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Auditor Report of Granules India Ltd.

Mar 31, 2016

1. We have audited the accompanying standalone financial statements of Granules India Limited ("the Company"), which comprises the Balance Sheet as at March 31, 2016, the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management''s Responsibility for the Standalone Financial Statements

2. The Company''s Board of Directors are responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with 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 of 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 the 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 standalone financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor''s Responsibility

3. Our responsibility is to express an opinion on these standalone financial statements based on our audit. We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made thereunder. We conducted our audit in accordance with the Standards on Auditing, issued by the Institute of Chartered Accountants of India, as 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 standalone financial statements are free from material misstatement.

4. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial controls 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. An audit also includes evaluating the appropriateness of 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.

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

Opinion

6. In our opinion and to the best of our information and according to the explanations given to us, the standalone financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2016, its Profit and its cash flows for the year ended on that date.

Report on Other Legal and Regulatory Requirements

7. As required by the Companies (Auditor''s report) Order, 2016 ("the Order") issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in the ''Annexure A'', a statement on the matters specified in paragraphs 3 and 4 of the Order.

8. 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 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 it appears from our examination of those books;

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

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

(e) On the basis of written representations received from the directors as on March 31, 2016, and taken on record by the Board of Directors, none of the directors are disqualified as on March 31, 2016, from being appointed as a director in terms of section 164 (2) of the Act.

(f) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in ''Annexure B''.

(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 disclosed the impact of pending litigations on its financial position in its standalone financial statements - Refer Note 2.40 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 were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company.

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

(b) Fixed assets have been physically verified by the management during the period and no material discrepancies were identified on such verification.

(c) Based on our audit procedures performed for the purpose of reporting the true and fair view of the financial statements and according to the information and explanations given by the management, title deeds of all the immovable properties are held in the name of the Company.

(ii) (a) The Inventories of raw materials, packing materials, consumables, stores, work-in-progress and finished goods have been physically verified during the year at regular intervals by the management.

(b) The procedures of physical verification of stocks followed by the management are reasonable and adequate in relation to the size of the company and the nature of its business. In respect of finished goods lying with the consignees, the certificate given by the management is relied upon.

(c) The company is maintaining the proper records for recording the inventory and the discrepancies noticed on verification of stocks as compared to books were not material and have been properly dealt with in the books of accounts.

(iii) The Company has granted loans to parties covered in the register maintained under section 189 of the Act and complied with the provisions of the said Act..

(iv) In our opinion and according to the information and explanations given to us, the Company has complied with the provisions of section 185 and 186 of Act, in respect of loans, investments, guarantees, and security to the extent applicable to it.

(v) According to the information and explanations given to us, the company has not accepted any deposits from the public within the meaning of section 73 to 76 of the Act and the rules framed thereunder. Therefore, the provisions of clause 3(v) of the order are not applicable to the Company.

(vi) The Central Government has prescribed maintenance of cost records under the provisions of Section 148(1) of the Companies Act, 2013 in respect of manufacturing activities of the company. The company has maintained accounts and records of such activities.

(vii) (a) The company is regular in depositing with appropriate authorities undisputed statutory dues including Provident Fund, Employees State Insurance, Income tax, Wealth Tax, Sales tax, Service tax, Customs Duty, Excise Duty, Cess and other applicable statutory dues with the appropriate authorities. According to the information and explanations given to us no undisputed amounts payable in respect of outstanding statutory dues as at the last day of the year ending 31.03.2016 for period exceeding 6 months from the date they became payable.

(b) Reference is invited to Note No.2.40 regarding pending litigations with various authorities in respect of Income- tax, Customs duty, Sales tax, Service tax, Excise duty, Cess.

(viii) According to the records of the Company examined by us and the information and explanations given to us, the Company has not defaulted in repayment of dues to any financial institution, bank, Government or debenture holders as at the Balance Sheet date.

(ix) According to the information and explanations given to us and based on our verification, the Company has not raised moneys by way of public issue and moneys raised by way of term loans were applied for the purpose for which the loans were obtained.

(x) Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the year.

(xi) In our opinion, the managerial remuneration has been paid or provided in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V of the Companies Act, 2013.

(xii) In our opinion, the Company is not a chit fund or a nidhi / mutual benefit fund / society. Therefore, the provisions of clause 3(xii) of the Order are not applicable to the Company.

(xiii) In our opinion, all the transactions with the related parties are in compliance with section 177 and 188 of the Act, where applicable and the details have been disclosed in the notes to the financial statements as required by applicable accounting standards.

(xiv) During the year, the Company has made preferential allotment of warrants to promotors and promotor group entities numbering 40,95,230 warrants Rs. 84.91 each and 1,86,56,000 warrants Rs. 95.30 each totalling to Rs.21256.43 lakhs. Out of the said warrants, a total of 40,95,230 at Rs.84.91 each and 72,55,000 at Rs.95.30 each were converted into equity shares of Rs.1/- each. The company has complied with the requirement of section 42 of the Companies Act 2013 for the allotment of warrants/shares and has applied the funds received there from for the purpose for which the funds were raised.

(xv) According to the information and explanations given to us and on an overall examination of the financial statements of the Company, we report that the Company has not entered into any non-cash transaction with directors or persons connected with him.

(xvi) In our opinion, the Company is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934.

For Kumar & Giri

Chartered Accountants

FRN 001584S



Sd/-

J.Bhadra Kumar

Partner

Membership No.025480



Place: Hyderabad

Date: April 28, 2016


Mar 31, 2015

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

Management's Responsibility for the Financial Statements

2. 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 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 of 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 the 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

3. 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 thereunder. We conducted our audit in accordance with the Standards on Auditing, issued by the Institute of Chartered Accountants of India, as 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.

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

5. 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

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

Report on OtherLegal and Regulatory Requirements

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

8. 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 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 it appears from our examination of those books;

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

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

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

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

i) The Company has reported correctly in its financial statements regarding pending litigations.

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

iii) There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company.

ANNEXURE REFERRED TO IN PARAGRAPH 7 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) Fixed assets have been physically verified by the management during the period and no material discrepancies were identified on such verification.

(ii) (a) The stocks of raw materials, consumables, stores, work-in- progress and finished goods have been physically verified during the year at regular intervals by the management.

(b) The procedures of physical verification of stocks followed by the management are reasonable and adequate in relation to the size of the company and the nature of its business. In respect of finished goods lying with the consignees, the certificate given by the management is relied upon.

(c) The company is maintaining the proper records for recording the inventory and the discrepancies noticed on verification of stocks as compared to books were not material and it has been properly dealt with in the books of account.

(iii) 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 covered in the register maintained under section 189 of the Companies Act, 2013. Accordingly, the provisions of clause 3 (iii) (a) to (b) of the Order are not applicable to the Company.

(iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business for the purchase of inventory, fixed assets and for sale of goods and services. During the course of our audit, we have not observed any major weakness or continuing failure to correct any major weakness in the internal control system of the Company in respect of these areas.

(v) The Company has not accepted any deposits from the public.

(vi) The Central Government has prescribed maintenance of cost records under the provisions of Section 148(1) of the Companies Act, 2013 in respect of manufacture activities of the company. The company has maintained accounts and records of such activities.

(vii) (a) The company is regular in depositing with appropriate authorities undisputed statutory dues including Provident Fund, Employees State Insurance, Income tax, Customs Duty, Wealth Tax, Sales Tax, Excise Duty, Cess and other applicable statutory dues with the appropriate authorities. According to the information and explanations given to us no undisputed amounts payable in respect of outstanding statutory dues as at the last day of the year ending 31.03.2015 for period exceeding 6 months from the date they became payable.

(b) Reference is invited to Note No.2.41 regarding pending litigations with various authorities in respect of Income-tax, Customs duty, Wealth tax, Sales tax, Service tax, Excise duty, Cess.

(c) According to the information and explanations given to us, the company has transferred amounts required to be transferred as per the provisions of Investor Education and Protection Fund in accordance with the relevant provisions of the Companies Act and rules made thereunder.

(viii) The company has been in existence for a period of more than Five years and it has not incurred any cash losses in the financial year and in the immediately preceding financial year and the company does not have any accumulated losses.

(ix) According to the records of the Company examined by us and the information and explanations given to us, the Company has not defaulted in repayment of dues to any financial institution or bank as at the Balance Sheet date.

(x) The company has extended corporate guarantee to Financial Institutions for the Term Loans taken by one its Joint Venture company M/s. Granules Omnichem Private Limited and basing on the information and explanation furnished before us the terms and conditions of such loans are not prejudicial to the interest of the company.

(xi) Based on the information and explanations given to us, term loans were applied for the purpose for which the loans were obtained.

(xii) Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the year.

for Kumar & Giri Chartered Accountants Firm Registration No. 001584S

Sd/- J. Bhadra Kumar Place: Hyderabad Partner Date: April 27, 2015 Membership No. 25480


Mar 31, 2013

1. We have audited the attached Balance Sheet of M/s Granules India Limited, Hyderabad as on March 31, 2013 and the Profit and Loss Account and Cash Flow Statement of the Company for the year ended on that date, annexed thereto. These financial statements are the responsibility of the Company''s management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. Audit also includes assessing the accounting principles used and 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 issued by the Central Government of India 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) & (4) above:

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 the Law have been kept by the Company so far as it appears from our examination of such books.

c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement referred to in this report are in agreement with the Books of Account.

d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement comply with the requirements of the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956.

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

f) In our opinion, and to the best of our information and according to the explanations given to us, the said Balance Sheet, Profit & Loss Account and Cash Flow Statement read together with the significant accounting policies and notes thereon, give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India.

i) in so far as it relates to the Balance Sheet, of the state of affairs of the Company as on March 31, 2013.

ii) in so far as it relates to the Profit & Loss Account, of the Profit of the Company for the year ended on that date.

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

(I) Fixed Assets

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

b) The Physical verification of fixed assets is being carried out as per the program drawn up and to the extent the physical verification is carried out, no material discrepancies were noticed on such verification.

c) There was no disposal of a substantial part of fixed assets during the year.

(II) Inventory

a) The stocks of raw materials, consumables, stores, work-in-progress and finished goods have been physically verified during the year at regular intervals by the management.

b) The procedures of physical verification of stocks followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business. In respect of finished goods lying with the consignees, the certificate given by the management is relied upon.

c) The discrepancies noticed on verification of stocks as compared to books were not material and it has been properly dealt with in the books of account.

(III) Loans taken / granted

According to the information and explanations given to us, the Company has neither taken nor granted any loans, secured or unsecured to/from companies, firms or other parties covered in the register maintained under Sec.301 of the Companies Act, 1956.

(IV) Internal control

a) In our opinion and according to the information and explanations given to us, the internal control procedures are being strengthened on a continuous basis so as to be commensurate with the size of the Company and the nature of its business for the purchase of inventory keeping in view of the expansion.

b) There are no major weaknesses in the internal control procedures.

(V) Section 301

Necessary entries were made in the register maintained under Sec. 301 of the Companies Act, 1956.

(VI) Public Deposits

The Company has not accepted any deposits from the public.

(VII) Internal Audit

The Company has an internal audit system so as to be commensurate with its size and the nature of its business.

(VIII) Cost Records

The Central Government has prescribed maintenance of cost records in respect of manufacture of API products and formulations. The Company has made and maintained account and records of such activities.

(IX) Statutory Dues

a. The Company is regular in depositing with appropriate authorities undisputed statutory dues including Provident Fund, Employees State Insurance, Income tax. Customs Duty, Wealth Tax, Sales Tax, Excise Duty, Cess and other applicable statutory dues with the appropriate authorities. According to the information and explanations given to us no undisputed amounts payable in respect of outstanding statutory dues as at the last day of the year ending 31.03.2013 for period exceeding 6 months from the date they became payable.

b. According to the records of the Company, the dues outstanding of Income tax. Customs Duty, Wealth Tax, Sales Tax, Excise Duty, Cess on account of any dispute, are as follows:

Name of the statute Nature of dues Rs. in Lakhs

The Customs Act, 1962 Duty demand on Imports 32.57 under DEEC

The Customs Act, 1962 Duty demand on export 10.90 obligations

Service Tax Penalty on Service Tax 89.37 matters

The Central Excise Act, Duty and Penalty on 205.55 1944 CENVAT availment

The Income Tax Act, 1961 Tax demand on transfer 721.39 pricing & other matters

The Income Tax Act, 1961 Tax demand on transfer 508.99 pricing & other matters

Name of the Statute Period for which the Forum where dispute amount relate is pending

The Customs Act 1962 1993-94 High Court, Andhra Pradesh

The Customs Act 1962 1993-94 Commissioner of Customs, Chennai

Service Tax 2002-07 CESTAT, Bangalore

The Central Excise Act 1944 2006-09 CESTAT, Bangalore

The Income Tax Act 1961 2006-07 & ITAT, Hyderabad 2007-08

The Income Tax Act 1961 2008-09 DRP, Hyderabad

(X) Accumulated losses / cash losses

The Company has no accumulated losses as on 31st March, 2013.

(XI) Repayment of Dues

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

(XII) Loans & Advances

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

(XIII) Chit - Fund companies/ Nidhi/Mutual benefit societies

The provisions of special statute relating to chit fund companies and the provisions of Nidhi or mutual benefit fund/ societies are not applicable to the Company.

(XIV) Financing Companies

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

(XV) Guarantee for Loans

The Company has not given any guarantee for loans taken by others to banks or financial institutions.

(XVI) Term Loans

In our opinion and according to the information and explanations given to us, the term loans are applied for the purpose for which the loans were obtained.

(XVII) Usage of Funds

According to the information and explanations given to us and on an overall examination of Balance Sheet of the Company, we report that no funds raised on short- term basis have been used for long-term investment. No long-term funds have been used to finance short-term assets except permanent working capital.

(XVIII) Preferential Allotments

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

(XIX) Creation of Securities

The Company has not issued any debentures during the year; hence, the question of creation of securities does not arise.

(XX) Public Issue

The Company has not raised any money through Public Issue.

(XXI) Fraud

According to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the year.

For M/s KUMAR & GIRI

Chartered Accountants

Firm Reg No: 001584S

J. Bhadra Kumar

Place: Hyderabad Partner

Date: April 25, 2013 Membership No. 25480


Mar 31, 2011

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

2. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. Audit also includes assessing the accounting principles used and 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 issued by the Central Government of India 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 the above, our comments are as under:

a) Reference is invited to Note No. B (3) under Schedule No. R regarding dues to micro, small and medium enterprises

5. Further to our comments in the Annexure referred to in paragraph (3) & (4) above:

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 the Law have been kept by the Company so far as it appears from our examination of such books.

c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement referred to in this report are in agreement with the Books of Account.

d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement comply with the requirements of the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956.

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

f) In our opinion, and to the best of our information and according to the explanations given to us, the said Balance Sheet, Profit & Loss Account and Cash Flow Statement read together with the significant accounting policies and notes thereon, give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India.

i) in so far as it relates to the Balance Sheet, of the state of affairs of the Company as on March 31, 2011

ii) in so far as it relates to the Profit & Loss Account, of the Profit of the company for the year ended on that date

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

Annexure referred to in paragraph (3) of our report of even date

(I) FIXED ASSETS

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

b) The Physical verification of fixed assets is being carried out as per the program drawn up and to the extent the physical verification is carried out, no material discrepancies were noticed on such verification.

(II) INVENTORY

a) The stocks of raw materials, consumables, stores, work-in-progress and finished goods have been physically verified during the year at regular intervals by the management.

b) The procedures of physical verification of stocks followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business. In respect of finished goods lying with the consignees, the certificate given by the management is relied upon.

c) The discrepancies noticed on verification of stocks as compared to books were not material and it has been properly dealt with in the books of account.

(III) LOANS TAKEN / GRANTED

According to the information and explanations given to us, the Company has neither taken nor granted any loans, secured or unsecured to/from companies, firms or other parties covered in the register maintained under sec. 301 of the Companies Act, 1956.

(IV) INTERNAL CONTROL

a) In our opinion and according to the information and explanations given to us, the internal control procedures are being strengthened on a continuous basis so as to be commensurate with the size of the Company and the nature of its business for the purchase of inventory keeping in view of the expansion.

b) There are no major weaknesses in the internal control procedures.

(V) SECTION 301

Necessary entries were made in the register maintained under sec. 301 of the Companies Act, 1956.

(VI) PUBLIC DEPOSITS

The Company has not accepted any deposits from the public.

(VII) INTERNAL AUDIT

The Company has an internal audit system so as to be commensurate with its size and the nature of its business.

(VIM) COST RECORDS

The Central Government has prescribed maintenance of cost records in respect of manufacture of API products and formulations. The Company has made and maintained account and records of such activities.

(IX) STATUTORY DUES

The Company is generally regular in depositing undisputed statutory dues including Provident Fund, Employees State Insurance, Income tax, Customs Duty, Wealth Tax, Sales Tax, Excise Duty, Cess and other statutory dues with the appropriate authorities. There are no arrears of outstanding statutory dues as at the last day of the year ending 31.03.2011 for period exceeding 6 months from the date they became payable, excepting an amount of Rs. 11.49 lakhs representing unpaid dividend.

(X) ACCUMULATED LOSSES / CASH LOSSES

The Company has no accumulated losses as on March 31, 2011.

(XI) REPAYMENT OF DUES

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

(XII) LOANS & ADVANCES

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

(XIII) CHIT - FUND COMPANIES/ NIDHI/MUTUAL BENEFIT SOCIETIES

The provisions of special statute relating to chit fund companies and the provisions of Nidhi or mutual benefit fund/ societies are not applicable to the Company.

(XIV) FINANCING COMPANIES

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

(XV) GUARANTEE FOR LOANS

The Company has not given any guarantee for loans taken by others to banks or financial institutions.

(XVI) TERM LOANS

In our opinion and according to the information and explanations given to us, the term loans are applied for the purpose for which the loans were obtained.

(XVII) USAGE OF FUNDS

According to the information and explanations given to us and on an overall examination of Balance Sheet of the Company, we report that no funds raised on short-term basis have been used for long-term investment. No long-term funds have been used to finance short-term assets except permanent working capital.

(XVIII) PREFERENTIAL ALLOTMENTS

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

(XIX) CREATION OF SECURITIES

The Company has not issued any debentures during the year; hence, the question of creation of securities does not arise.

(XX) PUBLIC ISSUE

The Company has not raised any money through Public Issue.

(XXI) FRAUDS

According to the information and explanations given to us, no fraud on or by the company has been noticed or reported during the year.

For M/s KUMAR & GIRI

Chartered Accountants

Firm Reg No: 001584S

Sd/-

J. Bhadra Kumar

Place: Hyderabad Partner

Date: April 29, 2011 Membership No. 25480


Mar 31, 2010

1. We have audited the attached Balance Sheet of M/s Granules India Limited, Hyderabad as on March 31, 2010 and the Profit and Loss Account and Cash Flow Statement of the Company for the year ended on that date, 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 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. Audit also includes assessing the accounting principles used and 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 issued by the Central Government of India 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 the above, our comments are as under:

a) Reference is invited to Note No. B (3) under Schedule No. R regarding dues to micro, small and medium enterprises.

b) Reference is invited to Note No. B (19) under Schedule No. R regarding confirmation of balances.

5. Further to our comments in the Annexure referred to in paragraph (3) & (4) above:

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 it appears from our examination of such books.

c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement referred to in this report are in agreement with the Books of Account.

d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement comply with the requirements of the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956.

e) On the basis of the written representations received from the directors, and taken on record by the Board of Directors, we report that none of the Directors are disqualified as on March 31, 2010, from being appointed as directors in terms of clause (g) of sub- section (1) of Section 274 of the Companies Act, 1956.

f) In our opinion, and to the best of our information and according to the explanations given to us, the said Balance Sheet, Profit & Loss Account and Cash Flow Statement read together with the significant accounting policies and notes thereon, give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India.

i) in so far as it relates to the Balance Sheet, of the state of affairs of the Company as on March 31, 2010.

ii) in so far as it relates to the Profit & Loss Account, of the Profit of the Company for the year ended on that date.

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

Annexure referred to in paragraph (3) of our report of even date I) Fixed Assets

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

b) The physical verification of fixed assets is being carried out as per the programme drawn up and to the extent the physical verification is carried out, no material discrepancies were noticed on such verification.

II) Inventory

a) The stocks of raw materials, consumables, stores, work-in-progress and finished goods have been physically verified during the year at regular intervals by the management.

b) The procedures of physical verification of stocks followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business. In respect of finished goods lying with the consignees, the certificate given by the management is relied upon.

c) The discrepancies noticed on verification of stocks as compared to books were not material and it has been properly dealt with in the books of account.

III) Loans Taken / Granted

According to the information and explanations given to us, the Company has neither taken nor granted any loans, secured or unsecured to/from companies, firms or other parties covered in the register maintained under sec.301 of the Companies Act, 1956.

IV) Internal Control

a) In our opinion and according to the information and explanations given to us, the internal control procedures are being strengthened on a continuous basis so as to be commensurate with the size of the Company and the nature of its business for the purchase of inventory keeping in view of the expansion.

b) There are no major weaknesses in the internal control procedures.

V) Section 301

Necessary entries were made in the register maintained under sec.301 of the Companies Act, 1956.

VI) Public Deposits

The Company has not accepted any deposits from the public.

VII) Internal Audit

The Company has an internal audit system so as to be commensurate with its size and the nature of its business.

VIII) Cost Records

The Central Government has prescribed maintenance of cost records in respect of manufacture of API products and formulations. The Company has made and maintained account and records of such activities.

IX) Statutory Dues

The Company is generally regular in depositing undisputed statutory dues including Provident Fund, Employees State Insurance, Income tax, Customs Duty, Wealth Tax, Sales Tax, Excise Duty, Cess and other statutory dues with the appropriate authorities. There are no arrears of outstanding statutory dues as at the last day of the year ending March 31, 2010 for period exceeding 6 months from the date they became payable, excepting an amount of Rs.11.47 lakhs representing unpaid dividend.

X) Accumulated Losses / Cash Losses

The Company has no accumulated losses.

XI) Repayment of Dues

There are minor delays in repayment of dues to banks.

XII) Loans & Advances

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

XIII) Chit Fund Companies/ Nidhi/Mutual Benefit Societies

The provisions of special statute relating to chit fund companies and the provisions of Nidhi or mutual benefit fund / societies are not applicable to the Company.

XIV) Financing Companies

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

XV) Guarantee for Loans

The Company has not given any guarantee for loans taken by others to banks or financial institutions.

XVI) Term Loans

The term loans are applied for the purpose for which the loans were obtained.

XVII) Usage of Funds

According to the information and explanations given to us and on an overall examination of Balance Sheet of the Company, we report that no funds raised on short- term basis have been used for long-term investment. No long-term funds have been used to finance short-term assets except permanent working capital.

XVIII) Preferential Allotments

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

XIX) Creation of Securities

The Company has not issued any debentures during the year; hence, the question of creation of securities does not arise.

XX) Public Issue

The Company has not raised any money through Public Issue.

XXI) Fraud

According to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the year.



For M/s Kumar & Giri Chartered Accountants Firm Reg. No. 001584S

J. Bhadra Kumar

Place: Hyderabad Partner

Date: May 5, 2010 Membership No. 25480

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