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Auditor Report of Gayatri Sugars Ltd.

Mar 31, 2015

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

Management's Responsibility for the Financial Statements

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

Auditor's Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under.

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

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

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

Opinion

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

Emphasis of Matters

We draw attention to the following matter in the Notes to the financial statements:

Note 30 relating to the accumulated losses amounted to Rs. 1,253,287,646 which has completely eroded the net-worth of the Company as on that date. The Company had also made reference to the Board for Industrial and Financial Reconstruction (BIFR) on August 5, 2013, under Section 23 of Sick Industrial Companies (Special Provisions) Act, 1985. The Company incurred a loss of Rs. 623,771,436 during the year ended March 31, 2015 and the current liabilities exceeded its current assets by Rs. 1,060,886,507. These conditions, along with other matters as set forth in the said Note, including dependence on continuous support from its promoters to make it economically viable, indicate the existence of a material uncertainty that may cast significant doubt about the Company's ability to continue as a going concern. These financial statements have been prepared on a going concern basis for the reasons stated in the said Note.

Our opinion is not qualified in respect of this matter.

Report on Other Legal and Regulatory Requirements

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

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

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

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

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

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

(e) The going concern matter described under the Emphasis of Matters paragraph above, in our opinion, may have an adverse effect on the functioning of the Company.

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

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

i. The Company has disclosed the impact of pending litigations on its financial position in its financial statements - Refer Note 23. 1(a), 23.1 (b) and 23.1 (c) to the financial statements;

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

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

ANNEXURE TO THE INDEPENDENT AUDITOR'S REPORT

(Referred to in paragraph 1 under 'Report on Other Legal and Regulatory Requirements' section of our report of even date)

(i) Having regard to the nature of the Company's business / activities / results during the year, clauses (v) of paragraph 3 of the Order is not applicable to the Company

(ii) In respect of its fixed assets:

(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.

(iii) In respect of its inventories:

(a) As explained to us, the inventories 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, 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 explanations given to us, the Company has maintained proper records of its inventories and no material discrepancies were noticed on physical verification.

(iv) The Company has not granted any loans, secured or unsecured, to companies, firms or other parties covered in the Register maintained under Section 189 of the Companies Act, 2013.

(v) In our opinion and according to the information and explanations given to us, having regard to the explanations that some of the items purchased are of special nature and suitable alternative sources are not readily available for obtaining comparable quotations, there is an adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchases of inventory and fixed assets and the sale of goods and services. During the course of our audit, we have not observed any major weakness in such internal control system.

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

(vii) The accumulated losses of the Company at the end of the financial year are not less than fifty percent of its net worth and the Company has incurred cash losses during the financial year covered by our audit and in the immediately preceding financial year.

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

(a) The Company has generally been regular in depositing undisputed dues, including Provident Fund, Investor Education and Protection Fund, Employees' State Insurance, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, Cess and other material statutory dues applicable to it with the appropriate authorities except for dues relating to Cane Development Council Fund and Income-tax.

(b) There were no undisputed amounts payable in respect of Provident Fund, Investor Education and Protection Fund, Employees' State Insurance Income-Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, Cess and other material statutory dues in arrears as at 31 March, 2015 for a period of more than six months from the date they became payable, except as given below:

Name of the statute Nature of Dues Period to Amount which the involved amount relates Rs.

Income Tax Dividend 2006-07 802,523

Act, 1961 Distribution Tax

(c) There were no dues of Income-tax, Sales Tax, Wealth Tax, Service Tax and Customs Duty Excise Duty and Cess which have not been deposited as on 31st March, 2015 on account of disputes except as given below:

Name of the Nature of Period to which Forum where statute Dues the amount relates pending



Central Excise Excise Duty Various periods Central Excise Act, 1944 (excluding interest covering the period and Service Tax and penalty) 2006 to 2010 Appellate Tribunal

Various years Central Excise covering the period and Service Tax 2008 to 2013 Appellate Tribunal

Andhra Pradesh Value 2011-12 and Appellate Value Added Tax Added Tax 2012-13 Deputy Act, 2005 Commissioner



Name of the Amount statute involved Rs.

Central Excise 5,853,521 Act, 1944



80,28,148



Andhra Pradesh 1,107,079 Value Added Tax Act, 2005

Out of the total disputed dues aggregating to Rs. 14,988,748 as above, Rs. 6,960,600 has been stayed for recovery by the relevant authorities.

(d) There are no amounts that are due to be transferred to the Investor Education and Protection Fund in accordance with the relevant provisions of the Companies Act, 1956 (1 of 1956) and Rules made thereunder.

(ix) In our opinion and according to the information and explanations given to us, the Company has not defaulted in the repayment of dues to financial institutions and banks except for payment of Right to Recompense Interest claims (Refer Note 31(a) of the financial statements) and the following:

Lender Name Principal Number of Period of Rs. Installments delay (in days)

Union Bank of India Vehicle Loan 175,161 11 2-64 days

IFCI - Sugar Development Fund Loan 59,748,000 3 133-498 days

Bank of Baroda Term Loan 38,888,885 7 18-86 days

Andhra Bank Harvesting Term Loan - - -

Andhra Bank Excise duty Term Loan - - -

Union Bank of India - - - Excise Duty Term Loan

State Bank of India - - - Excise Duty Term Loan

Bank of Baroda - - - Excise Duty Term Loan

Punjab National Bank - - - Excise Duty Term Loan



Lender Name Interest Number of Period of delay Rs. Installments (in days)

Union Bank of India Vehicle Loan 15,986 11 2-64 days

IFCI - Sugar Development Fund Loan 21,727,538 3 133-498 days

Bank of Baroda Term Loan 25,482,339 11 2-90 days

Andhra Bank Harvesting Term Loan 762,572 11 9-103 days

Andhra Bank Excise duty Term Loan 10,160,713 11 8-89 days

Union Bank of India 4,717,565 9 4-50 days Excise Duty Term Loan

State Bank of India 4,043,705 10 1-18 days Excise Duty Term Loan

Bank of Baroda 3,975,120 9 2-44 days Excise Duty Term Loan

Punjab National Bank 888,635 8 1-44 days Excise Duty Term Loan

(x) 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 and financial institutions are not, prima facie, prejudicial to the interests of the Company.

(xi) In our opinion and according to the information and explanations given to us, the term loans have been applied by the Company during the year for the purposes for which they were obtained, other than temporary deployment pending application.

(xii) To the best of our knowledge and according to the information and explanations given to us, no fraud by the Company and no fraud on the Company has been noticed or reported during the year.

For DELOITTE HASKINS & SELLS Chartered Accountants (Firm's Registration No. 008072S)

Ganesh Balakrishnan Place: Hyderabad Partner Date: April 27, 2015 Membership No. 201193














Mar 31, 2014

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

Management''s Responsibility for the Financial Statements

The Company''s Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards notified under the Companies Act, 1956 ("the Act") (which continue to be applicable in respect of Section 133 of the Companies Act, 2013 in terms of General Circular 15/2013 dated 13thSeptember, 2013 of the Ministry of Corporate Affairs) and in accordance with the accounting principles generally accepted in India. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and 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 the disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company''s internal control. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by 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

The Company was paying interest on Working Capital received from the Banks at a concessional rate under Corporate Debt Restructuring (''CDR'') scheme as per the Reserve Bank of India Guidelines pursuant to which the Banks had a Right of Recompense (''ROR'') i.e. interest rate concession given earlier to the Company will have to be compensated by the Company at the end of the scheme. Upon expiry of the CDR time period, the respective banks have raised a demand of Rs. 84,000,000 towards ROR and the Company''s proposal for payment of interest claims partly in cash and balance in the form of redeemable preference shares was not agreed by the banks. The Company has paid Rs.8,400,000 till March 31, 2014. As the Company was incurring losses for past few years and there was no cash surplus, the Company was pursuing with the banks for waiver of balance amount of Rs. 75,600,000. Subsequently, the bankers have agreed for extension of time for payment of the balance ROR claim up to March 2015 or earning of profit whichever is earlier (Refer Note 32 in the financial statements). No provision for the said liability has been made in the books which constitutes a departure from the Accounting Standard 1 "Disclosure of Accounting Policies", referred to in Section 211(3C) of the Companies Act 1956 (which continue to be applicable in respect of Section 133 of the Companies Act, 2013 in terms of General Circular 15/2013 dated 13thSeptember 2013 of the Ministry of Corporate Affairs). Had the Company made provision for the said unpaid claims, Finance Cost and Net Loss would have been higher by Rs.75,600,000 (March 31, 2013: Rs.75,600,000) and shareholders'' funds would have been reduced by Rs.75,600,000 (March 31, 2013: Rs.75,600,000) and the Loss per Share would be higher by Rs.1.73 (March 31, 2013: Rs.1.73). This matter was also qualified in our report on the financial statements for the year ended 31st March, 2013.

Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matter described in the Basis for Qualified Opinion paragraph above, the aforesaid financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

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

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

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

Emphasis of Matter

We draw attention to the following notes to the financial statements:

(i) Note 31 relating to accumulated losses amounting to Rs.606,201,701 as at 31st March, 2014, resulting in the substantial erosion of the net-worth of the Company as on that date and the Company''s reference to the Board for Industrial and Financial Reconstruction on August 5, 2013 under Section 23 of Sick Industrial Companies (Special Provisions) Act, 1985. The Company incurred a loss of Rs.228,729,923 during the year ended 31st March 2014 and the current liabilities exceeded its current assets by Rs. 584,680,821. These conditions, along with other matters as set forth in the said Note, including its dependence on continuous support from its promoters to make it economically viable, indicate the existence of a material uncertainty that may cast significant doubt about the Company''s ability to continue as a going concern. These financial statements have been prepared on a going concern basis for the reasons stated in the said Note.

(ii) Note 33 regarding the payment of remuneration to the Executive Director reappointed during the year, which is in excess of the limits specified in Schedule XIII, to the Companies Act, 1956 by Rs.3,699,000 and in respect of which the Company is in the process of taking approval from the Central Government.

Our report is not qualified in respect of these matters.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2003 ("the Order") issued by the Central Government in terms of Section 227(4A) 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 under provisions of Section 227(3) of the Act, we report that:

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

(b) Except for the effects of the matter described in the Basis for Qualified Opinion paragraph above, in our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books.

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

(d) Except for the effects of the matter described in the Basis for Qualified Opinion paragraph above, in our opinion, the Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statement comply with the Accounting Standards notified under the Act (which continue to be applicable in respect of Section 133 of the Companies Act, 2013 in terms of General Circular 15/2013 dated 13thSeptember, 2013 of the Ministry of Corporate Affairs).

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

ANNEXURE TO THE INDEPENDENT AUDITORS'' REPORT

(Referred to in paragraph 1 under ''Report on Other Legal and Regulatory Requirements'' section of our report of even date)

i) Having regard to the nature of the Company''s business/activities/ results during the year, clauses (vi), (xii), (xiii), (xiv), (xviii), (xix) and (xx) of paragraph 4 of the Order are not applicable to the Company.

ii) In respect of its fixed assets:

(a) The Company has maintained proper records showing full particulars, including quantitative details and situation of the 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) None of the fixed assets was disposed during the year. iii) In respect of its inventories:

(a) As explained to us, the inventories 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, 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 explanations given to us, the Company has maintained proper records of its inventories and no material discrepancies were noticed on physical verification.

iv) The Company has neither granted nor taken any loans, secured or unsecured, to/from companies, firms or other parties covered in the Register maintained under Section 301 of the Companies Act, 1956.

v) In our opinion and according to the information and explanations given to us, having regard to the explanations that some of the items purchased are of special nature and suitable alternative sources are not readily available for obtaining comparable quotations, there is an adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchase of inventory and fixed assets and the sale of goods and services. During the course of audit, we have not observed any major weakness in such internal control system.

vi) To the best of our knowledge and belief and according to the information and explanations given to us, there are no contracts or arrangements that needed to be entered in the Register maintained in pursuance of Section 301 of the Companies Act, 1956.

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) We have broadly reviewed the cost records maintained by the Company pursuant to the Companies (Cost Accounting Records) Rules, 2011 prescribed by the Central Government under Section 209(1)(d) of the Companies Act, 1956 and are of the opinion that prima facie the prescribed cost records have been maintained. We have, however, not made a detailed examination of the cost records with a view to determining whether they are accurate or complete.

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

(a) The Company has generally been regular in depositing undisputed dues, including Provident Fund, Investor Education and Protection Fund, Employees'' State Insurance, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, Cess and other material statutory dues applicable to it with the appropriate authorities except for dues relating to Cane Development Council Fund and Income-tax.

(b) There were no undisputed amounts payable in respect of Provident Fund, Investor Education and Protection Fund, Employees'' State Insurance Income-Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, Cess and other material statutory dues in arrears as at 31 March, 2014 for a period of more than six months from the date they became payable, except as given below:

Name of the Nature of Dues Period to which Amount statute the amount relates involved Rs.

Income Tax Act, Dividend 2006-07 802,523 1961 Distribution Tax

(c) There were no dues of Income-tax, Sales Tax, Wealth Tax, Service Tax and Customs Duty, Excise Duty and Cess which have not been deposited as on 31 March, 2014 on account of disputes except as given below:

Name of the Nature of Period to which statute Dues the amount relates

Central Excise Various years covering Excise Act, 1944 Duty the period (excluding 2006 to 2010 interest and Various years covering penalty) the period 2008 to 2013

Andhra Pradesh Value 2011-12 and Value Added Added 2012-13 Tax Act, 2005 Tax



Name of the Statute Forum where Amount pending involved Rs.

Central Central Excise 5,853,521 Excise Act, 1944 and Service Tax Appellate Tribunal

Central Excise 8,028,148 and Service Tax Appellate Tribunal

Andhra Pradesh Value Appellate Deputy 1,107,079 Added Tax Act, 2005 Commissioner

Out of the total disputed dues aggregating to Rs. 14,988,748 as above, Rs. 6,960,600 has been stayed for recovery by the relevant authorities.

x) Subject to the consequential effects of our qualification reported in the paragraph "Basis for Qualified Opinion" of our Audit Report of even date, the accumulated losses of the Company at the end of the financial year are more than fifty percent of its net worth and the Company has incurred cash losses during the financial year covered by our audit and in the immediately preceding financial year.

xi) According to the records of the Company examined by us and the information and explanations given to us, the Company has defaulted in repayment of dues to the bank as at the balance sheet date. Also refer Note No 32 forming part of the financial statements, for default in payment of Right of Recompense interest claims. Such delays have been summarized as given below:

Amount in Rs. Lender Name Principal Number of Period of Instalments delay (in days)

Indian Overseas 8,474,000 3 42-90 Days Bank-I

Indian Overseas 12,375,000 9 17-139 Days Bank-II

Union Bank of 9,052,942 1 78 Days India - I

Union Bank of 4,876,471 1 78 Days India - II

Union Bank of 1,929,412 1 78 Days India – III

Andhra Bank - I 40,000,000 4 2-89 Days

Andhra Bank - II 1,314,748 1 77 Days

Union Bank of India 156,891 11 3-61 Days Vehicle Loan

IFCI- Sugar 19,916,000 1 133 Days Development Fund Loan

Andhra Bank - - - Harvesting Term Loan

Bank of Baroda - - -

Lender Name Interest Number of Period of Instalments delay (in days)

Indian Overseas Bank-I 632,289 3 13-170 Days

Indian Overseas Bank-II 1,276,029 9 17-108 Days

Union Bank of India - I 648,264 1 85 Days

Union Bank of India - II 358,087 1 85 Days

Union Bank of India – III 141,512 1 85 Days

Andhra Bank - I 3,331,454 9 3-136 Days

Andhra Bank - II 47,526 1 78 Days

Union Bank of India Vehicle Loan 34,289 11 3-61 Days

IFCI- Sugar Development Fund Loan 6,667,768 1 133 Days

Andhra Bank Harvesting Term Loan 938,946 12 29-333 Days

Bank of Baroda 8,150,420 4 1-48 Days

xii) 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 are not,prima facie, prejudicial to the interests of the Company.

xiii) In our opinion and according to the information and explanations given to us, the term loans have been applied by the Company during the year for the purposes for which they were obtained, other than temporary deployment pending application.

xiv) 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 aggregating approximately Rs.485,817,989 have been used for long-term investments.

xv) To the best of our knowledge and according to the information and explanations given to us, no fraud by the Company and no material fraud on the Company has been noticed or reported during the year.

For DELOITTE HASKINS & SELLS Chartered Accountants (Firm''s Registration No.008072S)

Ganesh Balakrishnan Partner Hyderabad, May 26, 2014 Membership No.201193


Mar 31, 2013

Report on the Financial Statements

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

Management''s Responsibility for the Financial Statements

The 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 Section 211(3C) of the Companies Act, 1956 ("the Act"). This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of the financial statements that 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 the disclosures in the financial statements. The procedures selected depend on the auditor''s judgement, 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 the 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

The Company was paying interest on Working Capital received from the Banks at a concessional rate under Corporate Debt Restructuring (''CDR'') scheme as per the Reserve Bank of India, guidelines pursuant to which the Banks had a Right of Recompense (''ROR'') i.e. interest rate concession given earlier to the Company will have to be compensated by the Company at the end of the scheme. Upon expiry of the CDR time period, the respective banks have raised a demand of Rs. 84,000,000 towards ROR and the Company''s proposal for payment interest claims partly in cash and balance in the form of redeemable preference shares was not agreed by the banks during the year. The Company has paid Rs. 8,400,000 till 31 March, 2013. As the Company was incurring losses for past few years and there was no cash surplus, the Company is pursuing with the banks for waiver of balance amount of Rs. 75,600,000. The management is confident of getting waiver for the payment of the said demand and accordingly no provision has been made in the books which constitutes a departure from the Accounting Standard 1 "Disclosure of Accounting Policies" referred to in Section 211(3C) of the Act. Had the Company made provision for the said unpaid claims, Finance Cost, Other current liabilities and net loss would have been increased by Rs. 75,600,000 and shareholders'' funds would have been reduced by Rs. 75,600,000.

Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matter described in the Basis for Qualified Opinion paragraph above, the aforesaid financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

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

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

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

Emphasis of Matter

We draw attention to Note 32 in the financial statements which indicates that the Company incurred a loss of Rs.135,192,123 during the year ended 31 March 2013 and as of that date the accumulated losses amounting to Rs. 377,471,778 has substantially eroded the net-worth of the Company and the Company''s current liabilities exceeded its current assets by Rs.496,857,408. These conditions, along with other matters as set forth in the said Note, indicate the existence of a material uncertainty that may cast significant doubt about the Company''s ability to continue as a going concern. These financial statements have been prepared on a going concern basis for the reasons stated in the said.

Our opinion is not qualified in respect of this matter

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2003 ("the Order") issued by the Central Government in terms of Section 227(4A) 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 under provisions of Section 227(3) of the Act, we report that:

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

(b) Except for the effects of the matter described in the Basis for Qualified Opinion paragraph, in our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books.

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

(d) Except for the effects of the matter described in the Basis for Qualified Opinion paragraph above, in our opinion, the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement comply with the Accounting Standards referred to in Section 211(3C) of the Act.

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

ANNEXURE TO THE INDEPENDENT AUDITORS'' REPORT (Referred to in paragraph 1 under ''Report on Other Legal and Regulatory Requirements'' section of our report of even date)

i) Having regard to the nature of the Company''s business/activities/results during the year ended, clauses 4(vi), (xii), (xiii), (xiv), (xviii), (xix) and (xx) of the Order are not applicable to the Company.

ii) In respect of its fixed assets:

(a) The Company has maintained proper records showing full particulars, including quantitative details and situation of the 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) In respect of its inventories:

(a) As explained to us, the inventories 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, 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 explanations given to us, the Company has maintained proper records of its inventories and no material discrepancies were noticed on physical verification.

iv) According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured, to companies, firms or other parties listed in the Register maintained under Section 301 of the Companies Act, 1956.

In respect of unsecured loans, 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:

(a) The Company has taken unsecured loan aggregating Rs. 412,435,273 from one party during the year. At the year-end, the outstanding balance of such loans taken aggregated Rs. 493,372,271 (One Party) and the maximum amount involved during the year was Rs. 493,372,271 (One Party).

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

(c) The payments of principal amounts in respect of such loans are regular as per stipulations.

v) In our opinion and according to the information and explanations given to us, having regard to the explanations that some of the items purchased are of special nature and suitable alternative sources are not readily available for obtaining comparable quotations, there is an adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchases of inventory and fixed assets and the sale of goods and services. During the course of our audit, we have not observed any major weakness in such internal control system.

vi) In our opinion and according to the information and explanations given to us, there are no contracts or arrangements that need to be entered into the Register maintained under section 301 of the Companies Act, 1956.

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) We have broadly reviewed the cost records maintained by the Company pursuant to the Companies (Cost Accounting Records) Rules, 2011 prescribed by the Central Government under Section 209(1)(d) of the Companies Act, 1956 and are of the opinion that prima facie the prescribed cost records have been maintained. We have, however, not made a detailed examination of the cost records with a view to determining whether they are accurate or complete.

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

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

(b) There were no undisputed amounts payable in respect of Provident Fund, Investor Education and Protection Fund, Employees'' State Insurance, Income-Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, Cess and other material statutory dues in arrears as at 31 March, 2013 for a period of more than six months from the date they became payable, except as given below :

Statute Nature of Dues Period to which Amount the amount relates involved Rs.

Income Tax Act, Dividend 2006-07 802,523 1961 Distribution Tax

(c) There were no dues of Income-tax, Sales Tax, Wealth Tax, Service Tax and Customs Duty which have not been deposited as on 31 March, 2013 on account of disputes except Excise Duty as under:

Name of the Nature of Amount Period to which Forum where statute the dues (in Rs.) the amount relates pending

Central Excise 5,853,521 Various years covering Central Excise Excise Act, 1944 Duty the period and Service Tax 2006 to 2010 Appellate Tribunal

x) Subject to the consequential effects of our comments in paragraph "basis for qualified opinion" of the Independent Auditors'' Report, the accumulated losses of the Company at the end of the financial year are more than fifty percent of its networth and the Company has incurred cash losses during the financial year covered by our audit and in the immediately preceding financial year.

xi) According to the records of the company examined by us and the information and explanation given to us, the company has defaulted in repayment of dues to the bank as at the balance sheet date. Also refer note no 33 for default in payment of Right of Recompense interest claims. Such delays have been summarized below indicating the Average number of delays and the amount involved :

Amount in Rs.

Lender Total Number of Amount of Average Amount Installments each delay in Involved installment number of days

Principal

Yes Bank Limited 72,916,667 10 7,291,667 105

Indian Overseas Bank-I 33,816,000 12 2,818,000 61

Indian Overseas Bank-II 16,500,000 12 1,375,000 61

Union Bank of India - I 36,211,768 4 9,052,942 136

Union Bank of India - II 9,505,884 4 4,876,471 136

Union Bank of India - III 7,717,648 4 1,929,412 136

Andhra Bank - I 40,000,000 4 10,000,000 79

Andhra Bank - II 6,000,000 4 1,500,000 163

Union Bank of India Vehicle Loan 208,560 12 17,380 50



Amount in Rs.

Lender Total Number of Average Average Amount Installments monthly delay in Involved interest number of days

Interest

Yes Bank Limited 39,374,627 12 3,281,219 61

Indian Overseas Bank-I 4,752,942 12 396,079 61

Indian Overseas Bank-II 3,620,461 12 301,705 61

Andhra Bank Harvesting TL 1,724,763 12 143,730 47

Union Bank of India - I 6,012,143 12 501,012 92

Union Bank of India - II 3,220,480 12 268,373 91

Union Bank of India - III 1,277,080 12 106,423 91

Andhra Bank - I 10,271,785 12 855,982 87

Andhra Bank - II 971,920 12 80,993 92



xii). 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 are not prima facie prejudicial to the interests of the Company.

xiii). In our opinion and according to the information and explanations given to us, the term loans have been applied by the Company during the year for the purposes for which they were obtained, other than temporary deployment pending application.

xiv) 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 been used during the year for long- term investment to the extent of Rs.496,857,408.

xv) To the best of our knowledge and according to the information and explanations given to us, no fraud by the Company and no material fraud on the Company has been noticed or reported during the year.



For DELOITTE HASKINS & SELLS

Chartered Accountants

Registration No.008072S



Ganesh Balakrishnan

Partner

Hyderabad, May 27, 2013 Membership No.201193


Mar 31, 2012

1. We have audited the attached Balance Sheet of GAYATRI SUGARS LIMITED ("the Company") as at 31st March, 2012, the Statement of Profit and Loss and the Cash Flow Statement of the Company for the year ended on that date, both annexed thereto. Th ese 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 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 (Auditor's 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.

4. Further to our comments in the Annexure referred to in paragraph 3 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 those books;

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

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

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, 1 956 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India

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

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

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

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

ANNEXURE TO THE AUDITORS' REPORT

(Referred to in paragraph 3 of our report of even date)

(i) Having regard to the nature of the Company's business / activities, clause 4 (vi), (x), (xii),

(xiii), (xiv), (xviii), (xix) and (xx) of CARO are not applicable.

(ii) In respect of its fixed assets:

(a) The Company has maintained proper records showing full particulars, including quantitative details and situation of the 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) In respect of its inventory:

(a) As explained to us, the inventories were physically verified during the year 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 explanations given to us, the Company has maintained proper records of its inventories and no material discrepancies were noticed on physical verification.

(iv) According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured, to companies, firms or other parties listed in the Register maintained under Section 301 of the Companies Act, 1956.

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:

(a) The Company has taken interest free unsecured loan aggregating Rs. 1,35,00,000 from one party during the year. At the year-end, the outstanding balance of such loans taken aggregated Rs. 8,09,36,998 (One Party) and the maximum amount involved during the year was Rs. 9,06,00,000 (One Party).

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

(c) The payments of principal amounts in respect of such loans are regular as per stipulations.

(v) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchases of inventory and fixed assets and the sale of goods. During the course of our audit, we have not observed any major weakness in such internal control system.

(vi) According to the information and explanations given to us there are no contracts or arrangements that needs to be entered in the Register maintained in pursuance of Section 301 of the Companies Act, 1956.

(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) We have broadly reviewed the books of account maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under Section 209(1) (d) of the Companies Act, 1956 in respect of Sugar and Distillery units and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have, however, not made a detailed examination of the records with a view to determining whether they are accurate or complete.

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

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

(b) There were no undisputed amounts payable in respect of Income-Tax, Wealth Tax, Custom Duty, Excise Duty and other material statutory dues in arrears as at 31st March, 2012 for a period of more than six months from the date they became payable, except as given below:

Nature Period to which Amount Statute of dues the amount involved relates (Rs.)

Income Dividend 2006-07 802,523 Tax Act, Distribution 1961 Tax

(c) There were no dues of Income-tax, Sales Tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty which have not been deposited as on 31st March, 2012 on account of disputes.

(x) According to the records of the company examined by us and the information and explanation given to us, the company has defaulted in repayment of dues to the financial institution as at the balance sheet date. Such delays have been summarized below indicating the Average number of delays and the amount involved :

Amount in

Lender Total Amount Number of Amount of Average delay Involved installments each installment in number of days

Principal

Yes Bank Limited 87,500,000 12 7,291,667 36

Indian Overseas Bank-I 33,816,000 12 2,818,000 50

Indian Overseas Bank-II 16,500,000 12 1,375,000 50

Andhra Bank- Harvesting TL 2,547,890 1 2,547,890 44

State Bank of India-EDTL 13,596,000 12 1,133,000 32

Bank of Baroda- EDTL 13,050,000 12 1,087,500 38

Andhra Bank-EDTL 9,192,000 12 766,000 51

PNB-EDTL 4,200,000 12 350,000 13

Union Bank of India-I 36,201,592 4 9,050,398 71

Union Bank of India-II 19,515,768 4 4,878,942 81

Union Bank of India-III 7,717,684 4 1,929,421 66

Andhra Bank-I 40,000,000 4 10,000,000 55

Andhra Bank-II 6,000,000 4 1,500,000 55

Union Bank of India-EDTL 8,100,000 12 675,000 37

Andhra Bank-EDTL 6,456,000 12 538,000 73

Interest

Yes Bank Limited 45,577,112 1 4,143,374 35

Indian Overseas Bank-I 9,382,992 11 852,999 39

Indian Overseas Bank-II 5,472,451 11 497,496 39

Andhra Bank-Harvesting TL 1,212,308 7 173,187 41

Union Bank of India-I 9,876,108 1 897,828 35

Union Bank of India-II 5,307,618 1 482,511 34

Union Bank of India-III 2,085,486 12 173,791 32

Andhra Bank-I 15,904,757 12 1,325,396 37

Andhra Bank-II 1,591,464 12 132,622 31

(xi) 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 are not prima facie prejudicial to the interests of the Company.

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

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

(xiv) To the best of our knowledge and according to the information and explanations given to us, no fraud by the Company and no fraud on the Company has been noticed or reported during the year.

For DELOITTE HASKINS & SELLS

Chartered Accountants Registration No.008072S

Ganesh Balakrishnan

Place: Hyderabad Partner

Date: May 9, 2012 Membership No.201193


Mar 31, 2010

1. We have audited the attached Balance Sheet of Gayatri Sugars Limited ("the Company") as at 31st March, 2010, the Profit and Loss Account 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 Companys Management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and 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 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.

4. Further to our comments in the Annexure referred to in paragraph 3 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 those books;

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

(d) in our opinion, the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report 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 31s1 March, 2010;

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

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

5. On the basis of the written representations received from the Directors as on 31s1 March, 2010 taken on record by the Board of - Directors, we report that, none of the Directors is disqualified as on 31s1 March, 2010 from being appointed as a director in terms of Section 274(1)(g)ofthe Companies Act, 1956.

ANNEXURE TO THE AUDITORS REPORT

(Referred to in paragraph 3 of our report of even date)

(i) Having regard to the nature of the Companys business/activities, clause 4 (vi), (xii), (xiii), (xiv), (xviii), (xix) and (xx) of CARO are not applicable.

(ii) In respect of its fixed assets:

(a) The Company has maintained proper records showing full particulars, including quantitative details and situation of the 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) In respect of its inventory:

(a) As explained to us, the inventories were physically verified during the year 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 oik opinion and according to the information and explanations given to us, the Company has maintained proper records of its inventories and no material discrepancies were noticed on physical verification.

(iv) According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured, to companies, firms or other parties listed in the Register maintained under Section 301 of the Companies Act, 1956.

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:

(a) The Company has taken loans aggregating Rs.50,650,000 from two parties during the year. At the year end, the outstanding balance of such loans taken aggregated Rs.228,252,133 (Five Parties) and the maximum amount involved during the year was Rs.228,252,133 (Five Parties).

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

(c) The payments of principal amounts and interest in respect of such loans are regular as per stipulations.

(v) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business, with regard to purchases of inventory and fixed assets and the sale of goods. During the course of our audit, we have not observed any major weakness in such internal control system.

(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:

(a) The particulars of contracts or arrangements referred to Section 301 that needed to be entered in the Register maintained under the said Section have been so entered.

(b) Where each of such transaction is in excess of Rs.5 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 except in respect of certain purchases for which comparable quotations are 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) We have broadly reviewed the books of account maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under Section 209(1) (d) of the Companies Act, 1956 in respect of Sugar and Distillery units and are of the opinion that prima facie the prescribed accounts and records vhave been made and maintained. We have, however, not made a detailed examination of the records with a view to determining whether they are accurate or complete. To the best of our knowledge and according to the information and explanations given to us, the Central Government has not prescribed the maintenance of cost records for any other product of the Company.

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

(a) The Company has generally been regular in depositing undisputed dues, including Provident Fund, Investor Education and Protection 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, 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, 2010 for a period of more than six months from the date they became payable, except as given below.

Nature Period to which Amount Statute of dues the amount involved relates (Rs.)

Income Dividend 2006-07 802,523 Tax Act, Distribution 1961 Tax

(c) There were no dues of Income-tax, Sales Tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty and Cess which have not been deposited as on 31st March, 2010 on account of disputes.

(x) The accumulated losses of the Company at the end of the financial year are more than fifty percent of its net worth and the Company has not incurred cash losses in the current financial year and has incurred cash losses 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 the repayment of dues to banks and debenture holders.

(xii) 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 are not prima facie prejudicial to the interests of the Company.

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

(xiv) In our opinion and according to the information and explanations given to us and on an overall examination of the Balance Sheet, we report that funds raised on short- term basis have been used during the year for long- term investment.

(xv) To the best of our knowledge and according to the information and explanations given to us, no fraud by the Company and no fraud on the Company has been noticed or reported during the year.

For DELOITTE HASKINS & SELLS

Chartered Accountants Registration No.008072S

Ganesh Balakrishnan

Partner Membership No.201193

Place: Hyderabad

Date :29th May 2010



 
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