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Auditor Report of Indosolar Ltd.

Mar 31, 2015

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

2. 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 referred 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.

3. 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 thereunder.

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

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

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

4. Basis of Qualification

a) The Company has made a profit in the current quarter though on a full year basis it has continued to incur losses resulting in further erosion of its net worth which had already been fully eroded as at 31 March 2014. Further the Company has not met its liabilities (Rs. 26522.78 lakhs) due on the first corporate debt restructuring package and on account of purchase of materials and capital goods (Rs. 3,866.32 lakhs). The Company has therefore approached the bankers for a second corporate debt restructuring package on the basis of a technical economic viability study conducted by an external expert.

b) As per the Company, despite significant downturn in global market, as a result of several initiatives by Government of India, the domestic market has been showing an upturn of late resulting in the Company having obtained orders for 132.65 MW in the current year which has resulted in recommencement of production in the current year ended 31 March 2015 which is expected to ensure full capacity utilization upto May 2015. The note also expands on certain measures taken/expected to be announced by the Government to support domestic manufacturers in India including the domestic content requirement, viability gap funding etc.

c) The Company's claim to it being eligible for certain capital incentives is still under litigation. (Note 35)

d) The dispute with MP Urja regarding the turnkey contract and the likely impact of the customers claim is uncertain. (Note 42)

e) The Company has not been able to meet its commitment to customs authorities on the basis of which the company imported certain raw materials and machinery without payment of customs duty. (Note 35)

On the basis of its overall evaluation of the above factors and as per the techno-economic viability study conducted by an external expert, the Company believes that there is no impairment in respect of carrying value of its fixed assets including capital work in progress as at 31 March 2015 and it is appropriate to prepare the accounts on a going concern basis. In our view, the full erosion of net worth, inability of the Company to meet certain material liabilities and commitments, the fact that the impact of the government decisions (some of which are yet to be announced) would be known only in future, the uncertainty of outcome of various litigations and claims and uncertainty regarding whether the second corporate debt restructuring package (which, as informed to us is under consideration by the bankers) would be sanctioned or not create material uncertainties (even though the procurement of certain orders during the year resulting in full resumption of production is a positive factor). Therefore, the quantum of impairment in respect of carrying value of fixed assets cannot be determined as at present and material uncertainties exist regarding the use of going concern assumption in preparing the financial statements.

5. Qualified opinion

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

6. Emphasis of matter

Without qualifying our opinion, attention is invited to note 36, with regard to managerial remuneration paid by the Company amounting to Rs. 97 lakhs for the year ended 31 March 2015, which is in excess of the limits specified under schedule V read with section 197 of the Companies Act, 2013 and in respect of which Central Government approval as required under the provisions of the Companies Act, 2013, is pending. The impact if any of this on the financial statement is not ascertainable at present.

7. Report on Other Legal and Regulatory Requirements

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

As required by section 143(3) of the Companies Act, 2013, we report that:

a. We have sought and, except for the matters described in the Basis for Qualified Opinion paragraph, 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 possible 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 possible effects of the matter described in the Basis for Qualified Opinion paragraph, in our opinion, the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement comply with the Accounting Standards specified under section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2013; and

e. The matter described in the Basis for Qualified Opinion paragraph above, in our opinion, may have an adverse effect on the functioning of the Company

f. On the basis of written representations received from the directors as on 31 March 2015, and taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 2015, from being appointed as a director in terms of sub-section (2) of section 164 of the Companies Act, 2013.

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 41 to the financial statement;

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

iii. The Company did not have any dues on account of Investor Education and Protection Fund.

ANNEXURE REFERRED TO IN PARAGRAPH 6 OF THE INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF INDOSOLAR LIMITED ON THE ACCOUNTS FOR THE YEAR ENDED 31ST MARCH 2015

(i) (a) According to the information and explanations given to us, the Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

(b) According to the information and explanations given to us, the Company has a regular programme of physical verification of its fixed assets by which all fixed assets are physically verified by the management in a phased manner over a period of two years. In accordance with such phased programme, the Company has carried out physical verification of majority of its fixed assets during the year. In our opinion, the frequency of physical verification is reasonable having regard to the size of the Company and nature of its fixed assets. As informed to us, no discrepancies have been noticed on such verification.

(ii) (a) According to the information and explanations given to us, the inventories have been physically verified by the management during the year. In our opinion, the frequency of such verification is reasonable. Further, as informed, there are no stocks lying with third party.

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

(c) According to the information and explanations given to us, and on the basis of our examination of the records of inventories, we are of the opinion that the Company is maintaining proper records of inventories. As informed to us, the discrepancies noticed on physical verification of inventories as compared to the book records were not material.

(iii) (a) According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured, to companies or other parties covered in the register maintained under section 189 of the 2013 Act. Accordingly, paras 3 (iii) (a) and (b) of the Order are not applicable. There are no firms covered in the register required under section 189 of the Act.

(iv) In our opinion and according to the information and explanations given to us, and having regard to the explanation that purchases of certain items of inventories and fixed assets are for the Company's specialised requirements and suitable alternative sources are not available to obtain 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 inventories and fixed assets and with regard to sale of goods. The activities of the Company do not involve rendering of services. We did not observe any major weakness in internal controls during the course of our audit.

(v) According to the information and explanations given to us, the Company has not accepted any deposits from the public during the year.

(vi) We have broadly reviewed the books of account maintained by the Company pursuant to the rules prescribed by Central government for maintenance of cost records under section 148(1) of the Companies Act, 2013 and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the records with a view to determine whether they are accurate or complete.

(vii) (a) According to the information and explanations given to us and on the basis of our examination of the records of the Company, amounts deducted/ accrued in the books of account in respect of undisputed statutory dues including Provident fund, Employees' state insurance, Income tax, Sales tax, Wealth tax, Service tax, Excise duty, Custom duty, Value added tax, Cess and other material statutory dues, to the extent applicable, have generally been regularly deposited with the appropriate authorities.

According to the information and explanations given to us, no undisputed amounts payable in respect of Provident fund, Employees' state insurance, Income tax, Sales tax, Wealth tax, Service tax, Excise duty, Custom duty, Value added tax, Cess and other material statutory dues were in arrears as at 31 March 15 for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us, and on the basis of the records of the Company examined by us, there are no dues of Income tax, Wealth tax, Service tax, Sales tax, Customs duty and Excise duty which have not been deposited with the appropriate authorities on account of any dispute except as mentioned below:

Amount in Name of the Nature of the Rupees Amount statute dues (lakhs) deposited

Customs Act, Customs duty 9,430.19 - 1962*

Name of the Statute Period to which Forum where the amount relates dispute is pending

Customs Act, 1962 2010-11 and Commissioner, 2011-12 Customs, Central Excise & Service Tax

*Amount as per the show cause notice.

(c) According to the information and explanations given to us, and on the basis of the records of the Company examined by us, no amount is required to be transferred to investor education and protection fund in accordance with the relevant provisions of the Companies Act, 1956 (1 of 1956) and rules made thereunder.

(viii)The accumulated losses of the Company at the end of the financial year are more than fifty percent of its net worth. The Company has incurred cash losses during the financial year and in the immediately preceding financial year.

(ix) In our opinion and according to the information and explanations given to us, and on the basis of our examination of the books of account and related records, the Company has defaulted in repayment of dues to its bankers. The Company did not have any outstanding dues to debenture holders during the year.

Nature of the lender Nature of dues Amount in rupees (lakhs) Period to which it relates

Andhra Bank Interest on secured loans 3,498.79 July 2013-March 2015

Andhra Bank Principal amount 1,287.27 January 2014- March 2015

Bank of Baroda Interest on secured loans 2,384.74 July 2013-March 2015

Bank of Baroda Principal amount 1,274.29 January 2014- March 2015

Corporation Bank Interest on secured loans 3,223.80 April 2013- March 2015

Corporation Bank Principal amount 1,412.58 January 2014- March 2015

Indian Bank Interest on secured loans 2,414.33 April 2013- March 2015

Indian Bank Principal amount 1,037.30 January 2014- March 2015

Union Bank of India Interest on secured loans 5,446.97 April 2013- March 2015

Union Bank of India Principal amount 2,552.70 January 2014- March 2015

Interest on interest Interest on secured loans 3,498.79 August 2014- March 2015

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

(xi) According to the information and explanations given to us, term loans have been applied for the purpose for which such loans were obtained.

(xii) According to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the course of our audit.

For B S R & Co. LLP

Chartered Accountants

Firm registration number: 101248W

VIKRAM ADVANI

Place:New Delhi Partner

Date :4 May, 2015 Membership No.: 091765


Mar 31, 2013

1. Report on the Financial Statements

We were engaged to audit the accompanying financial statements of Indosolar Limited ("the Company"), which comprise the Balance Sheet as at 31st March 2013, and the Statement of Profit and Loss and the Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

2. Management''s Responsibility for the Financial Statements

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 ("the Act"). This responsibility includes the design, implementation and maintenance of internal controls relevant to the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error.

3. Auditor''s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Because of the matter described in the Basis for Disclaimer of Opinion paragraph, however, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion.

4 . Basis for disclaimer of opinion

(i) Certain consignments relating to plant and machinery, imported in connection with the expansion of the manufacturing facility, had been lying at the bonded warehouse for a significant period of time until 31st March 2012. During the year, a substantial portion of such machinery was removed and demurrage/ detention charges was paid at the time of such removal amounting to Rs.1,365.93 lakhs and the same has been considered as part of the cost of acquisition of an asset and capitalised under capital work-in-progress accordingly, as at 31st March 2013. Management is of the view that such expenses are directly attributable to bringing the machinery to its current location and condition and should be capitalized.

However, we are of the view that such charges should be treated as an expense and accordingly should not be capitalised as they cannot be considered as a cost that is directly attributable for getting the asset ready for its intended use in accordance with the requirements of AS 10 "Accounting for fixed assets". Had the Company accrued for such demurrage/ detention charges, other expense would have been higher by Rs.1,365.93 lakhs and the loss for the year ended 31st March 2013 would have been higher by the corresponding amount.

(ii) Attention is invited to note 28, which explains in detail the substantial erosion of net worth as at the balance sheet date because of which the reference required in case of erosion of more than 50% of peak net worth has been made to BIFR during the year and also explains the multiple uncertainties being faced by the company. The Company has been unable to utilise its capacity as the cost of production of solar cells continues to be higher than the prevailing market prices and the plant has remained shut for a significant part of the current year and for the other part of the year has been operational at significantly low levels of capacity utilization. Key policy decisions such as those relating to imposition of Anti Dumping Duty, Local Content requirement and Company''s eligibility for certain incentives remain unresolved.

The actual net cash inflows during the year ended 31st March 2013 are significantly lower than the projections for the same period incorporated in the first CDR package. Accordingly the cash flow projections approved as part of that CDR package can no longer be relied upon. Due to continued liquidity issues the Company has approached the bankers for a second Corporate Debt Restructuring package. The response of the banks is awaited.

Overall the short term liabilities exceed the short term assets by Rs. 7,125.31 lakhs. In addition as per the terms of the first Corporate Debt Restructuring package, an amount of Rs. 2,281.89 lakhs, representing 3% of the outstanding Term Loans, Funded Interest Term Loans, Working Capital Demand Loan and Priority Term Loan together with quarterly interest thereon shall become payable in the year ending 31st March 2014.

The above factors create multiple uncertainties and we are unable to determine their possible effects on the financial statements. We are also unable to conclude on the ability of the Company to carry on as a going concern.

5 . Disclaimer of opinion

Because of the significance of the matters described, specifically relating to the multiple uncertainties created due to factors such as response of banks to the application filed for a 2nd Corporate Debt Restructuring; key policy initiatives of the government relating to anti dumping duty and local content requirement; we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Accordingly, we do not express an opinion on the financial statements.

6. Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2003 ("the Order") issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

2. As required by section 227(3) of the Companies Act, 1956, we report that:

(a) as described in the Basis for Disclaimer of Opinion paragraph, we were unable to obtain all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;

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

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

(d) due to the possible effects of the matter described in the Basis for Disclaimer of Opinion paragraph, we are unable to state whether the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement comply with the accounting standards referred to in sub-section (3C) of section 211 of the Act; and

(e) on the basis of written representations received from the directors as on 31st March 2013, and 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 clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

ANNEXURE REFERRED TO IN PARAGRAPH 6 OF THE INDEPENDENT AUDITORS'' REPORT TO THE MEMBERS OF INDOSOLAR LIMITED ON THE ACCOUNTS FOR THE YEAR ENDED 31ST MARCH 2013

(i) (a) According to the information and explanations given to us, the Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

(b) According to the information and explanations given to us, the Company has a regular programme of physical verification of its fixed assets by which all fixed assets are physically verified by the management in a phased manner over a period of two years. In accordance with such phased programme, certain categories of fixed assets have been physically verified by the management during the year. In our opinion, the frequency of physical verification is reasonable having regard to the size of the Company and nature of its fixed assets. As informed to us, discrepancies noticed on such verification were not material and have been properly dealt with in the books of account.

(c) Fixed assets disposed of during the year were not substantial, and therefore, do not affect the going concern assumption.

(ii) (a) According to the information and explanations given to us, the inventories have been physically verified by the management during the year. In our opinion, the frequency of such verification is reasonable. Further, as informed, there are no stocks lying with third party.

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

(c) According to the information and explanations given to us, and on the basis of our examination of the records of inventories, we are of the opinion that the Company is maintaining proper records of inventories. As informed to us, the discrepancies noticed on physical verification of inventories as compared to the book records were not material and have been properly dealt with in the books of account.

(iii) (a) The Company had taken interest free loan from a party covered in the register maintained under Section 301 of the Companies Act, 1956 in the year ended 31st March 2012. The maximum amount outstanding during the year in respect of such loan was Rs. 418.62 lakhs and the year-end balance of such loan is Rs. 418.62 lakhs.

In our opinion, the terms and conditions on which interest free loan was taken from such party are not, prima facie, prejudicial to the interest of the Company.

In the case of interest free loan taken from a party listed in the register maintained under Section 301, the Company is not permitted to repay the loan under the terms and condition of restructuring agreement approved by the CDR Cell, unless the same has been approved by CDR Cell. As informed by the management and according to the terms and conditions of restructuring agreement, the loan has accordingly not been repaid by the Company during the year.

(b) According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured, to or from companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Accordingly, paras 4 (iii) (f) to (g) of the Order are not applicable.

(iv) In our opinion and according to the information and explanations given to us, and having regard to the explanation that purchases of certain items of inventories and fixed assets are for the Company''s specialised requirements and suitable alternative sources are not available to obtain 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 inventories and fixed assets and with regard to sale of goods. The activities of the Company do not involve rendering of services. We did not observe any major weakness in internal controls during the course of our audit.

(v) (a) In our opinion, and according to the information and explanations given to us, the particulars of contracts or arrangements referred to in section 301 of the Companies Act, 1956 have been entered in the register required to be maintained under that section.

(b) In our opinion, and according to the information and explanations given to us, there are no transactions made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956, and exceeding Rs. 5 lakhs with any party during the year.

(vi) According to the information and explanations given to us, the Company has not accepted any deposits from the public during the year.

(vii) The Company has an internal audit system. In our opinion, the scope of work and coverage of internal audit needs to be enlarged to make it 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 prescribed by Central government for maintenance of cost records under section 209(1)(d) of the Companies Act, 1956 and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the records with a view to determine whether they are accurate or complete.

(ix) (a) According to the information and explanations given to us and on the basis of our examination of the records of the Company, amounts deducted/ accrued in the books of account in respect of undisputed statutory dues including Wealth tax, Customs duty, Excise duty and other material statutory dues, to the extent applicable, have generally been regularly deposited with the appropriate authorities. In respect of Provident Fund, Employees'' State Insurance, Income Tax, Service Tax and Work Contract Tax, the deposits have not been regularly deposited with the appropriate authorities and there have been serious delays in large number of cases. As explained to us, the Company did not have any dues on account of Investor Education and Protection Fund and Customs duty.

According to the information and explanations given to us, no undisputed amounts payable in respect of Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income tax, Sales tax, Wealth tax, Service tax, Customs duty, Excise duty and other material statutory dues were in arrears as at 31st March 2013 for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us, and on the basis of the records of the Company examined by us, there are no dues of Income-tax, Wealth-tax, Service tax, Sales-tax, Customs duty and Excise duty which have not been deposited with the appropriate authorities on account of any dispute except as mentioned below:



Name of the Nature of the Amount in Amount statute dues Rupees* deposited

Customs Act, 1962 Customs duty 9,223,204 8,690,510

Central Excise Excise duty 112,249,935 18,198,763 Act, 1944

Finance Act, 1994 Service tax 190,371,164 13,706,745

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

Customs Act,1962 2009-2011 Office of settlement commission

Central Excise Act,1944 2009-2011 Office of settlement commission

Finance Act,1994 2009-2011 Office of settlement commission

*amount as per demand orders, including interest and penalty wherever quantified in the order.

(x) The accumulated losses of the Company at the end of the financial year are more than fifty percent of its net worth. The Company has incurred cash losses during the financial year and in the immediately preceding financial year.

(xi) In our opinion and according to the information and explanations given to us, and on the basis of our examination of the books of account and related records, the Company has not defaulted in repayment of dues to its bankers. The Company did not have any outstanding dues to financial institutions or debenture holders during the year.

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

(xiii) According to the information and explanations given to us, the Company is not a chit fund or a nidhi/ mutual benefit fund/ society.

xiv) According to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debentures and other investments.

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

(xvi) According to the information and explanations given to us, term loans have been applied for the purpose for which such loans were obtained.

(xvii) According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, we are of the opinion that the funds raised on short-term basis amounting to Rs. 4,843.11 lakhs have been used for long-term investments.

(xviii) The Company has not made any preferential allotment of shares to companies/firms or parties covered in the register maintained under Section 301 of the Companies Act, 1956.

(xix) The Company did not have any outstanding debentures during the year.

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

(xxi) According to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the course of our audit.



For B S R and Associates

Chartered Accountants

Firm Registration No.: 128901 W

VIKRAM ADVANI

Place:New Delhi Partner

Date :29.05.2013 Membership No.: 091765


Mar 31, 2012

1. We have audited the attached Balance Sheet of Indosolar Limited ("the Company") as at 31st March, 2012 and the Statement of Profit and Loss and Cash Flow Statement for the year ended on that date ("financial year"), annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor's Report) Order, 2003 ('the Order') issued by the Central Government of India in terms of Sub-Section (4A) of Section 227 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 above, we report that:

(i) we have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purpose of our audit;

(ii) in our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books;

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

(iv) in our opinion, the Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statement dealt with by this report comply with the accounting standards referred to in Sub-Section (3C) of Section 211 of the Companies Act, 1956, to the extent applicable;

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

(vi) without qualifying our opinion, attention is invited to Note 28, with regard to impairment assessment carried out by management as of 31st March, 2012 based on cash flows determined after taking into account the current business realities and which has been incorporated in the Corporate Debt Restructuring ('CDR') package approved by the consortium of banks ('CDR Cell'). Such cash flows do not indicate impairment as at 31st March, 2012.

As elaborated in the note, the achievement of such cash flows is dependent upon sustaining reasonable gross margins despite low selling prices; ability of project developers reaching financial closure; the Company being able to garner a reasonable share of the demand both under National Solar Missions and State Solar Missions and the ultimate outcome of various policy interventions that are required for the viability of the sector. The result of all of the above significant possible changes in the business dynamics and its consequent effect on the Company's cash flows will be known in the ensuing period. Accordingly, the cash flows that were prepared by management and as approved by the CDR cell have been considered by us for impairment assessment; and

(vii) Without qualifying our opinion, attention is invited to note 6 (iii) (f) that highlights that one of the lending banks has not signed the joint Master Restructuring Agreement. However for purposes of the attached financial statements, the owings to this particular bank including interest due at lower rates have been disclosed / calculated in accordance with the terms of the CDR package per Letter of Approval dated 7th March, 2012 received from the CDR cell. As informed to us the owings to this particular bank have been reclassified / interest calculated in accordance with the CDR package as the necessary stipulated majority of the CDR cell has agreed to the CDR package. Accordingly, short term borrowings comprising cash credit amounting to Rs. 1,223.92 lakhs and devolved Letter of Credit amounting to Rs. 511.57 lakhs have been reclassified as Long Term Borrowing (Rs 1,402.43) and Short Term Borrowings (Rs. 333.06 lakhs) as at 31st March, 2012. The existing term loan of Rs. 5,996.79 lakhs has been disclosed as long term borrowing with nil current maturities. The interest due w.e.f 1st July, 2011 till 31st March, 2012 at revised rates amounting to Rs. 549.73 lakhs has been reclassified as a Funded Interest Term Loan. The above reclassifications and interest calculations are subject to reconciliation and approval by this particular bank.

(viii) in our opinion, and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

a. in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2012;

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.

ANNEXURE REFERRED TO IN PARAGRAPH 3 OF OUR REPORT OF EVEN DATE

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

(b) The Company has a regular programme of physical verification of its fixed assets by which all fixed assets are verified in a phased manner over a period of two years. In accordance with the policy, the Company has carried out physical verification of majority of its fixed assets during the year. In our opinion, the frequency of physical verification is reasonable having regard to the size of the Company and the nature of its assets. As informed to us, no material discrepancies were noticed on such verification.

(c) Fixed assets disposed of during the year were not substantial, and therefore, do not affect the going concern assumption.

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

(b) The procedures for physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) The Company is maintaining proper records of inventory. As informed to us, no material discrepancies were noticed on verification between the physical stocks and the book records.

(iii) (a) The Company had taken interest free loan from a party covered in the register maintained under Section 301 of the Companies Act, 1956. The maximum amount outstanding during the year in respect of such loan was Rs 418.62 lakhs and the year-end balance of such loan is Rs 418.62 lakhs.

In our opinion, the terms and conditions on which interest free loan had been taken from such party are not, prima facie, prejudicial to the interest of the Company.

In the case of interest free loan taken from a party listed in the register maintained under Section 301, the Company is not permitted to repay the loan under the terms and condition of restructuring agreement approved by the CDR Cell, unless the same has been approved by CDR Cell. As informed by the management and according to the terms and conditions of restructuring agreement, the loan has accordingly not been repaid by the Company during the year.

(b) The Company has not granted any loans, secured or unsecured, to companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956.

(iv) In our opinion and according to the information and explanations given to us, and having regard to the explanation that purchases of certain items of inventories and fixed assets are for the Company's specialized requirements and suitable alternative sources are not available to obtain 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 inventories and fixed assets and with regard to sale of goods. The activities of the Company do not involve rendering of services. We did not observe any major weakness in internal controls during the course of our audit.

(v) (a) In our opinion and according to the information and explanations given to us, the particulars of contracts or arrangements referred to in Section 301 of the Companies Act, 1956 have been entered in the register required to be maintained under that section.

(b) In our opinion, and according to the information and explanations given to us, there are no contracts or arrangement referred to in (a) above that exceeds the value of Rs. 5 lakh during the year except interest free loan taken from a party covered in the register maintained under Section 301 of the Companies Act, 1956. Refer to our comments in respect of transaction related to loan taken in para (iii) (a) above.

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

(vii) In our opinion, the Company has an internal audit system commensurate with the size and nature of its business.

(viii) We have broadly reviewed the books of account maintained by the Company pursuant to the rules prescribed by the Central Government for maintenance of cost records under section 209(1)(d) of the Companies Act, 1956 and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. However, we have not made a detailed examination of the records.

(ix) (a) According to the information and explanations given to us and on the basis of our examination of the records of the Company, the amounts deducted/ accrued in the books of accounts in respect of undisputed statutory dues including Income tax, Provident Fund, Employees' State Insurance, Sales tax, Wealth tax, Excise duty and other material statutory dues have generally been regularly deposited with the appropriate authorities except Service tax and work contract tax where there have been serious delays in few cases. As explained to us, the Company did not have any dues on account of Investor Education and Protection Fund and Customs duty.

According to the information and explanations given to us, no undisputed amounts payable in respect of Provident Fund, Employees' State Insurance, Income tax, Sales tax, Wealth tax, Service tax, Excise duty and other material statutory dues were in arrears as at 31st March, 2012 for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us, there are no amounts in respect of Income tax, Sales tax, Service tax, Wealth tax and Excise duty that have not been deposited with appropriate authorities on account of any dispute. As explained to us, the provisions relating to Customs duty are not applicable to the Company.

(x) The accumulated losses of the Company at the end of the financial year are more than fifty percent of its net worth. The Company has incurred cash losses during the financial year and in the immediately preceding financial year.

(xi) In our opinion and according to the information and explanations given to us, and on the basis of our examination of the books of account and related records, we observed following delays in the repayment of principal sums and interest thereon to banks:

Name of the lender Period of default Minimum amount of Maximum amount of in days default (Rs. in lakhs) default (Rs. in lakhs)

Corporation Bank 1 to 271 0.64 3,522.47

Bank of Baroda 6 to 274 74.59 3,303.07

Indian bank 18 to 274 70.58 2,977.80

Union Bank of India 1 to 212 20.12 1,806.11

Andhra Bank 6 to 308 14.52 4,174.46

However, as explained in Note 6 of financial statements the Corporate Debt Restructuring Empowered Group approved a restructuring package on 28th March, 2012 in terms of which the Existing loans were restructured with effect from 1st July, 2011. As a consequence, there are no overdue amounts outstanding towards interest and principal as at year end.

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

(xiii) In our opinion and according to the information and explanations given to us, the Company is not a chit fund or a nidhi/mutual benefit fund/society.

(xiv) According to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debentures and other investments.

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

(xvi) In our opinion and according to the information and explanations given to us, the term loans taken by the Company have been applied for the purpose for which they were raised.

(xvii) According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we are of the opinion that funds raised on short-term basis amounting to Rs. 2,254.50 lakhs have been used for long-term investment.

(xviii) The Company has not made any preferential allotment of shares to companies, firms or parties covered in the register maintained under Section 301 of the Companies Act, 1956.

(xix) The Company did not have any outstanding debentures during the year.

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

(xxi) According to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the course of our audit.

ForB S R and Associates

Chartered Accountants

Firm Registration No.: 128901 W

VIKRAM ADVANI

Place : Gurgaon Partner

Date : 30.05.2012 Membership No.: 091765

 
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