Auditor Report of KMG Milk Food Ltd.

Mar 31, 2015

We have audited the accompanying financial statements of KMG MILK FOOD LIMITED ("the company"), which comprise the Balance Sheet as at 31 March 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 Statement

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

Auditor's Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit.

We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under.

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

An audit involves performing procedures to obtain audit evidence about the amounts and 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 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 Company's Directors, as well as evaluating the overall presentation of the financial statements.

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

Opinion

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

a) In the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2015;

b) In the case of the Statement of Profit and Loss Account, of the Profit for the year ended on that date;

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

Report on the other Legal and regulatory Requirements

1. 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 Companies Act 2013, We give in the Annexure statement on the matters specified in paragraph 3 & 4 of the order.

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

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

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

c) The Balance Sheet, the 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 31 March, 2015, 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 Section 164(2) of the Act.

f) With respect to the other matters included in the Auditor's Report and to our best of our information and according to the explanations given to us:

i. The Company have the following pending litigations which would impact its financial position.

a.) In the matter of M/s Goel Agencies Pvt. Ltd/M/s Fair Deal Agencies, Ludhiana vs. Company/ Shri Basudev Garg/Smt. Mithlesh Garg for Rs.6, 00,528.15 – Ludhiana

b.) In the matter of Semen Bank Officer/Haryana Live Stock Development Board, Pehowa, Harayana (Milk Cess) vs. Company of Rs 35,01,14,839/ –as interest 1,57,59,375/- as principal.

c.) In the matter of Company vs Hitkari Industries Ltd in the Karkadoma Court for Rs.1,85,000 123671/- Delhi.

d.) Company V/s Shree Ganesh Trading Co. Kurukshetra, Kurukshetra Court for Rs 128693 Interest

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

iii. No amount is required to be transferred to the Investor Education and Protection Fund by the Company as on 31 March, 2015.

The Annexure referred to in paragraph 1 of the Our Report of even date to the members of KMG MILK FOOD LIMITED on the accounts of the company for the year ended 31st March, 2015.

On the basis of such checks as we considered appropriate and according to the information and explanation given to us during the course of our audit, we report that:

(i) (a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets on the basis of information available.

(b) As explained to us, fixed assets have been physically verified by the management reasonable intervals; no material discrepancies were noticed on such verification.

In our opinion and according to the information and explanations given to us, no substantial part of fixed asset has been disposed off during the year and therefore does not affect the going concern assumption.

(ii) (a) According to the information and explanations given to us and on the basis of our examination of the books of account, 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. Consequently, the provisions of clauses iii (a) and iii (b) of the order are not applicable to the Company.

(iii) In our opinion and according to the information and explanations given to us, there is generally an adequate internal control procedure commensurate with the size of the company and the nature of its business, for the purchase of inventories & fixed assets and for the sale of goods and services. During the course of our audit, no major instance of continuing failure to correct any weaknesses in the internal controls has been noticed.

(iv) In our opinion, and according to the information and explanation given to us, the company has not accepted any deposits; hence, clause (v) is not applicable to the company. Accordingly, directives issued by the Reserve Bank of India and the provisions of section 73 to 76 or any other relevant provisions of the Companies Act and the rules framed there under are not applicable.

(v) The Company is not required to maintain cost records pursuant to the Rules made by the Central Government for maintenance of cost records under sub-section (1) of section 148 of the Act.

(vi) (a) According to the records of the Company, undisputed statutory dues including Provident Fund, Employees' State Insurance, Income-tax, Sales-tax, Wealth Tax, Service Tax, Duty of Custom, Duty of Excise, Value added tax, cess to the extent applicable and any other statutory dues have generally been regularly deposited with the appropriate authorities. According to the information and explanations given to us there were no outstanding statutory dues as on 31st of March, 2015 for a period of more than six months from the date they became payable

(b) According to the information and explanations given to us, the following amounts payable in respect of income tax, sales tax, wealth tax, service tax, duty of customs, duty of excise or value added tax or cess which have not been deposited on account of any disputes.

STATEMENT OF DUES

Name of the Nature of the Amount In Rs Statute dues

Haryana Live Milk Cess 1,57,59,375/- stock

Development Interest on Milk 35,01,14,839/- Board, Cess

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

Hariyana Live Stock 2001-2007 Haryana Live stock Development

Development Board Board, Pehowa, Haryana

(c) Company does not have any amount 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 there under.

(vii) The Company has accumulated loss of Rs.3,37,07321/- (Previous Year of Rs.4,84,292,18/-) at the end of the financial year which are more than fifty percent of net worth of the Company and has not incurred cash losses in the financial year and in the financial year immediately preceding such financial year.

(viii) In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to a financial institution, bank or debenture holders.

(ix) According to the information and explanations given to us, the Company has not given any guarantee for loans taken by other from bank or financial institutions.

(x) According to the information and explanations given to us, the Company has not raised any term loans during the year.

For Rajan K Gupta & Co.

Chartered Accountants

Rajan Gupta

(Partner)

M. No:074696

FRN: 005945C

Place : Delhi

Date : 29.05.2015

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Mar 31, 2014

We have audited the accompanying financial statements of KMG Milk Food Limited which comprise the Balance Sheet as at 31st March, 2014 and the Statement of Profit & Loss and Cash Flow Statement for the year then ended and a summary of significant accounting policies and other additional information.

2. Management''s Responsibility for the financial statements

The Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position and financial performance of the Company in accordance with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956 read with the General Circular 15 / 2013 dated 13th September, 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013 and in accordance with the accounting principles generally accepted in India. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

3. Auditor''s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

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

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

4. Opinion

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

(i) In the case of the Balance Sheet, of the state of affairs of the company as at 31st March, 2014 and

(ii) In the case of the Statement of Profit & Loss, of the profit of the company for the year ended on that date.

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

5. Report on Other legal Regulatory Requirements

A. As required by the Companies (Auditor''s Report) Order, 2003 (''the Order''), as amended, 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.

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

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

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

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

d. In our opinion, the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956 read with the General Circular 15/ 2013 dated 13th September, 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013.; and

e. On the basis of written representations received from the directors as on March 31, 2014, and taken on record by the Board of Directors, none of the directors are disqualified as on March 31, 2014, from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956.

KMG MILK FOOD LTD Annexure to the Audit Report referred to in paragraph 5 A of our report of even date

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

(b) All the assets have not been physically verified by the management during the year but there is a regular programmed of verification which, in our opinion, is reasonable having regard to the size of the company and the nature of its assets. No material discrepancies were noticed on such verification.

(c) During the year, the company has not disposed off a major part of the plant and machinery and consequently the going concern has not been affected.

(d) During the year all the fixed assets including factory building is given on lease to Mahaan Milk Foods Ltd.

2. Since there is no stock of inventory, hence physically verification of the stock not required.

3. (a) The company had taken unsecured loan from associates and therefore the provisions regarding taking of loan by the company from other companies covered in the register maintained under section 301 of the Companies Act, 1956 is applicable to the company.

(b) In our opinion, the rate of interest and other terms and conditions on which loans have been taken from/ granted to companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956 are not, prima facie, prejudicial to the interest of the company.

(c) The company is regular in repaying the principal amounts as stipulated and has been regular in the payment of interest. The parties have repaid the principal amounts as stipulated and have been regular in the payment of interest.

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

4. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the company and the nature of its business with regard to purchases of inventory, fixed assets and with regard to the sale of goods. During the course of our audit, no major weakness has been noticed in internal controls.

5. (a) Based on the Audit procedures applied by us and according to the information and explanations provided by the management, we are of the opinion that the transactions that need to be entered into the register maintained under section 301 of the Companies Act, 1956 have been so entered.

(b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and exceeding the value of rupees five lakhs in respect of any party during the year have been made at prices which are reasonable having regard to prevailing market prices at the relevant time.

6. In our opinion and according to the information and explanations given to us, the company has not accepted any deposit under the provisions of sections 58A and 58AA of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 with regard to the deposits accepted from the public.

7. In our opinion, the company has an internal audit system commensurate with the size and nature of its business.

8. The provision regarding maintenance of cost records under section 209 (1) (d) of the Companies Act, 1956 does not apply to the company under review.

9. (a) According to the information and explanations given to us and the records of the company examined by us, in our opinion, the company is regular in depositing with appropriate authorities undisputed statutory dues including provident fund, investor education protection fund, income tax, sales tax, wealth tax, custom duty, excise duty, cess and other material statutory dues applicable to it.

(b) According to the information and explanation given to us, and the records of the company examined by us, no undisputed amount payable in respect of income tax, wealth tax, sale tax, custom duty, excise duty and cess were in arrears, as at 31.03.2014 for the period of more than six months from the date they become payable except the milk cess of Rs 1,50,84,375/- against the supreme court order dated 07-09-2012.

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

Statement of disputed Dues

Name of the Statute Nature of the dues Amount In Rs Period to which the amount relates

Haryana Live stock Milk Cess 1,57,59,375/- 2001-2007 Development Board, Interest on Milk cess 26,04,15,499/-

Name of the Statue Forum where dispute is pending

Haryana Live stock Development Board, Haryana Live stock Development Board, Pehowa, Haryana

10. The company has accumulated losses of Rs 4,84,29,218/-(Previous Year Rs 5,85,61,634/ -) at the end of the financial year under review which are more than fifty percent of its net worth. The company has not incurred cash losses during the financial year covered by our audit and the immediately preceding financial year.

11. In our opinion and according to the information and explanations given to us, the company has not defaulted in repayment of dues to a financial institution, bank or debenture holders.

12. Based on our examination of documents and records, the company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

13. In our opinion, the company is not a chit fund or a nidhi/ mutual benefit fund/society. Therefore, the provisions of clause 4(xiii) of the Companies (Auditor''s Report) Order. 2003 are not applicable to the company.

14. In our opinion, the company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Company (Auditor''s report) Order, 2003 are not applicable to the company.

15. The company has not given any guarantee for loans taken by others from banks or financial institutions.

16. In our opinion, the term loans have been applied for the purpose for which they were raised.

17. According to the information and explanations given to us and on an overall examination of the balance sheet of the company, we report that the 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.

18. Based on our examination of records and the information provided to us by management we report that the company has not made preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Act.

19. During the period covered by our audit report, the company has not issued debentures. The question of creation of any security in respect of these debentures does not arise.

20. The company has not raised any money by public issued during the financial year under review.

21. 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 Rajan K. Gupta & Co.

Chartered Accountants

Place: Delhi (Rajan Gupta)

Dated: 30-05-2014 Partner

M.NO 74696 FRN 005945C

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Mar 31, 2013

1. Report on the Financial Statements

We have audited the accompanying financial statements of KMG Milk Food Limited which comprise the Balance Sheet as at 31st March, 2013 and the Statement of Profit & Loss and Cash Flow Statement for the year then ended and a summary of significant accounting policies and other additional information.

2. Management''s Responsibility for the financial statements

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

3. Auditor''s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by the Management, as well as evaluating the overall presentation of the financial statements.

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

4. Opinion

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

(i) In the case of the Balance Sheet, of the state of affairs of the company as at 31st March, 2013 and

(ii) In the case of the Statement of Profit & Loss, of the loss of the company for the year ended on that date.

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

5. Report on Other legal Regulatory Requirements

A. As required by the Companies (Auditor''s Report) Order, 2003 (''the Order''), as amended, 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.

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

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

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

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

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

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

KMG MILK FOOD LTD Annexure to the Audit Report referred to in paragraph 5 A of our report of even date

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

(b) All the assets have not been physically verified by the management during the year but there is a regular programmed of verification which, in our opinion, is reasonable having regard to the size of the company and the nature of its assets. No material discrepancies were noticed on such verification.

(c) During the year, the company has not disposed off a major part of the plant and machinery and consequently the going concern has not been affected.

2. Since there are no stock of inventory, hence physically verification of the stock not required.

3. (a) The company had taken unsecured loan from associates and therefore the provisions regarding taking of loan by the company from other companies covered in the register maintained under section 301 of the Companies Act, 1956 is applicable to the company.

(b) In our opinion, the rate of interest and other terms and conditions on which loans have been taken from/ granted to companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956 are not, prima facie, prejudicial to the interest of the company.

(c) The company is regular in repaying the principal amounts as stipulated and has been regular in the payment of interest. The parties have repaid the principal amounts as stipulated and have been regular in the payment of interest.

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

4. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the company and the nature of its business with regard to purchases of inventory, fixed assets and with regard to the sale of goods. During the course of our audit, no major weakness has been noticed in internal controls.

5. (a) Based on the Audit procedures applied by us and according to the information and explanations provided by the management, we are of the opinion that the transactions that need to be entered into the register maintained under section 301 of the Companies Act, 1956 have been so entered.

(b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and exceeding the value of rupees five lakhs in respect of any party during the year have been made at prices which are reasonable having regard to prevailing market prices at the relevant time.

6. In our opinion and according to the information and explanations given to us, the company has not accepted any deposit under the provisions of sections 58A and 58AA of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 with regard to the deposits accepted from the public.

7. In our opinion, the company has an internal audit system commensurate with the size and nature of its business.

8. The provision regarding maintenance of cost records under section 209 (1) (d) of the Companies Act, 1956 does not apply to the company under review.

9. (a) According to the information and explanations given to us and the records of the company examined by us, in our opinion, the company is regular in depositing with appropriate authorities undisputed statutory dues including provident fund, investor education protection fund, income tax, sales tax, wealth tax, custom duty, excise duty, cess and other material statutory dues applicable to it.

(b) According to the information and explanation given to us, and the records of the company examined by us, no undisputed amount payable in respect of income tax, wealth tax, sale tax, custom duty, excise duty and cess were in arrears, as at 31.03.2013 for the period of more than six months from the date they become payable except the milk cess of Rs 1,50,84,375/- against the supreme court order dated 07-09-2012.

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

10. The company has accumulated losses of Rs 5,85,61,634/-(Previous Year Rs 4,95,25,298/-) at the end of the financial year under review which are more than fifty percent of its net worth. The company has not incurred cash losses during the financial year covered by our audit and the immediately preceding financial year.

11. In our opinion and according to the information and explanations given to us, the company has not defaulted in repayment of dues to a financial institution, bank or debenture holders.

12. Based on our examination of documents and records, the company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

13. In our opinion, the company is not a chit fund or a nidhi/ mutual benefit fund/society. Therefore, the provisions of clause 4(xiii) of the Companies (Auditor''s Report) Order. 2003 are not applicable to the company.

14. In our opinion, the company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Company (Auditor''s report) Order, 2003 are not applicable to the company.

15. The company has not given any guarantee for loans taken by others from banks or financial institutions.

16. In our opinion, the term loans have been applied for the purpose for which they were raised.

17. According to the information and explanations given to us and on an overall examination of the balance sheet of the company, we report that the 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.

18. Based on our examination of records and the information provided to us by management we report that the company has not made preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Act.

19. During the period covered by our audit report, the company has not issued debentures. The question of creation of any security in respect of these debentures does not arise.

20. The company has not raised any money by public issued during the financial year under review.

21. 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 Rajan K. Gupta & Co.

Chartered Accountants



Sd/-

(Rajan Gupta)

Partner

M.NO 74696

FRN 005945C

Place: Delhi

Dated: 29-05-2013

---

Mar 31, 2012

1. Report on the Financial Statements

We have audited the accompanying financial statements of KMG Milk Food Limited which comprise the Balance Sheet as at 31st March, 2012 and the Statement of Profit & Loss and Cash Flow Statement for the year then ended and a summary of significant accounting policies and other additional information.

2. Management's Responsibility for the financial statements

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

3. Auditor's Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by the Management, as well as evaluating the overall presentation of the financial statements.

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

4. Opinion

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

(i) In the case of the Balance Sheet, of the state of affairs of the company as at 31st March, 2012 and

(ii) In the case of the Statement of Profit & Loss, of the profit of the company for the year ended on that date.

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

5. Report on Other legal Regulatory Requirements

A. As required by the Companies (Auditor's Report) Order, 2003 ('the Order'), as amended, 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.

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

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

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

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

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

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

ANNEXURE TO THE AUDIT REPORT OF KMG MILK FOOD LTD.

Referred to in paragraph 5 A of our report of even date

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

(b) All the assets have not been physically verified by the management during the year but there is a regular programmed of verification which, in our opinion, is reasonable having regard to the size of the company and the nature of its assets. No material discrepancies were noticed on such verification.

(c) During the year, the company has not disposed off a major part of the plant and machinery and consequently the going concern has not been affected.

2. (a) since there are no stock of inventory, hence physically verification of the stock not required.

3. (a) The company had taken unsecured loan from associates and therefore the provisions regarding taking of loan by the company from other companies covered in the register maintained under section 301 of the Companies Act, 1956 is applicable to the company.

(b) In our opinion, the rate of interest and other terms and conditions on which loans have been taken from/ granted to companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956 are not, prima facie, prejudicial to the interest of the company.

(c) The company is regular in repaying the principal amounts as stipulated and has been regular in the payment of interest. The parties have repaid the principal amounts as stipulated and have been regular in the payment of interest.

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

4. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the company and the nature of its business with regard to purchases of inventory, fixed assets and with regard to the sale of goods. During the course of our audit, no major weakness has been noticed in internal controls.

5. Based on the Audit procedures applied by us and according to the information and explanations provided by the management, we are of the opinion that the transactions that need to be entered into the register maintained under section 301 of the Companies Act, 1956 have been so entered.

6. In our opinion and according to the information and explanations given to us, the company has not accepted any deposit under the provisions of sections 58A and 58AA of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 with regard to the deposits accepted from the public.

7. The provision regarding maintenance of cost records under section 209 (1) (d) of the Companies Act, 1956 does not apply to the company under review.

8. (a) According to the information and explanations given to us and the records of the company examined by us, in our opinion, the company is regular in depositing with appropriate authorities undisputed statutory dues including provident fund, investor education protection fund, income tax, sales tax, wealth tax, custom duty, excise duty, cess and other material statutory dues applicable to it.

(b) According to the information and explanation given to us, and the records of the company examined by us, the particulars of dues of Income Tax, Sales Tax & SEBI as at 31st March 2012 which has not been deposited on account of dispute are mentioned hereunder'.

Nature of the Nature of Amount Period to Forum where the Statute Dues in Lacs which the dispute is pending amount relates

Stock Exchanges Demand Annual Listing Fees 8.06 Since 1995 SEBI

9. The company has accumulated losses of Rs 4,96,56,103/-(Previous Year Rs 5,02,85,383/-) at the end of the financial year under review.

10. In our opinion and according to the information and explanations given to us, the company has not defaulted in repayment of dues to a financial institution, bank or debenture holders.

11. Based on our examination of documents and records, the company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

12. In our opinion, the company is not a chit fund or a nidhi/ mutual benefit fund/society. Therefore, the provisions of clause 4(xiii) of the Companies (Auditor's Report) Order. 2003 are not applicable to the company.

13. In our opinion, the company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Company (Auditor's report) Order, 2003 are not applicable to the company.

14. The company has not given any guarantee for loans taken by others from banks or financial institutions.

15. In our opinion, the term loans have been applied for the purpose for which they were raised.

16. According to the information and explanations given to us and on an overall examination of the balance sheet of the company, we report that the 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.

17. Based on our examination of records and the information provided to us by management we report that the company has not made preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Act.

18. During the period covered by our audit report, the company has not issued debentures. The question of creation of any security in respect of these debentures does not arise.

19. The company has not raised any money by public issued during the financial year under review.

20. 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 Rajan K. Gupta & Co.

Chartered Accountatlts

Place: Delhi Sd/-

Date: 07.05.2012 (Rajan Gupta)

Partner

M.NO 74696

FRN 005945C

---

Mar 31, 2011

(A) We have audited the attached Balance Sheet of M/s KMG MILK FOOD.LTD. As at 31st March 2011 and together with the Profit & loss Account of the company for the year ended on that date both of which we have signed under reference to this report. These financial statement are the responsibility of the Company's Management. Our responsibility is to express an opinion on these financial statements based on our audit.

(B) We have 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 the 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 the management, presentation. We believe that our audit provides a reasonable basis for our opinion

(C) As require by the companies (Auditor's Report) order, 2003 issued by the Central Government of India in terms of sub -section (4A) of section 227 of the Companies Act, 1956 and on the basis of such checks as we consider appropriate and according to the information and explanations given to us, a statement on the matters specified in Paragraphs (4 &5) of the said order is annexed as Annexure-A.

(D) Further to our comments in the order referred to above we report that: -

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

2. In our opinion, proper books of accounts as required by law have been kept by the company so for as appears from our examination of the books;

3. The Balance sheet and Profit & Loss Account dealt with by this report are in agreement with the books of accounts.

4. In our opinion, the Balance Sheet and Profit and Loss Account dealt with by this report comply with the applicable accounting standards referred to in Section 211 (3C) of the Companies Act, 1956.

5. As per the representation made to us by all Directors of the company none of the Directors is disqualified from being appointed as Directors Vis 274(1) (g) of the companies Act, 1956.

6. In our opinion and to the best of our infoffilation and according to the explanations given to us the said accounts together with notes thereon and statement on significant Accounting Policies 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 principle generally accepted in India:-

(a) In the case of Balance Sheet of the State of Affairs of the company as on 31st March, 2011, and

(b) In the case of the Profit & Loss Account of the loss for the year ended on that date.

ANNEXURE TO THE AUDIT REPORT OF KMG MILK FOOD LTD. Referred to in paragraph 3 of our report of even date,

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

(b) All the assets have not been physically verified by the management during the year but there is a regular programmed of verification which, in our opinion, is reasonable having regard to the size of the company and the nature of its assets. No material discrepancies were noticed on such verification.

(c) During the year, the company has not disposed off a major part of the plant and machinery and consequently the going concern has not been affected.

2. (a) since there are no stock of inventory, hence physically verification of the stock not required.

3. (a) The company had taken secured loan from banking companies and therefore the provisions regarding taking of loan by the company from other companies covered in the register maintained under section 301 of the Companies Act, 1956 is applicable to the company.

(b) In our opinion, the rate of interest and other terms and conditions on which loans have been taken from granted to companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956 are not, prima facie, prejudicial to the interest of the company.

(c) The company is regular in repaying the principal amounts as stipulated and has been regular in the payment of interest. The parties have repaid the principal amounts as stipulated and have been regular in the payment of interest.

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

4. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the company and the nature of its business with regard to purchases of inventory, fixed assets and with regard to the sale of goods. During the course of our audit, no major weakness has been noticed in internal controls.

5. (a) Based on the Audit procedures applied by us and according to the information and explanations provided by the management, we are of the opinion that the transactions that need to be entered into the register maintained under section 301 of the Companies Act, 1956 have been so entered.

6. In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements have been entered in the register maintained under section 301 of the Companies Act, 1956. ,;

7. In our opinion and according to the information and explanations given to us, the company has not accepted any deposit under the provisions of sections 58A and 58AA of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 with regard to the deposits accepted from the public.

8. In our opinion, the company has an internal audit system commensurate with the size and nature of its business.

9. The provision regarding maintenance of cost records under section 209 (1) (d) of the Companies Act, 1956 does not apply to the company under review.

10. (a) According to the information and explanations given to us and the records of the company examined by us, in our opinion, the company is regular in depositing with appropriate authorities undisputed statutory dues including provident fund, investor education protection fund, income tax, sales tax, wealth tax, custom duty, excise duty, cess and other material statutory dues applicable to it.

(b) According to the information and explanation given to us, and the records of the company examined by us, the particulars of dues of Income Tax, Sales Tax & SEBI as at 31st March 2011 which has not been deposited on account of dispute are mentioned hereunder'.

Nature of the Nature of Amount Period to Forum where the Statute Dues in Lacs which the dispute is pending amount relates

Central Sales Tax_Tax Demand 253 - DETC, KAITHAL

Stock Exchanges Demand Fees 6.26 Since 1995 SEBI

11. The company has accumulated losses of Rs 5,02,85,383/-(Previous Year Rs 4,96,27,921/-) at the end of the financial year under review. The company has incurred cash losses amounting to Rs--Nil--(Previous Year -nil) during the financial year covered by our audit and the immediately preceding financial year.

12. In our opinion and according to the information and explanations given to us, the company has not defaulted in repayment of dues to a financial institution, bank or debenture holders.

13. Based on our examination of documents and records, the company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

14. In our opinion, the company is not a chit fund or a nidhi/ mutual benefit fund/ society. Therefore, the provisions of clause 4(xiii) of the Companies (Auditor's Report) Order. 2003 are not applicable to the company.

15. In our opinion, the company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Company (Auditor's report) Order, 2003 are not applicable to the company.

16. The company has not given any guarantee for loans taken by others from banks or financial institutions.

17. In our opinion, the term loans have been applied for the purpose for which they were raised.

18. According to the information and explanations given to us and on an overall examination of the balance sheet of the company, we report that the 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.

19. Based on our examination of records and the infomwtion provided to us by management we report that the company has not made preferential allotment of shares to parties and companies covered in the register maintained under section 301 ofthe Act.

20. During the period covered by our audit report, the company has not issued debentures. The question of creation of any security in respect of these debentures, does not arise.

21. The company has not raised any money by public issued during the [financial year under review.

22. 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 Rajan K. Gupta & Co. Chartered Accountatlts

Place: Delhi Sd/-

Date : 13.08.2011 (Rajan Gupta)

Partner

M.NO 74696

---

Mar 31, 2010

(A) We have audited the attached Balance Sheet of M/s KMG MILK TOOD LTD As at 31st March 2010 and together with the Profit & loss Account of the company for the year ended on that date both of which we have signed under reference to this report. 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.

(B) We have 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 materia! misstatement. An audit includes examining, on the 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 the management, presentation. We believe that our audit provides a reasonable basis for our opinion

(C) As require by the companies (Auditor's Report) order, 2003 issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956 and on the basis of such checks as we consider appropriate and according to the information and explanations given to us, a statement on the matters specified in Paragraphs (4 &5) of the said order is annexed as Annexure-A.

(D) Further to our comments in the order referred to above we report that:-

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

2. In our opinion, proper books of accounts as required by law have been kept by the company so for as appears from our examination of the books;

3. The Balance sheet and Profit & Loss Account dealt with by this report are in agreement with the books of accounts.

4. In our opinion, the Balance Sheet and Profit and Loss Account dealt with by this report comply with the applicable accounting standards referred to in Section 211(3C) of the

Companies Act, 1956.

5. As per the representation made to us by all Directors of the company none of the Directors is disqualified from being appointed as Directors U/s 274(1) (g) of the companies Act, 1956.

6. In our opinion and to the best of our information and according to the explanations given to us the said accounts together with notes thereon and statement on significant Accounting Policies 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 principle generally accepted in India: -

(a) In the case of Balance Sheet of the State of Affairs of the company as on 31st March, 2010, and

(b) In the case of the Profit & Loss Account of the profit for the year ended on that date.

ANNEXURE TO THE AUDIT REPORT OF KMG MILK FOOD LTD.

Referred to in paragraph 3 of our report of even date,

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

(b) All the assets have not been physically verified by the management during the year but there is a regular programmed of verification which, in our opinion, is reasonable having regard to the size of the company and the nature of its assets. No material discrepancies were noticed on such verification.

(c) During the year, the company has not disposed off a major part of the plant and machinery and consequently the going concern has not been affected.

2. (a) since no stock of inventory, hence physically verification of the stock not required.

3. (a) The company had taken secured loan from banking companies and therefore the provisions regarding taking of loan by the company from other companies covered in the register maintained under section 301 of the Companies Act, 1956 is applicable to the company.

(b) In our opinion, the rate of interest and other terms and conditions on which loans have been taken from/granted to companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956 are not, prima facie, prejudicial to the interest of the company.

(c) The company is regular in repaying the principal amounts as stipulated and has been regular in the payment of interest. The parties have repaid the principal amounts as stipulated and have been regular in the payment of interest.

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

4. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the company and the nature of its business with regard to purchases of inventory, fixed assets and with regard to the sate of goods. During the course of our audit, no major weakness has been noticed in internal controls.

5. (a) Based on the Audit procedures applied by us and according to the information and explanations provided by the management, we are of the opinion that the transactions that need to be entered into the register maintained under section 301 of the Companies Act, 1956 have been so entered.

6. In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements have been entered in the register maintained under section 301 of the Companies Act, 1956

7. In our opinion and according to the information and explanations given to us, the company has not accepted any deposit under the provisions of sections 58A and 58AA of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 with regard to the deposits accepted from the public.

8. In our opinion, the company has an internal audit system commensurate with the size and nature of its business,

9. The provision regarding maintenance of cost records under section 209 (1) (d) of the Companies Act, 1956 does not apply to the company under review.

10. (a) According to the information and explanations given to us and the records of the company examined by us, in our opinion, the company is regular in depositing with appropriate authorities undisputed statutory dues including provident fund, investor education protection fund, income tax, sales tax, wealth tax, custom duty, excise duty, cess and other material statutory dues applicable to it.

(b) According to the information and explanation given to us, and the records of the company examined by us, the particulars of dues of Income Tax, Sales Tax & SEBI as at 31st March 2010 which has not been deposited on account of dispute are mentioned in Annexure 'A'.

Nature of the Nature of Amount in Period to Forum where Statute Dues Lacs which the the dispute is amount pending relates

Central Sales TAX 2.53 - DETC, Tax DEMAND KAITHAL

Stock Fees 6.26 Since 1995 SEBI Exchanges Demand

11. The company has accumulated losses of Rs 4,96,27,921/- (Previous Year Rs 5,21,52,800/-) at the end of the financial year under review. The company has incurred cash losses amounting to Rs -Nil- (Previous Year -nil) during the financial year covered by our audit and the immediately preceding financial year.

12. In our opinion and according to the information and explanations given to us, the company has not defaulted in repayment of dues to a financial institution, bank or debenture holders.

13. Based on our examination of documents and records, the company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

14. In our opinion, the company is not a chit fund or a nidhi/mutual benefit fund/society. Therefore, the provisions of clause 4(xiii) of the Companies (Auditor's Report) Order. 2003 are not applicable to the company.

15. In our opinion, the company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Company (Auditor's report) Order, 2003 are not applicable to the company.

16. The company has not given any guarantee for loans taken by others from banks or financial institutions.

17. In our opinion, the term loans have been applied for the purpose for which they were raised.

18. According to the information and explanations given to us and on an overall examination of the balance sheet of the company, we report that the 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.

19. Based on our examination of records and the information provided to us by management we report that the company has not made preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Act.

20. During the period covered by our audit report, the company has not issued debentures. The question of creation of any security in respect of these debentures does not arise.

21. The company has not raised any money by public issued during the financial year under review.

22. 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 RAJAN K. GUPTA & CO. Chartered/Accountants (Rajan Gupta) Partner M.NO 74696 FRN 005945C

Place: Delhi Dated: 19/08/2010