial to the interest of the Company.

(xvi) In our opinion, except for Rs. 196,134,000, the term loans have been applied for the purpose for which the loans were raised. Out of this, Rs. 1,184,000 are lying in the current account.

(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 the Company has used funds of Rs. 2,322,589,879 raised on short-term basis for long-term investment.

(xviii) According to the information and explanation given to us, 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

(xix) The Company did not have outstanding debentures during the year and hence this clause is not applicable.

(xx) The Company has not raised money by way of public issue during the year.

During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted 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. However, we are informed that as explained in Note 28, during the financial year 2010-11, the CBI in its charge sheet filed in connection with irregularities in the allotment of 2G telecom license, has accused certain Directors of the Company (in their capacity as promoters of a telecom licensee Company). Two other Management Personnel of the Company have also been charge sheeted in their capacity as Directors of another Company (Refer Note 40) which is alleged to have paid an amount of Rs. 2,000,000,000 as illegal gratification in the same connection. As explained to us, the Company is not directly a party to the allegations and the matter is sub-judice in the Court of Special Judge (CBI), New Delhi.

For Haribhakti & Co. Chartered Accountants Firm Registration No.103523W

Chetan Desai Partner Membership No. 17000

Mumbai: 24th May, 2014


Mar 31, 2013

Report on the Financial Statements

We have audited the accompanying fi nancial statements of DB Realty Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2013, and the Statement of Profi t and Loss and Cash Flow Statement for the year then ended and a summary of signifi cant accounting policies and other explanatory information.

Management''s Responsibility for the Financial Statements

Management is responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position, fi nancial performance and cash fl ows 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 fi nancial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditors'' Responsibility

Our responsibility is to express an opinion on these fi nancial 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 fi nancial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditors'' judgment, including the assessment of the risks of material misstatement of the fi nancial 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 fi nancial 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 fi nancial statements.

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

Opinion

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

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

(b) in the case of the Statement of Profi t and Loss, of the profi t for the year ended on that date; and

(c) in the case of the Cash Flow Statement, of the cash fl ows for the year ended on that date.

Emphasis of Matter

1. We draw attention to Note No. 37 regarding managerial Remuneration of Rs. 6,000,000 paid by the Company has exceeded the limits specifi ed under Schedule XIII read with Sec 349, 350 & 198 of the Companies Act, 1956. We are informed that the Company will recover the excess remuneration of Rs. 6,000,000 from the relevant Directors during FY 2013-14.

2. We draw attention to Note No. 42 regarding attachment order issued by adjudicating authority under Prevention of Money Laundering Act (PML Act), by which the Company''s assets amounting to Rs. 521,621,696 have been attached on August 30, 2011. This matter is sub-judice and the impact, if any, of the outcome is unascertainable at this stage.

3. We draw attention to Note No. 21 which includes share of losses (net) from investment in partnership fi rms and LLPs (the ‘Firms'') aggregating Rs. 93,097,413 and investments in these Firms aggregating Rs. 2,613,624,756 (Refer Note 11 & 14); are based on fi nancial statements of the fi rms as audited by other auditors whose reports have been furnished to us and which have been relied upon by us.

4. We draw attention to the following disclosures in audited fi nancial statements in respect of a partnership fi rm viz. Dynamix Realty (‘Dynamix'') where the Company is one of the partner :

I. Outstanding receivables of Rs 737,420,341 as at March 31, 2013 from Companies in which Directors of the Company are interested. (Refer Note 30 (A)(i) (1) and (2))

These amounts are considered as good and recoverable as stated in the said disclosure.

II. Allegations made by the Central Bureau of Investigation of India ("CBI") relating to the 2G Spectrum case {Refer Note 27 (A) (iii)}

This matter is sub-judice and the impact, if any, of the outcome is unascertainable at this stage.

5. We draw attention to note number 27, regarding guarantees issued and securities provided aggregating Rs. 24,148,098,400 issued by the Company to banks and fi nancial institutions on behalf of various entities, which are signifi cant in relation to the net worth of the Company at the year end. In the opinion of the Company, these are not expected to result into any fi nancial liability to the Company.

6. We draw attention to note number 35 regarding the Company''s investments aggregating Rs. 2,046,339,120 in and loans and advances aggregating Rs. 3,043,702,747 to, certain subsidiaries, joint controlled entities and associates which have incurred losses and also have negative net worth as at the year end. As explained in the said Note, investments in these entities are considered strategic and long term in nature, the entities are in early stage of real estate development and in the opinion of the Company, have current market values of certain property signifi cantly in excess of carrying values and are expected to achieve adequate profi tability on substantial completion of their projects.

7. We draw attention to Note No. 31 to 33 regarding matters which are sub-judice, based on the Company''s assessment of the outcome, no adjustments are considered necessary in respect of recoverability of balances as at March 31, 2013 for loans and advances aggregating Rs. 1,676,350,333 and investments of Rs. 312,018,720.

8. We draw attention to Note No. 15 of the fi nancial statements regarding the status of the projects and the opinion framed by the Company regarding realizable value of the cost incurred, being a technical matter, relied upon by us.

9. We draw attention to note no 46 w.r.t manner of recognition of Company''s share in Association of Persons. Our opinion is not qualifi ed in respect of the above matters.

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 specifi ed in paragraphs 4 and 5 of the Order.

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

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

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

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

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

ANNEXURE TO AUDITORS'' REPORT

[Referred to in paragraph 1 under ‘Report on Other Legal and Regulatory Requirements'' of the Independent Auditors'' Report of even date to the members of DB Realty Limited on the fi nancial statements for the year ended on 31st March, 2013]

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

(b) All the fi xed assets have not been physically verifi ed by the management during the year but there is a regular programme of verifi cation 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 verifi cation.

(c) In our opinion and according to the information and explanations given to us, no substantial part of fi xed assets has been disposed off by the Company during the year.

(ii) (a) Inventories comprise of expenditure incurred on acquisition of plot of lands and tenancy rights, development rights and other expenditure on construction and development thereof. The inventory has been physically verifi ed by the management during the year. In our opinion, the frequency of verifi cation is reasonable.

(b) The procedures of physical verifi cation 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, except for records in respect of payments to tenants where documentation needs to be considerably strengthened by the Company and no material discrepancies were noticed on physical verifi cation carried out at the end of the year.

(iii) (a) The Company has granted loan to seventeen companies covered in the register maintained under section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs. 5,321,461,703 and the year- end balance of loans granted to such parties was Rs. 4,825,061,807.

(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. Attention is invited to Para 6 of Auditors'' Report of even date.

(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) There is no overdue amount of loans granted to companies, fi rms or other parties listed in the register maintained under section 301 of the Companies Act, 1956.

(e) The Company had taken loan from two companies covered in the register maintained under section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs. 964,832,142 and the year-end balance of loans taken from such parties was Rs. 714,725,262.

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

(g) Since the said loans (including interest thereon) are repayable on demand except for one of the loan taken from a subsidiary and there is no repayment schedule, the question of repayment being regular does not arise. In respect of the loan from a subsidiary, it is repayable after three years from acceptance and hence, the question of repayment being regular does not arise.

iv) In our opinion and according to the information and explanations given to us, having regard to the explanation that prelaunch advances from prospective buyers where the Company is in the process of fi nalizing the term sheets/ agreements, supporting receipts for aggregate consideration of Rs. 45,793,700 are in accordance with general industry practice; 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, fi xed assets and with regard to the sale of goods and services. As regards project inventory, the Company needs to strengthen internal controls for (a) tenancy payments/ compensation (as stated in ii (c) above) and (b) project contracting (including proper documentation for comparative quotations and machinery/mobilization advances) to be commensurate with the size of the Company and the nature of its business. During the course of our audit, we have not observed any continuing failure to correct weakness in internal control system of the company.

(v) (a) According to the information and explanations 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) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangements exceeding value of Rs fi ve lakhs have been entered into during the fi nancial year at prices which are reasonable having regard to the prevailing market prices at the relevant time except for certain transactions in respect of (1) aircraft charges of Rs. 10,048,565 (referred to in iv above) awarded to an entity and approved by the Board of Directors where comparable quotations for additional scope of work were not available and in respect of which we are unable to comment.

(vij In our opinion and according to the information and explanations given to us, 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.

(vii) The Company has an internal audit system, the scope and coverage of which, in our opinion requires to be enlarged to be commensurate with the size and nature of its business.

(viii) We have been informed by the Management regarding 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. However, the same records have not been provided to us for our verifi cation.

(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, service tax, cess and other material statutory dues applicable to it.

(c) According to the information and explanation given to us, there are no dues of income tax, service tax and cess which have not been deposited on account of any dispute.

(x) In our opinion, the accumulated losses of the Company are not more than fi fty percent of its net worth. Further, the Company has not incurred cash losses during the fi nancial year covered by our audit and the immediately preceding fi nancial 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 fi nancial institution and bank. The Company has not issued any debentures during the year.

(xii) According to the information and explanations 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 benefi t fund/ society. Therefore, the provisions of clause (xiii) of paragraph 4 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 in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause (xiv) of paragraph 4 of the Companies (Auditor''s Report) Order, 2003 (as amended) are not applicable to the Company.

(xv) In our opinion and according to the information and explanations given to us, the terms and conditions of the guarantees given by the company, for loans taken by others from banks or fi nancial institutions during the year, are not prejudicial to the interest of the company.

The Company had given guarantees (as referred in Note 27, 28 & 29) on behalf of four non- group entities and the balance of Rs 17,739,848,400 (previous year Rs 15,589,597,000) is subsisting as at the year end. As informed to us, the Board of Directors have approved the same considering the long term business interests of the Company and the same were consented to in writing by the non-promoter group shareholders in those years. Based on approvals/ written consents/ control relationships, the terms and conditions of such guarantees have been regarded as, prima facie not prejudicial to the interests of the Company.

(xvi) In our opinion, the term loans have been applied 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 the Company has used funds raised on short term basis for long term investment. The Company has borrowed loan amounting to Rs. 61 crores which would fall due for repayment six months from the date of acceptance. The Company has invested Rs. 34.74 Crores out of the same in preference shares in one of the company under the same management.

(xviii) According to the information and explanation given to us, 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

(xix) The Company did not have outstanding debentures during the year and hence this clause is not applicable.

(xx) We have verifi ed that the end use of money raised by public issues from the draft prospectus fi led with SEBI, the offer document and as disclosed in the note 45 to the fi nancial statements.

(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 such case by the management. However, we are informed that during the fi nancial year 2010-11, the CBI in its charge sheet fi led in connection with irregularities in the allotment of 2G telecom license, has accused the Managing Directors of the Company (in their capacity as promoters of a telecom licensee company – Swan Telecom Pvt Ltd (now known as Etisalat DB Telecom Pvt Ltd)). Two other Key Management Personnel of the Company have also been charge sheeted in their capacity as Directors of another Company (Refer Note 42) which is alleged to have paid an amount of Rs 2,000,000,000 as illegal gratifi cation in the same connection. As explained to us, the Company is not directly a party to the allegations and the matter is sub-judice in the Court of Special Judge (CBI), New Delhi.

For Haribhakti & Co.

Chartered Accountants

Firm Registration No.103523W

Chetan Desai

Partner

Membership No.: 17000

Place: Mumbai

Date: May 18, 2013


Mar 31, 2012

1. We have audited the attached Balance Sheet of D B Realty Limited ('the Company') as at March 31, 2012 and also the Statement of Profit and Loss and the Cash Flow Statement of the Company for the year ended on that date, both 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. We draw your attention to the followings matters:

a) Managerial Remuneration of Rs. 15,709,677 paid by the Company has exceeded the limits specified under Schedule XIII read with Sec 349, 350 & 198 of the Companies Act, 1956, by Rs. 8,350,386. We are informed that the Company has recovered the excess remuneration from the relevant directors during FY 2012-13.

b) With reference to Note no 38 regarding provisional attachment order issued by adjudicating authority under prevention of Money Laundering Act (PML Act), by which the Company's assets amounting to Rs. 521,621,696 has been attached on August 30, 2011. This matter is sub-judice and the impact, if any, of the outcome is unascertainable at this stage.

c) Share of profit (net) from investment in partnership firms and LLPs (the 'Firms') aggregating Rs. 486,580,981 and investments in these Firms aggregating Rs. 5,752,683,419 (Refer Note 11 & 14); are based on financial statements of the firms as audited by another auditors whose reports have been furnished to us and which have been relied upon by us.

d) The audited financial statements of one of the firms viz. Dynamix Realty ('Dynamix'), include disclosure in respect of :

I. Outstanding receivables of Rs. 697,844,175 as at March 31, 2012 from Companies in which directors of the Company are interested. (Refer Note 27 (A) 1 and 2 ) These amounts are considered as good and recoverable as stated in the said disclosure.

II. Allegations made by the Central Bureau of Investigation of India ("CBI") relating to the 2G Spectrum case {Refer Note 27 (A)(iv)}

This matter is sub-judice and the impact, if any, of the outcome is unascertainable at this stage.

e) With reference to note number 26, regarding guarantees aggregating Rs. 15,589,597,000 issued by the Company to banks and financial institutions on behalf of two entities (in which some of directors of the Company are interested), which are significant in relation to the net worth of the Company at the year end. In the opinion of the Company, these are not expected to result into any financial liability to the Company.

f) With reference to note number 32 regarding the Company's investments aggregating Rs. 2,044,533,140 in and loans and advances aggregating Rs. 3,172,489,420 to, certain subsidiaries, joint controlled entities and associates which have incurred losses and also have negative net worth as at the year end. As explained in the said Note, investments in these entities are considered strategic and long term in nature, the entities are in early stage of real estate development and in the opinion of the Company, have current market values of certain property significantly in excess of carrying values and are expected to achieve adequate profitability on substantial completion of their projects. Accordingly, the said investments and loans and advances are considered good and recoverable by the Company. Further, the Company has invested Rs. 24,117,000 in one of the Joint Ventures. In the absence of financial statements of the said joint venture, we are not able to comment upon its impairment, if any.

g) With reference to note number 28 to 30 regarding matters under litigation and are sub-judice, based on the Company's assessment of the outcome, no adjustments are considered necessary in respect of recoverability of balances as at March 31, 2012 for loans and advances aggregating Rs. 1,640,849,994 and investments of Rs. 312,018,720.

4. Further to the matters referred to in paragraph 3 above, as required by the companies (Auditor's Report) Order, 2003, (as amended), issued by the Central Government of India in terms of sub-section (4A) of Section 227 of 'the Companies Act, 1956' (the 'Act') and on the basis of such checks of the books and records of the Company as we considered appropriate and according to the information and explanations given to us, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

5. Further to our comments in the paragraph 3 and 4 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 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 are in compliance with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956;

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

vi. 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.

6. The financial Statement of the Company for the year ended March 31, 2011, were audited by another auditor who had expressed an unmodified opinion on those statements on June 8, 2011.

ANNEXURE TO AUDITORS' REPORT

[Referred to in paragraph 4 of the Auditors' Report of even date to the members of DB Realty Limited on the financial statements for the year ended on 31st March, 2012]

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

(b) The fixed assets were physically verified during the year by the Management in accordance with a regular programme of verification which, in our opinion, provides for physical verification of all the fixed assets at reasonable intervals. According to the information and explanation given to us, no material discrepancies were noticed on such verification.

(c) In our opinion and according to the information and explanations given to us, no substantial part of fixed assets has been disposed of by the Company during the year.

(ii) (a) Inventories comprise of expenditure incurred on acquisition of plot of lands and development thereof. As explained to us, physical verifications were carried out during the year by the management at reasonable intervals.

(b) In our opinion and according to the information and explanations given to us, keeping in view the nature of inventory, the procedures of physical verification by way of site visits by the management are 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 explanations given to us, the adequate inventory records have been maintained by the Company, except for records in respect of payments to tenants where documentation needs to be considerably strengthened by the Company. As explained to us, no material discrepancies were noticed on physical verification of inventory by the management.

(iii) In respect of the loans, secured or unsecured, granted or taken by the Company to or from companies, firm or other parties covered in the register maintained under section 301 of the Companies Act, 1956, according to the information and explanations given to us:

(a) The Company has granted loans aggregating Rs. 3,668,971,775 to seventeen parties during the year. At the year end, the outstanding balances of such loans aggregated Rs. 4,160,996,605 to thirteen parties and the maximum amount involved during the year was Rs. 12,076,285,986.

(b) The aforesaid loans are interest free except for loans of Rs. 1,510,017,748. Based on explanations received from the management none of the other terms and conditions is prima facie, prejudicial to the interest of the Company. Attention is invited to Para 3(f) of Auditors' Report of even date.

(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) There is no overdue amount in excess of Rs. 1 lakh in respect of loans granted to companies, firms and other persons listed in register maintained under sec 301 of the Companies Act, 1956.

(e) The Company has taken loans from two parties during the year. As at the year end, the outstanding balance of such loans taken from one party aggregated Rs. 86,632,142 and the maximum amount involved during the year was Rs. 1,590,331,873.

(f) According to the information and explanations given to us, the loans are interest free except one loan which is repaid fully during the year and other terms and conditions are, prima facie not prejudicial to the interest of the Company.

(g) Since the said loans (including interest thereon) are repayable on demand and there is no repayment schedule, the question of repayment being regular does not arise.

(iv) In our opinion and according to the information and explanations given to us, having regard to the explanation that prelaunch advances from prospective buyers where the Company is in the process of finalizing the term sheets/ agreements, supporting receipts for aggregate consideration of Rs. 47,676,200 are in accordance with general industry practice; adequate internal control systems exist for sale of apartments and for purchase of fixed assets. As regards project inventory, the Company needs to strengthen internal controls for (a) tenancy payments/ compensation (as stated in ii (c) above) and (b) project contracting (including proper documentation for comparative quotations and machinery/mobilization advances) to be commensurate with the size of the Company and the nature of its business. During the course of our audit, we have not observed continuing failure to correct major weakness.

(v) In respect of contracts or arrangements 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:

(a) 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) Where each such transaction is in excess of rupees five lakhs in respect of each party, the transactions have been made at prices which are prima facie reasonable having regard to the prevailing market prices at the relevant time except for certain transactions in respect of (1) aircraft charges of Rs. 5,625,300 and (2) civil contract entered of Rs. 25,687,118 (referred to in (iv) above) awarded to an entity and approved by the Board of Directors where comparable quotations for additional scope of work were not available and in respect of which we are unable to comment.

(vi) In our opinion and according to the information and explanations given to us, 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.

(vii) A firm of chartered accountants has been appointed by the management for carrying out the internal audit. In our opinion, the function needs to be strengthened as regards time frame for reporting, coverage and periodicity of reporting so as to be commensurate with the size of the Company and the nature of its business.

(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. However, these records have not been provided to us for our verification.

(ix) According to the information and explanations given to us, in respect of statutory and other dues:

(a) The Company is generally regular in depositing undisputed statutory dues including provident fund, employees' state insurance, income-tax, wealth tax, cess and any other material statutory dues as applicable to it with the appropriate authorities during the year.

(b) No undisputed amounts payable in respect of aforesaid were in arrears as at 31st March 2012 for a period of more than six months from the date they became payable except service tax on booking of flats / premises of Rs. 455,163/- has not been deposited with the Government authorities.

(c) According to the information and explanations given to us, no dues are outstanding of income tax, service tax, provident fund, employees' state insurance and cess, for more than six months on account of any dispute.

(x) There are no accumulated losses of the Company as on 31st March 2012. Further, the Company has not incurred cash losses during the financial year covered by audit and in the immediately preceding financial year.

(xi) According to the information and explanations given to us, the Company has not defaulted in repayment of dues to a financial institution and banks. The Company has not issued any debentures during the year.

(xii) According to the information and explanations given to us and based on the documents and records produced before 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 (xiii) of paragraph 4 of the Companies (Auditor's Report) Order, 2003 (as amended) are not applicable to the Company.

(xiv) In our opinion and according to the information and explanations given to us, the Company is not dealing in or trading in shares, securities, debentures and other investments. The Company has redeemed surplus funds invested in mutual funds, in respect of which proper records of the transactions and contracts have been maintained and timely entries have beenRs. made therein. All shares, securities and other investments have been held by the Company in its own name.

(xv) The Company had given guarantees (as referred in Note 26) in the earlier years on behalf of two entities and the balance of Rs. 15,589,597,000 is subsisting as at the year end. As informed to us, the Board of Directors has approved this in the past considering the long term business interests of the Company and the same were consented to in writing by the non-promoter group shareholders in those years. Based on approvals / written consents / control relationships, the terms and conditions of such guarantees have been regarded as, prima facie, not prejudicial to the interests of the Company.

(xvi) In our opinion, the term loan has been applied 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, funds raised on short term basis have prima facie not been used during the year for long term investment.

(xviii) According to the information and explanation given to us, 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.

(xix) The Company did not have outstanding debentures during the year and hence this clause is not applicable.

(xx) The Management has disclosed the end use of money raised by public issue at Note 39. We have verified the same with monitoring report issued by monitoring agency (Punjab National Bank, Capital Market Service Branch, Mumbai).

(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 material fraud on or by the company, noticed or reported during the year, nor have we been informed of such case by the management. However, we are informed that during the previous year, the CBI in its charge sheet filed in connection with irregularities in the allotment of 2G telecom license, has accused the Managing Directors of the Company (in their capacity as promoters of a telecom licensee company – Swan Telecom Pvt Ltd (now known as Etisalat DB Telecom Pvt Ltd)). Two other Key Management Personnel of the Company have also been charge sheeted in their capacity as Directors of another Company (Refer Note 38) which is alleged to have paid an amount of Rs. 2,000,000,000 as illegal gratification in the same connection. As explained to us, the Company is not directly a party to the allegations and the matter is sub-judice in the Court of Special Judge (CBI), New Delhi.

For Haribhakti & Co.

Chartered Accountants

Chetan Desai

Partner

Membership No.: 17000

Place: Mumbai

Date: May 26, 2012


Mar 31, 2011

1. We have audited the attached Balance Sheet of DB Realty Limited (the "Company") as at March 31, 2011 and the Profit and Loss Account and Cash Flow Statement of the Company for the year ended on that date, both 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 misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and the disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. We draw your attention to the following matters more fully described in notes to Schedule 15 (B) to the financial statements:

a) Share of profit (net) from investment in partnership firms (the 'firms'), as is stated in the Profit & Loss account and aggregating Rs. 2,812,282,633, which represents the Company's share of profit (net) from its investments in three firms; and investments in these firms aggregating Rs. 7,339,689,382 (Refer Schedule 6); are based on financial statements of the firms as audited by other auditors whose reports have been furnished to us. (Refer Note 3)

b) The audited financial statements of one of the firms viz. Dynamix Realty ('Dynamix') include disclosures in respect of:

(i) outstanding receivables which include dues aggregating Rs. 4,476,974,912 as at March 31, 2011 from companies in which directors of the Company are interested. (Refer Note 3 (a) (i-ii))

These amounts constitute a significant portion of deployment of Dynamix's funds and are considered as good and recoverable as stated in the said note. Consequently, the Company's investment in Dynamix as at March 31, 2011 aggregating Rs. 6,302,022,746 is considered good of recovery.

(ii) allegations made by the Central Bureau of Investigation of India ('CBI') relating to the 2G Spectrum Case (Refer Note 3(c)).

This matter is sub-judice and the impact, if any, of the outcome is unascertainable at this stage.

c) Note 2 regarding guarantees aggregating Rs. 14,691,700,000, issued by the Company to banks and financial institutions on behalf of two entities (in which some of the directors of the Company are interested), which are significant in relation to the net worth of the Company as at the year end. In the opinion of the Company, these are not expected to result into any financial liability to the Company.

d) Note 8 regarding the Company's investments aggregating Rs. 148,933,200 in and loans and advances aggregating Rs. 5,843,995,961, to certain subsidiaries, jointly controlled entities and associates which have incurred losses and also have negative net worth as at the year end. As explained in the said Note, investments in these entities are considered strategic and long term in nature, the entities are in early stages of real estate development and in the opinion of the Company, have current market values of certain property significantly in excess of carrying values and are expected to achieve adequate profitability on substantial completion of their projects. Accordingly, the said investments and loans and advances are considered good and recoverable by the Company.

e) Notes 4 to 6 regarding matters under litigation. As these matters are sub-judice, based on the Company's assessment of the outcome, no adjustments are considered necessary in respect of recoverability of balances as at March 31, 2011 for loans and advances aggregating Rs. 1,875,757,604 and investments of Rs. 312,018,720.

4. Further to the matters referred to in paragraph 3 above, as required by the Companies (Auditors' Report) Order, 2003 (CARO) issued by the Central Government in terms of section 227 (4A) of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

5. Further to the matters referred to in paragraph 3 above and the Annexure referred to in paragraph 4 above, we report as follows:

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 it appears from our examination of the 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, the Profit and Loss Account and the Cash Flow Statement dealt with by this report are in compliance with the Accounting Standards referred to in Section 211 (3C) of the Companies Act, 1956;

e. 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:

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

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

(iii) in the case of Cash Flow statement, of the cash flows of the Company for the year ended on that date.

6. On the basis of the written representations received from the Directors as on 31st March, 2011 taken on record by the Board of Directors, we report that none of the Directors is disqualified as on 31st March, 2011 from being appointed as a director in terms of Section 274(1 )(g) of the Companies Act, 1956.

ANNEXURE TO THE AUDITORS' REPORT Re: DB Realty Limited (Referred to in Paragraph 4 of our report of even date)

i) Having regard to the nature of the Company's business/activities/result, clauses (vi), (viii), (x), (xii), (xiii), (xviii), (xix), of CARO are not applicable during the year.

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

(b) The fixed assets were physically verified during the year by the Management in accordance with a regular programme of verification which, in our opinion, provides for physical verification of all the fixed assets at reasonable intervals. According to the information and explanation given to us, no material discrepancies were noticed on such verification.

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

iii) (a) As explained to us, Inventories comprising of expenditure incurred on acquisition of plots of land and development thereof were physically verified during the year by the management at reasonable intervals.

(b) In our opinion and according to the information and explanations given to us, keeping in view the nature of inventory, the procedures of physical verification 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 explanations given to us, the adequate inventory records have been kept maintained by the Company, except for records in respect of payments to tenants where documentation needs to be considerably strengthened by the Company. As explained to us, no material discrepancies were noticed on physical verification of inventory by the management.

iv) In respect of the loans, secured or unsecured, granted or taken by the Company to or from companies, firm or other parties covered in the register maintained under Section 301 of the Companies Act, 1956, according to the information and explanations given to us;

(a) The Company has granted loans aggregating Rs. 6,250,937,964 to fifiteen parties during the year. At the year end, the outstanding balances of such loans aggregated Rs. 6,375,512,810 to fifiteen parties and the maximum amount involved during the year was Rs. 9,894,078,513.

(b) The aforesaid loans are interest free except for loans of Rs. 2,214,484,397. Based on explanations received from the management none of the other terms and conditions is prima facie, prejudicial to the interest of the Company. Attention is invited to Para 3(d) of Auditors' Report of even date.

(c) The said loans (including interest thereon) are repayable on demand and there are no repayment schedules except in case of one loan (including interest) of Rs. 503,963,329 for which there is no balance overdue as at year end. Accordingly the question of overdue amount does not arise in other cases.

In respect of loans, secured or unsecured, taken by the Company from companies, firms or other parties covered in the Register maintained under Section 301 of the Companies Act, 1956, according to the information and explanations given to us:

(d) The Company has taken loans from five parties during the year. As at the year end, the outstanding balance of such loans taken aggregated Rs. 541,643,424 from two parties and the maximum amount involved during the year was Rs. 1,347,024,400.

(e) According to the information and explanations given to us, the loans are interest free except one loan of Rs. 170,293,424 as at year end and other terms and conditions are not, prima facie, prejudicial to the interest of the Company.

(f) Since the said loans (including interest thereon) are repayable on demand and there are no repayment schedules, the question of repayment being regular does not arise.

v) In our opinion and according to the information and explanations given to us, having regard to the explanation that prelaunch advances from prospective buyers where the Company is in the process of finalizing the term sheets / agreements supporting receipts for aggregate consideration of Rs. 55,476,200 are in accordance with general industry practice; adequate internal control systems exist for sale of apartments and for purchase of fixed assets. As regards project inventory, the Company needs to strengthen internal controls for (a) tenancy payments/ compensation (as stated in iii (c) above) and (b) project contracting (including proper documentation for comparative quotations and machinery/mobilisation advances) to be commensurate with the size of the Company and the nature of its business. There were no transactions of sale of services during the year. During the course of our audit, we have not observed continuing failure to correct major weakness.

vi) In respect of contracts or arrangements 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:

i) The particulars of transactions referred to in Section 301 that needed to be entered into the register maintained under such section have been so entered, however, although the said register has been signed, it has not been authenticated by all directors present and required to authenticate.

ii) Where each such transaction is in excess of rupees five lakhs in respect of each party, the transactions have been made at prices which are prima facie reasonable having regard to (1) the prevailing market prices at the relevant time except for certain transactions in respect of aircraft charges of Rs. 65,114,950 and (2) civil contract entered of Rs. 977,384,310 (referred to in v above) awarded to an entity and approved by the Board of Directors where comparable quotations for additional scope of work were not available and in respect of which we are unable to comment.

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 the nature of its business.

viii) According to information and explanations given to us, in respect of statutory dues:

(a) The Company has been generally regular in depositing undisputed statutory dues, including Provident Fund, Investor Education and Protection Fund, Employees' State Insurance, Income-tax, Sales-tax, Wealth tax, Custom duty, Excise duty, Cess and any other material statutory dues applicable to it with the appropriate authorities.

(b) There were no undisputed amounts payable in respect of Income-tax, Wealth Tax, Custom Duty, Excise Duty, Cess and other material statutory dues in arrears as at 31st March, 2011 for a period of more than six months from the date they became payable.

(c ) There are no dues of sales tax/income tax/customs duty/ wealth tax/ excise duty/service tax and cess, which have not been deposited as on March 31, 2011 on account of any dispute, except in respect of service tax as under:

Name of statute Nature of the dues Amount Period to which Forum where the amount relates dispute is pending

Finance Act, 1994 Service Tax Amount unascertained 1st July 2010 to High Court, Mumbai*

(Refer note 1) E to 31st March 2011 Schedule 15(B))

* We are informed that the Company has applied for the membership of Maharashtra Chamber of Housing Industry ('MCHI') and will be a party to the said dispute along with MCHI, in respect of the said liability.

ix) 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 and banks. The Company has not issued any debentures during the year.

x) In our opinion and according to the information and explanations given to us, the Company is not a dealer or trader in securities. The company has invested surplus funds in mutual funds, in respect of which proper records of the transactions and contracts have been maintained and timely entries have been made therein. All shares, securities and other investments have been held by the Company in its own name except in respect of investments in a partnership firm as disclosed in Note 5 to Schedule 6 Investments".

xi) The Company had given guarantees (as referred at Para 3 (ii) of our Report of even date) in the earlier years on behalf of two entities and the balance of Rs. 14,691,700,000 (Previous year Rs. 15,183,445,000) is subsisting as at the year end. As informed to us, the Board of Directors have approved the same in past considering the long term business interests of the Company and the same were consented to in writing by the non-promoter group shareholders in those years. Further, during the year, the Company has given guarantees of Rs. 1,300,000,000 on behalf of a subsidiary (other than wholly owned). Based on approvals / written consents /control relationship, the terms and conditions of such guarantees have been regarded as, prima facie, not prejudicial to the interest of the Company.

xii) In our opinion and according to the information and explanations given to us, an amount of Rs. 251,100,000 (Previous year Rs. 1,248,000,000) out of a term loan was not applied for the purpose for which the loan was obtained. After repayments made during the year, the outstanding balance of loan as at the year-end is Rs. 306,229,178.

xiii) In our opinion and according to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we report that funds raised on short term basis have, prima facie, not been used during the year for long term investment.

xiv) The Management has disclosed the end use of money raised by public issue at note 18 of Schedule 15 (B).We have verified the same to the extent of utilization by the Company. With respect to utilisation by certain subsidiaries and a jointly controlled entity of a subsidiary, we have relied upon the certificates from the auditors of those entities for the end utilization of the IPO proceeds.

We are informed that the monitoring agency (Punjab National Bank Capital Market Services branch, Mumbai) is to yet to review the utilization of IPO proceeds for the period October 2010-March 2011, although the report for the half year ended September 2010 submitted by the monitoring agency has been considered by the Board of Directors.

xv) No material fraud on or by the Company was noticed or reported during the year. However, we are informed that the CBI in its chargesheet filed in connection with irregularities in the allotment of 2G telecom license, has accused the Managing Director and the erstwhile Managing Director of the Company (in their capacity as promoters of a telecom licensee company - Swan Telecom Pvt. Ltd. (now known as Etisalat DB Telecom Pvt. Ltd.). Two other Key Management Personnel of the Company have also been chargesheeted in their capacity as directors of another company (Refer Note 3 (c) to Schedule 15 (B)) which is alleged to have paid an amount of Rs. 2,000,000,000 as illegal gratification in the same connection. As explained to us, the Company is not directly a party to the allegations and the matter is sub-judice in the Court of Special Judge (CBI), New Delhi.

For Deloitte Haskins & Sells

Chartered Accountants

(Registration No. 117366W)

R. D. Kamat

Partner

(Membership No. 36822)

Mumbai, June 8, 2011.


Mar 31, 2010

1. We have audited the attached Balance Sheet of D B Realty Limited ("the Company") as at March 31, 2010 and the Profitand Loss Account and Cash Flow Statement of the Company for the year ended on THAT date, both annexed thereto. 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 misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and the disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by the 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 (CARo) issued by the Central Government in terms of Subsection (4A) of section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specifed in paragraphs 4 and 5 of the said order.

4. FURTHER to our comments in the Annexure referred to in paragraph 3 above, we REPORT as follows:

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 it appears from our examination of the books;

iii) the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this REPORT are in agreement with the books of account;

iv) in our opinion, the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this REPORT are in compliance with the Accounting Standards referred to in Section 211(3C) of the Companies Act, 1956;

v) without qualifying our opinion, we draw your attention to the following:

a) share of Profit from partnership firms (net) Rs. 2,266,117,928 (Previous year Rs. 2,896,888,424) is based on the financial statements of partnership firms audited by other AUDITORS whose reports have been furnished to us by the MANAGEMENT of the Company and our opinion is based solely on such audited financial statements.

b) Note 1B of Schedule 15(B) regarding guarantees issued to banks and financial institutions on behalf of various entities aggregating Rs. 20,231,695,000 (Previous year Rs. 21,465,565,000) are significant in relation to the net- worth of the Company as at THAT date. In the opinion of the MANAGEMENT, these are Not expected to result into any financial liability.

c) Note 14 of Schedule 15(B) regarding investments aggregating Rs. 385,188,120 (Previous year Rs. 411,132,515) and loans and advances aggregating Rs. 4,650,180,925 (Previous year Rs. 3,111,209,783) in/to certain subsidiaries and associates, which have incurred losses and also have negative net worth. As explained to us, these companies are at the start up stage of their real estate operations and the investments, loans and advances are considered good and recoverable based on assessment by the MANAGEMENT of the projects under execution.

vi) 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;

(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 Profitand Loss Account, of the Profit of the Company for the year ended on THAT date and

(iii) in the case of Cash Flow statement, of the cash flows of the Company for the year ended on THAT date.

vii) on the basis of written representations received from the directors as of March 31, 2010 and taken on record by the Board of Directors, None of the directors is disqualified as of March 31, 2010 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 AUDITORS REPORT Re: D B Realty Limited (Referred to in Paragraph 3 of our REPORT of even date)

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

(b) As explained to us, some of the fixed assets were physically verified during the year by the MANAGEMENT in accordance with its programme which is reasonable. No material discrepancies were Noticed by the MANAGEMENT on such verification

(c) The Company has Not made any substantial disposal of fixed assets.

ii) (a) Inventories comprise of expenditure on acquisition of plots of land and development thereof. As explained to us, such plots were physically verified during the year by the MANAGEMENT at reasonable intervals.

(b) In our opinion and according to the information and explanations given to us, keeping in view the nature of inventory, the procedures of physical verification followed by the MANAGEMENT are reasonable and adequate in relation to the size of the Company and the nature of its BUSINESS.

(c) In our opinion, the Company has maintained proper records of its inventories and as explained to us No material discrepancies were Noticed on physical verification.

iii) In respect of the loans, secured or unsecured, granted or taken by the Company to or from companies, firm or other parties covered in the register maintained under Section 301 of the Companies Act, 1956, according to the information and explana- tions given to us;

(a) The Company has granted loans to seventeen parties covered in the register maintained under Section 301 of the Companies Act, 1956. the maximum amount outstanding during the year is Rs. 7,650,510,321 and the year end balance of the loans granted to such parties was Rs. 7,450,090,669.

(b) The aforesaid loans are interest free except for loans of Rs. 3,822,731,432 as at year end. Based on explanations received from the MANAGEMENT None of the other terms and conditions are prima facie, prejudicial to the interest of the Company. Attention is invited to Para 4 (v) (c) of AUDITORS REPORT of even date.

(c) The said loans are repayable on demand and there are No repayment schedules. Hence, the question of overdue amount does Not arise.

(d) There are eight companies covered under the register maintained under Section 301 of the Act from which the Company has taken loans. the maximum amount outstanding during the year is Rs. 2,636,582,590 and the year end balance of the loans taken from such parties was Rs. 1,286,890,000.

(e) According to the information and explanations given to us, the loans are interest free and other terms and conditions are Not, prima facie, prejudicial to the interest of the Company.

(f) Since the said loans are repayable on demand and there are No repayment schedules, the question of repayment being regular does Not arise.

iv) As explained to us, the Company is in the process of strengthening internal controls in respect of purchase of fixed assets and inventory (of land plots/parcels) to be commensurate with the size of the Company and the nature of its BUSINESS. the Com- pany has Not commenced sale of goods/ services from its own projects however, in respect of advances received amounting to Rs. 65,000,000 from customers against on-going projects of the group companies, as explained to us, the Company is in the process of fnalizing the term sheets/ agreements. During the course of our audit, we have Not Observed continuing failure to correct major weaknesses.

v) In respect of contracts or arrangements 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:

(a) The Particulars of contracts or arrangements referred to Section 301 THAT needed to be entered into the register, maintained under the said section have been so entered;

(b) Where each of such transactions (other than loans Reported under paragraph (iii) above) in excess of rupees five lakhs in respect of any party, the transactions have been made at prices which are prima facie reasonable having regard to the prevailing market prices at the relevant time.

vi) The Company has Not accepted any Deposits from public during the year, hence, directive issued by Reserve Bank of India and the provisions of section 58A, 58AA or any other relevant provisions of the Companies Act, 1956 are Not applicable.

vii) A firm of Chartered Accountants has been appointed by the MANAGEMENT for carrying out internal audit from october 1, 2009. In our opinion, the function is commensurate with the size of the Company and the nature of its BUSINESS.

viii) According to information and explanations given to us, the Central Government has Not prescribed maintenance of cost records under section 209(1) (d) of the Companies Act, 1956 for the activities of the Company and hence the question of maintenance of such accounts and records does Not arise.

ix) According to information and explanations given to us, in respect of statutory and other dues:

(a) the Company has been generally regular in depositing undisputed statutory dues, including Provident Fund, Investor education and Protection Fund, employees State Insurance, Income-tax, Sales-tax, Wealth tax, Custom Duty, excise Duty, Cess and any other material statutory dues, as applicable, with the appropriate authorities during the year.

(b) No undisputed amounts payable in respect of aforesaid were in arrears as at 31st March, 2010 for a period of more than six months from the date they became payable except service tax of Rs. 858,991 on rent, Not deposited based on certain judicial precedents.

(c) there are No dues of sales tax/income tax/customs duty/ wealth tax/ excise duty/service tax and cess, which have Not been deposited as on March 31, 2010 on account of any dispute.

x) As the Company has Not completed five years since its incorporation; the paragraph 4(x) of the order is Not applicable.

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 and bank. the Company had borrowed through debentures during the year which were con- verted into equity shares as per its terms of issue.

xii) The Company has Not granted any loans and advances on the basis of security by way of pledge of shares, debentures and any other securities and hence the maintenance of adequate records for this purpose does Not arise.

xiii) The Company is Not a chit fund or a nidhi / mutual benefit fund / society. therefore, the provisions of clause (xiii) of paragraph 4 of the Companies (Auditors REPORT) order, 2003 are Not applicable to the Company.

xiv) In our opinion and according to the information and explanations given to us, the Company is Not a dealer or trader in securi- ties. the Company has invested surplus funds in mutual funds. According to the information and explanations given to us, the Company has maintained proper records of the transactions and contracts in respect of such investments and timely entries have been made therein. All shares, securities and other investments have been held by the Company in its own name except in respect of investments in a partnership firm as disclosed in Note 3 to Schedule 6 "Investments".

xv) The Company had given guarantees (as referred at Para 4 (v) (b) of our REPORT of even date) in the earlier years to entities and the balance of Rs. 15,183,445,000 is still subsisting as at the year end and during the year, the Company has given guar- antees of Rs. 4,448,000,000 to a subsidiary (other than wholly owned) and to a jointly controlled entity. We were explained THAT the Board of Directors have approved the same considering the long term BUSINESS of the Company and the earlier years guarantees have been Consented to in writing by the Non-promoter group shareholders in those years. Based on such approv- als/ written Consents, the terms and conditions of such guarantees have been regarded as, prima facie, Not prejudicial to the interest of the Company.

xvi) In our opinion and according to the information and explanations given to us, out of the term loan of Rs.1,880,000,000 from LIC Housing Finance Limited Rs.1,248,000,000 have been utilised towards part fnancing of other than specifed projects for which the Company has written a letter to the lender for inclusion of such other projects for utilisation and the response from the lender is awaited.

xvii) According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, funds raised on short term basis have, prima facie, Not been used during the year 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 and companies covered in the Register maintained under Section 301 of the Companies Act, 1956.

xix) During the year, the Company issued Unsecured compulsorily convertible debentures and all of them were converted into equity shares as per terms of its issue.

xx) The MANAGEMENT has disclosed the end use of money raised by public issue at Note 15(b) of Schedule 15(B). We have verified the same to the extent of utilization by the Company. With respect to utilisation by certain subsidiaries and a jointly controlled entity of a subsidiary, we have relied upon the end use certificates received from the AUDITORS of those entities. We are informed THAT the monitoring agency (Punjab National Bank, Capital Market Services Branch, Mumbai) is to yet to submit their REPORT.

xxi) To the best of our Knowledge and belief and according to the information and explanations given to us, No material fraud on or by the Company was Noticed or Reported during the year.

For deloitte Haskins& Sells

Chartered Accountants (Registration No. 117366W)

R. D. Kamat Partner (Membership No. 36822) Mumbai, dated May 12, 2010.

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