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Auditor Report of KNR Constructions Ltd.

Mar 31, 2016

To the Members of

KNR Constructions Limited

Report on the Standalone Financial Statements

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

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

Auditor''s Responsibility

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

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

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

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

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

Opinion

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

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2016 ("the order"), issued by the Central Government of India in terms of sub-section (11) of section 143 of the Companies Act, 2013, we give in the Annexure a statement on the matters specified in paragraphs 3 and 4 of the order.

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

that:

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

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

c) The reports on the accounts of the branch offices of the Company audited under Section 143(8) of the Act have been audited by the us.

d) 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 and the returns.

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

f) There are no observations or comments on the financial transactions or matters which have any adverse effect on the functioning of the company.

g) On the basis of written representations received from the directors as on 31 March, 2016, taken

on record by the Board of Directors, none of the directors is disqualified as on 31 March, 2016, from being appointed as a director in terms of Section 164(2) of the Act.

h) There are no qualification, reservation or adverse remark on the maintenance of accounts and other matters connected therewith.

i) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in "Annexure-A”.

j) 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 does not have any pending litigations which would impact its material financial position.

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

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

Annexure to the Independent Auditor''s Report

Annexures to the Independent Auditor''s Report of KNR Constructions Ltd., for the Year ended as on 31st March 2016

Annexure referred to in paragraph 1 under the heading "Report on Other Legal and Regulatory Requirements" of our report on even date:-

i. a) The company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets;

b) The Fixed Assets have been physically verified by the management at regular intervals and no material discrepancies were noticed on such verification.

c) The title deeds of immoveable properties are held in the name of the company except the following assets.

Total Number of

cases

(Lands)

Whether

leasehold/

freehold

Gross block and net block as on 31-03-16 (Amount in Lakhs)

Remarks

33

Freehold

841.90

Lands are registered in the name of directors, relatives of directors for and on behalf of the company due to restrictions in registration of the lands in the name of the Company, by the land laws of respective states in which the land is situated.*

*Company has taken undertaking from respective parties for having no interest in the lands.

ii. a) As explained to us, inventories have been physically verified at regular intervals during the year by the

management. In our opinion, having regard to the nature of business and location of inventory, the frequency of verification is reasonable.

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

c) In our opinion and according to the information and explanations given to us, the Company has maintained proper records of its inventories. The discrepancies noticed on verification between the physical stocks and the book records were not material and have been properly dealt with in the books of accounts.

iii. a) The Company has granted interest free un-secured loans / advances to subsidiary companies during the

year and the maximum amount involved during the period and the balances of said loans/advance were aggregating to Rs.18427.85 Lakhs and Rs. 33088.48 Lakhs respectively.

b) There are no specific agreements for these transactions except in the case of one of the subsidiaries which states that the interest free unsecured loans are to be granted as per the terms and conditions of common loan agreements entered into by the subsidiary company with its lenders. In all other cases un-secured loans are given on an account basis. In the absence of agreements for these loans/advances, the terms and conditions and their impact on the interests of the Company cannot be ascertained. Hence, the question of regularity of payment of principal and interest does not arise.

iv. The Company has not entered into any transaction in respect of loans, investments, guarantee and securities, which attracts compliance to the provisions of the sections 185 and 186 of the Companies Act, 2013. Therefore the paragraph 3(iv) of the Order is not applicable to the company.

v. The Company has not accepted deposits in terms of the provisions of section 73 to 76 of the Companies Act, 2013 and rules framed there under. Therefore the paragraph 3(v) of the Order is not applicable to the company.

vi. As per the information and the explanation given by the management, maintenance of cost records has been prescribed by the Central Government under sub-section (1) of section 148 of the Companies Act, 2013 and we are of the opinion that prima facie prescribed accounts and records have been made and maintained.

vii. a) According to the records of the company, undisputed statutory dues including Provident Fund, Employees''

State Insurance, Income Tax, Wealth Tax, Service Tax, Duty of Customs, Duty of Excise, Value added Tax, Sales Tax, Cess, and other statutory dues have been generally regularly deposited with appropriate authorities.

b) The disputed statutory dues that have not been deposited on account of matters pending before appropriate authorities are as under :

Name of statute

Nature of dues

Rupees in lakhs

Period to which the amount relates

Forum where dispute is pending

Income Tax Act, 1961

Income Tax

Tax paid under protest

F.Y 2006-07

Commissioner of Appeals - II, Hyderabad

Income Tax Act, 1961

Interest on TDS delay payments

9.86

F.Y 2009-10

Deputy Commissioner of Income Tax , Circle 14(2), Hyderabad

Andhra Pradesh Value Added Tax Act, 2005

VAT

45.35

F.Y 2010-11

Appellate Deputy Commissioner (C.T), Hyderabad.

Madhya Pradesh Value Added Tax Act, 2002

VAT

308.54

F.Y 2013-14

Commissioner of Appeals - Gwalior

Entry Tax

45.69

F.Y 2010-11

- Do -

Entry Tax

33.29

F.Y 2013-14

- Do -

Orissa Value Added Tax Act,

Entry Tax

28.87

F.Y 2009-10 to 11-12

Orissa High Court

c) The Company has transferred un-claimed IPO refund amount of Rs 64,209/- to the Investor Education and Protection Fund Account, during this year, as per rules made in the Companies Act, 1956.

viii. During the year the company has not defaulted in repayment of loans or borrowing to the bank. The company has taken loan or borrowings from financial institution and banks. The company has not issued debentures.

ix. Money raised by way of term loan were applied for the purpose for which it was raised. The Company has not raised money by way of initial public offer or further public offer.

x. According to the information and explanation given to us by the management which have been relied by us, there were no frauds on or by the company noticed or reported during the period under audit.

xi. The company has paid managerial remuneration, in accordance with provision of the section 197 of the Companies Act, 2013.

xii. The company is not a Nidhi Company, therefore para 3(xii) of the Order is not applicable.

xiii. In our opinion and according to the information provided to use, the transaction entered with the related parties are in compliance with section 177 and 188 of the Act and are disclosed in the financial statements as required by the applicable accounting standards.

xiv. In our opinion and according to the information provided to us, the company had not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year.

xv. According to the information provided to us, the company has not entered into any non-cash transaction with directors or the persons connected with him covered under section 192 of the Companies Act 2013. Therefore, paragraph 3(xv) of the Order is not applicable to the company.

xvi. According to the information provided to us, the company is not required to be registered under section 45IA of the Reserve Bank of India Act, 1934. Therefore, paragraph 3(xvi) of the Order is not applicable to the company.

Annexure-A

Annexure referred to in paragraph 2 (i) under the heading "Report on Other Legal and Regulatory Requirements” of our report on even date:-

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 ("the Act”)

We have audited the internal financial controls over financial reporting of KNR Constructions Limited ("the Company") as of March 31, 2016 in conjunction with our audit of the financial statements of the Company for the year ended on that date.

Management''s Responsibility for Internal Financial Controls

The Company''s management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India. These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to company''s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013.

Auditors'' Responsibility

Our responsibility is to express an opinion on the Company''s internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the "Guidance Note") and the Standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness.

Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. 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.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for my /our audit opinion on the Company''s internal financial controls system over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A company''s internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company''s internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of un authorised acquisition, use, or disposition of the company''s assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls over Financial Reporting

Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31, 2016, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.

Sd/-

for SUKUMAR BABU & CO.,

Chartered Accountants (Firm Regn. No.004188S)

Sd/-

C. SUKUMAR BABU Partner Membership No: 024293

Place: Hyderabad Date: 30-05-2016


Mar 31, 2014

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

Management''s Responsibility for the Financial Statements

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 ("the Act"). This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that gives 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 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 entity''s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management as well as evaluating the overall presentation of the financial statements.

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

Opinion

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

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

b) in the case of the Profit and Loss Account, of the profit/ loss for the year ended on that date; and

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

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 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 accounts.

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

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

The Annexure referred to in paragraph 1 of Our Report of even date to the members of KNR Constructions Limited on the accounts of the company for the year ended 31st March, 2014.

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

i) In respect of its fixed assets

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

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

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

ii) In respect of its inventories

a) As explained to us, inventories have been physically verified during the year by the management at reasonable intervals.

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

c) In our opinion and on the basis of our examination of the records, the Company is generally maintaining proper records of its inventories. No material discrepancy was noticed on physical verification of stocks by the management as compared to book records.

iii) a) According to the information and explanations given to us and on the basis of our examination of the books of accounts,

the Company has granted loans / advances, secured or unsecured, to companies, firms or other parties listed in the register maintained under Section 301 of the Companies Act, 1956.

b) There are no specific agreements for these transactions and were made on an on account basis. In the absence of agreements for these loans/advances, the terms and conditions and their impact on the interests of the Company cannot be ascertained.

c) The Company has given loans / advances to its wholly owned subsidiaries during the year. In respect of the said loans / advances , the maximum amount outstanding at any time during the year is Rs.14653.36 lakhs and the year ending balance is Rs.14381.71 lakhs.

d) In the absence of agreements, the transactions were made on an on-account basis and hence the question of regularity of payment of principal and interest dose not arise.

e) According to the information and explanations given to us and on the basis of our examination of the books of accounts, the Company has not taken loans from companies, firms or other parties listed in the register maintained under Section 301 of the Companies Act, 1956. Thus sub clauses (f) & (g) are not applicable to the company.

iv) 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 payment for expenses & for sale of goods. During the course of our audit, no major instance of continuing failure to correct any weaknesses in the internal controls has been noticed.

v) a) Based on the audit procedures applied by us and according to the information and explanations provided by the management, the particulars of contracts or arrangements referred to in section 301 of the Act have been entered in the register required to be maintained under that section.

b) As per information & explanations given to us and in our opinion, the transactions entered into by the company with parties covered u/s 301 of the Act does not exceed five lakhs rupees in a financial year. Therefore requirement of reasonableness of transactions does not arise.

vi) The Company has not accepted any deposits from the public covered under section 58A and 58AA of the Companies Act, 1956.

vii) As per information & explanations given by the management, the Company has an internal audit system commensurate with its size and the nature of its business.

viii) As per information & explanation given by the management, maintenance of cost records has been prescribed by the Central Government under clause (d) of sub-section (1) of section 209 of the Act and we are of the opinion that prima facie prescribed accounts and records have been made and maintained.

ix) In respect of statutory dues:

a) According to the records of the company, undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees'' State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, Cess and other statutory dues have been generally regularly deposited with appropriate authorities. According to the information and explanations given to us, no undisputed amounts payable in respect of the aforesaid dues were outstanding as at 31st March, 2014 for a period of more than six months from the date of becoming payable.

b) The disputed statutory dues aggregating to Rs. 3423.82 lakhs that have not been deposited on account of matters pending before appropriate authorities are as under :

x) The Company does not have any accumulated loss and has not incurred cash loss during the financial year covered by our audit and in the immediately preceding financial year.

xi) Based on our audit procedures and on the information and explanations given by the management, we are of the opinion that the Company has not defaulted in repayment of dues to financial institutions, banks or debenture holders.

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

xiii) The Company is not a chit fund or a nidhi / mutual benefit fund / society. Therefore, the provisions of this clause of the Com- panies (Auditor''s Report) Order, 2003 (as amended) is not applicable to the Company.

xiv) According to information and explanations given to us, the Company is not trading in Shares, Mutual funds & other Invest- ments.

xv) According to the information and explanations given to us, the terms and conditions of the guarantees given by the Company for loans taken by others from banks and financial institutions are not prima facie prejudicial to the interest of the Company.

xvi) Based on our audit procedures and the information given by the management, we report that the company has availed term loans which were prima facie applied by the Company during the year for the purposes for which the same were obtained.

xvii) Based on the information and explanations given to us and on an overall examination of the Balance Sheet of the Company as at 31st March, 2014, we report that no funds raised on short-term basis have been used for long term investment by the Company.

xviii) Based on the audit procedures performed and the information and explanations given to us by the management, we report that the Company has not made any preferential allotment of shares during the year.

xix) The Company has no outstanding debentures during the period under audit.

xx) The Company has not raised any money by public issue during the year.

xxi) Based on the audit procedures performed and the information and explanations given to us, we report that no fraud on or by the Company has been noticed or reported during the year, nor have we been informed of such case by the management.

for SUKUMAR BABU & CO., Chartered Accountants (Firm Regn. No.004188S)

Sd/- C. SUKUMAR BABU Place: Hyderabad Partner Date: 30-05-2014 Membership No: 024293


Mar 31, 2013

Report on the Financial Statements

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

Management''s Responsibility for the Financial Statements

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

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 management'' as well as evaluating the overall presentation of the financial statements.

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

Opinion

In our opinion and to the best of our information and according to the explanations given to us and subject to the qualification given on the issue of non - accounting of share of profit/(loss) from M/s. Patel-KNR-JV for the period of nine months from 01.07.2012 to 31.03.2013 in the note number 42 on the financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

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

b) in the case of the Profit and Loss Account'' of the profit/ loss for the year ended on that date; and

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

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 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 subsection (3C) of section 211 of the Companies Act'' 1956;

e) on the basis of written representations received from the directors as on March 31'' 2013'' and taken on record by the Board of Directors'' none of the directors is 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.

f) Since the Central Government has not issued any notification as to the rate at which the cess is to be paid under section 441A of the Companies Act'' 1956 nor has it issued any Rules under the said section'' prescribing the manner in which such cess is to be paid'' no cess is due and payable by the Company.

The Annexure referred to in paragraph 1 of Our Report of even date to the members of KNR Constructions Limited on the accounts of the company for the year ended 31st March'' 2013.

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) In respect of its fixed assets

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

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

c) In our opinion and according to the information and explanations given to us'' no fixed asset has been disposed during the year and therefore does not affect the going concern assumption.

ii) In respect of its inventories

a) As explained to us'' inventories have been physically verified during the year by the management at reasonable intervals.

b) In our opinion and according to the information and explanations given to us'' the procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the company and the nature of its business.

c) In our opinion and on the basis of our examination of the records'' the Company is generally maintaining proper records of its inventories. No material discrepancy was noticed on physical verification of stocks by the management as compared to book records.

iii) a) According to the information and explanations given to us and on the basis of our examination of the books of accounts'' the Company has granted loans / advances'' secured or unsecured'' to companies'' firms or other parties listed in the register maintained under Section 301 of the Companies Act'' 1956.

b) There are no specific agreements for these transactions and were made on an on account basis. In the absence of agreements for these loans/advances'' the terms and conditions and their impact on the interests of the Company cannot be ascertained.

c) The Company has given loans / advances to its wholly owned subsidiaries during the year. In respect of the said loans / advances'' the maximum amount outstanding at any time during the year is Rs. 4309.47 lakhs and the year ending balance is Rs. 4309.28 lakhs.

d) In the absence of agreements'' the transactions were made on an on-account basis and hence the question of regularity of payment of principal and interest dose not arise.

e) According to the information and explanations given to us and on the basis of our examination of the books of accounts'' the Company has not taken loans from companies'' firms or other parties listed in the register maintained under Section 301 of the Companies Act'' 1956. Thus sub clauses (f) & (g) are not applicable to the company.

iv) 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 payment for expenses & for sale of goods. During the course of our audit'' no major instance of continuing failure to correct any weaknesses in the internal controls has been noticed.

v) a) Based on the audit procedures applied by us and according to the information and explanations provided by the management'' the particulars of contracts or arrangements referred to in section 301 of the Act have been entered in the register required to be maintained under that section.

b) As per information & explanations given to us and in our opinion'' the transactions entered into by the company with parties covered u/s 301 of the Act does not exceed five lakhs rupees in a financial year. Therefore requirement of reasonableness of transactions does not arise.

vi) The Company has not accepted any deposits from the public covered under section 58A and 58AA of the Companies Act'' 1956.

vii) As per information & explanations given by the management'' the Company has an internal audit system commensurate with its size and the nature of its business.

viii) As per information & explanation given by the management'' maintenance of cost records has been prescribed by the Central Government under clause (d) of sub-section (1) of section 209 of the Act and we are of the opinion that prima facie the prescribed accounts and records have been made and maintained.

ix) In respect of statutory dues:

a) According to the records of the company'' undisputed statutory dues including Provident Fund'' Investor Education and Protection Fund'' Employees'' State Insurance'' Income-tax'' Sales-tax'' Wealth Tax'' Service Tax'' Custom Duty'' Excise Duty'' Cess 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'' 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'' there is no amounts payable in respect of Income tax'' Wealth tax'' Service tax'' Sales tax'' Customs Duty and Excise Duty which has not been deposited on account of any disputes'' the details of which are stated below.

Name of statute Nature of dues Rs. in lakhs

Income Tax Act'' 1961 Income Tax 26.18

Income Tax 116.05

Income Tax 13.34

Income Tax 869.11

Income Tax 223.37

Interest on TDS 9.86 delay payments Andhra Pradesh Sales Tax 21.39 General Sales Tax Act'' 1957 Andhra Pradesh VAT 307.36 Value Added Tax Act'' 2005

VAT 431.72

Karnataka VAT 100.00 Value Added Tax Act'' 2005

VAT 30.52

VAT 81.52

VAT 12.16

Service Tax Act'' Service Tax 243.12

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

Income Tax Act'' 1961 F.Y 1999-00 ITAT'' Hyderabad

F.Y 2001-02 ITAT'' Hyderabad

F.Y 2005-06 Deputy Commissioner of Income Tax'' Circle 2(1)'' Hyderabad

F.Y 2006-07 ITAT'' Hyderabad

F.Y 2007-08 Deputy Commissioner of Income Tax'' Circle 2(1)'' Hyderabad

F.Y 2009-10 Deputy Commissioner of Income Tax'' Circle 14(2)'' Hyderabad

Andhra Pradesh F.Y 2000-01 Sales Tax Tribunal'' Hyderabad

Andhra Pradesh F.Y 2008-09 Appellate Deputy Commissioner (CT)'' Punjagutta Division'' Hyderabad

F.Y 2009-10 Appellate Deputy Commissioner (CT)'' Punjagutta Division'' Hyderabad

Karnataka F.Y 2005-06 Joint Commissioner of Commercial Taxes'' (Appeals)'' Bangalore.

F.Y 2006-07 Joint Commissioner of Commercial Taxes'' (Appeals)'' Bangalore.

F.Y 2008-09 Joint Commissioner of Commercial Taxes'' (Appeals)'' Bangalore.

F.Y 2010-11 Joint Commissioner of Commercial Taxes'' (Appeals)'' Bangalore.

F.Y 2006-07 to Customs'' Excise and Service Tax 2010-11 Appellate Tribunal'' Bangalore

Note: Company has given bank guarantees for ? 241.63 lakhs to the Karnataka State Government against disputed VAT demands.

x) The Company does not have any accumulated loss and has not incurred cash loss during the financial year covered by our audit and in the immediately preceding financial year.

xi) Based on our audit procedures and on the information and explanations given by the management'' we are of the opinion that the Company has not defaulted in repayment of dues to financial institutions'' banks or debenture holders.

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

xiii) The Company is not a chit fund or a nidhi / mutual benefit fund / society. Therefore'' the provisions of this clause of the Companies (Auditor''s Report) Order'' 2003 (as amended) is not applicable to the Company.

xiv) According to information and explanations given to us'' the Company is not trading in Shares'' Mutual funds & other Investments.

xv) According to the information and explanations given to us'' the terms and conditions of the guarantees given by the Company for loans taken by others from banks and financial institutions are not prima facie prejudicial to the interest of the Company.

xvi) Based on our audit procedures and the information given by the management'' we report that the company has availed term loans which were prima facie applied by the Company during the year for the purposes for which the same were obtained..

xvii) Based on the information and explanations given to us and on an overall examination of the Balance Sheet of the Company as at 31st March'' 2013'' we report that no funds raised on short-term basis have been used for long-term investment by the Company.

xviii) Based on the audit procedures performed and the information and explanations given to us by the management'' we report that the Company has not made any preferential allotment of shares during the year.

xix) The Company has no outstanding debentures during the period under audit.

xx) The Company has not raised any money by public issue during the year.

xxi) Based on the audit procedures performed and the information and explanations given to us'' we report that no fraud on or by the Company has been noticed or reported during the year'' nor have we been informed of such case by the management.

For SUKUMAR BABU & CO.''

Chartered Accountants

(Firm Regn. No.004188S)

Sd/-

C. SUKUMAR BABU

Place: Hyderabad Partner

Date: 30-05-2013 Membership No: 024293


Mar 31, 2012

1. We have audited the attached Balance Sheet of KNR Constructions Limited as at March 31, 2012, the Statement of Profit and Loss for the year ended on that date and the Cash Flow Statement for the year ended on that date both annexed thereto, in which are incorporated the returns from Dubai branch ("the Branches") audited by other auditors. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with the auditing standards generally accepted in India. These 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 check 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 as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor's Report) Order, 2003 (CARO) issued by the 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 in paragraph 3 above, we report that:

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

b) in our opinion, proper books of account as required by law have been kept by the company so far as it appears from our examination of those books and proper returns, adequate for the purposes of our audit have been received from the branches not visited by us. The Branch Auditors Reports have been forwarded to us and appropriately dealt with;

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 accounts and with the audited returns from the Branches;

d) 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;

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

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

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

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

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

Annexure to the Auditors' Report

(Referred to in Paragraph 3 of our Report of even date)

i) In respect of its fixed assets

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

b) As explained to us, all the fixed assets have been physically verified by the management during the year in a phased periodical manner which in our opinion is reasonable having regard to the size of the Company and nature of its assets. No material discrepancies were noticed on such physical verification.

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

ii) In respect of its inventories

a) According to the information and explanations given to us, the Management has physically verified the inventory during the year. In our opinion, having regard to the nature of business and location of stocks, the frequency of verification is reasonable.

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

c) In our opinion and according to the information and explanations given to us, the Company has maintained proper records of its inventories. The discrepancies noticed on verification between the physical stocks and the book records were not material and have been properly dealt with in the books of accounts.

iii) a) According to the information and explanations given to us, the Company has granted unsecured loans to Companies covered in the Register maintained under Section 301 of the Companies Act, 1956. There are companies under the same management as defined under Sub-section (1-B) of section 370 of the Companies Act, 1956.

b) There are no specific agreements for these transactions and were made on an on account basis. In the absence of agreements for these loans, the terms and conditions and their impact on the interests of the Company cannot be ascertained.

c) The Company has given advances / loans to its wholly owned subsidiaries (including foreign companies) during the year. In respect of the said advances / loans, the maximum amount outstanding at any time during the year is Rs 3136.63 lakhs and the year ending balance is Rs 526.68 lakhs.

d) In the absence of agreements, the transactions were made on an on-account basis and hence the question of regularity of payment of principal and interest dose not arise.

e) In the absence of specific agreements for these transactions, the question of over- dues does not arise for these transactions.

f) The Company has taken unsecured loans during the year from other parties covered in the Register maintained under Section 301 of the Companies Act, 1956. There are no specific agreements for these transactions and were made on an on- account basis. In the absence of agreements, the regularity of payment of principal and interest could not be verified.

iv) In our opinion and according to the information and explanations given to us, the company has internal control system commensurate with its size and the nature of its business for the purchase of inventory and fixed assets.

v) In respect of contracts or arrangements entered into in the register maintained in pursuance of section 301 of the Companies Act, 1956 to the best of our knowledge and belief and according to the information and explanations given to us:

a) the Particulars of contracts or arrangements referred to in section 301 that needs to be entered into the register maintained under the said section have been so entered.

b) in our opinion, the transactions (excluding loans reported under paragraph(iii) above) exceeding the value of Rs 5 lakhs in respect of any party during the year have been made at prices which are prima facie reasonable having regard to the prevailing market prices at the relevant time where such market prices are available.

vi) In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits from the public. Accordingly, the provisions of clause 4(vi) of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company.

vii) In our opinion, the internal audit functions carried out during the year by a firm of Chartered Accountants appointed by the management have been commensurate with the size of the Company and the nature of its business.

viii) In our opinion and according to the information and explanations given to us, the Central Government has not prescribed the maintenance of cost records for any of the products or activities of the company.

ix) In respect of statutory dues:

a) According to the Information and explanations given to us, the Company has been generally regular in depositing undisputed statutory dues including Provident Fund, Employees State Insurance, Income Tax, Wealth Tax, Sales Tax, Service Tax, Customs Duty, Excise Duty, Cess and any other material statutory dues applicable to it with the appropriate authorities during the year.

b) According to the Information and explanations given to us, there were no undisputed amounts payable in respect of income tax, wealth tax, customs duty, excise duty and cess which were in arrears as at March 31, 2012 for a period of more than six months from the date they became payable:

c) The disputed statutory dues that have not been deposited on account of matters pending before appropriate authorities are as under:

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

Income Tax Act, 1961 Income Tax 26.18 F.Y 1999-00 ITAT, Hyderabad

Income Tax 116.05 F.Y 2001-02 ITAT, Hyderabad

Income Tax 13.34 F.Y 2005-06 Deputy Commis sioner of

Income Tax, Circle 2(1), Hyderabad

Income Tax 1141.80 F.Y 2006-07 ITAT, Hyderabad

Income Tax 223.37 F.Y 2007-08 Deputy Commis sioner of Income Tax, Circle 2(1), Hyderabad

Interest on TDS 9.86 F.Y 2009-10 Deputy Commis sioner of delay pay ments Income Tax, Circle 14(2), Hyderabad

Andhra Pradesh Sales Tax 21.39 F.Y 2000-01 Sales Tax Tribunal, General Sales Hyderabad Tax Act, 1957

Andhra Pradesh VAT 307.36 F.Y 2008-09 Appellate Deputy

Value Added Commis sioner (CT),

Tax Act, 2005 Punjagutta Division, Hyderabad

VAT 431.72 F.Y 2009-10 Appellate Deputy

Commis sioner (CT), Punjagutta Division, Hyderabad

Karnataka VAT 100.00 F.Y 2005-06 Joint Commis sioner of

Value Added Commercial Taxes,

Tax Act, 2005 (Appeals), Bangalore.

VAT 30.52 F.Y 2006-07 Joint Commi ssioner of

Commercial Taxes, (Appeals), Bangalore.

VAT 81.52 F.Y 2008-09 Joint Commi ssioner of Commercial Taxes, (Appeals), Bangalore.

VAT 12.16 F.Y 2010-11 Joint Commi ssioner of

Commercial Taxes, (Appeals), Bangalore.

Note: Company has given bank guarantees for Rs 241.63 lakhs to the Karnataka State Government against disputed VAT demands.

x) The Company does not have accumulated losses and has not incurred cash losses during the financial year covered by our audit and the immediately preceding financial year.

xi) In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to financial institutions and banks.

xii) In our opinion and 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 and debentures and other securities. Accordingly, the provisions of clause 4(xii) of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company.

xiii) In our opinion, the Company is not a Chit Fund or a Nidhi or Mutual Benefit Fund/Society. Accordingly, the provisions of clause 4(xiii) of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company.

xiv) In our opinion and according to the information and explanations given to us, the Company does not deal or trade in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company.

xv) In our opinion and according to the information and explanations given to us, the terms and conditions of the guarantees given by the Company for loans taken by others from banks and financial institutions are not prima facie prejudicial to the interests of the Company.

xvi) To the best of our knowledge and belief and according to the information and explanations given to us, in our opinion, term loans availed by the Company were prima facie applied by the Company during the year for the purposes for which the same were obtained.

xvii) According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, funds raised on short-term basis have, prima facie, not been used for long-term investment.

xviii) According to the information and explanations given to us, the Company has not made preferential allotment of shares or warrants during the year to a company covered in the register maintained under section 301 of the Companies Act, 1956.

xix) According to the information and explanations given to us, no debentures have been issued by the Company. Accordingly the provisions of clause 4(xix) of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company.

xx) During the year covered by our audit report, the company has not raised any money by public issues.

xxi) To the best of our knowledge and belief and according to the information and explanations given to us, no fraud on or by the Company was noticed or reported during the year.

for SUKUMAR BABU & CO.,

Chartered Accountants

(ICAI Registration No.004188S)

Sd/-

C.SUKUMAR BABU

Place : Hyderabad Partner

Date : 28-05-2012 M.No: 024293


Mar 31, 2011

1. We have audited the attached Balance Sheet of KNR Constructions Limited as at March 31, 2011, the Profit and Loss Account for the year ended on that date and the Cash Flow Statement for the year ended on that date both annexed thereto, in which are incorporated the returns from Dubai branch (“the Branches”) audited by other auditors. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test check 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, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor's Report) Order, 2003 (CARO) issued by the 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 in paragraph 3 above, we report that:

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

b) in our opinion, proper books of account as required by law have been kept by the company so far as it appears from our examination of those books and proper returns, adequate for the purposes of our audit have been received from the branches not visited by us. The Branch Auditors Reports have been forwarded to us and appropriately dealt with;

c) the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of accounts and with the audited returns from the Branches;

d) in our opinion, the Balance Sheet, Profit and Loss Account and 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;

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

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

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

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

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

Annexure to the Auditors' Report (Referred to in Paragraph 3 of our Report of even date)

i) In respect of its fixed assets

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

b) As explained to us, all the fixed assets have been physically verified by the management during the year in a phased periodical manner, which in our opinion is reasonable having regard to the size of the Company and nature of its assets. No material discrepancies were noticed on such physical verification.

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

ii) In respect of its inventories

a) According to the information and explanations given to us, the Management has physically verified the inventory during the year. In our opinion, having regard to the nature of business and location of stocks, the frequency of verification is reasonable.

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

c) In our pinion and according to the information and explanations given to us, the Company has maintained proper records of its inventories. The discrepancies noticed on verification between the physical stocks and the book records were not material and have been properly dealt with in the books of account.

iii) a) According to the information and explanations given to us, the Company has granted unsecured loans to Companies covered in the Register maintained under Section 301 of the Companies Act, 1956. There are companies under the same management as defined under Sub-section (1-B) of section 370 of the Companies Act, 1956.

b) There are no specific agreements for these transactions and were made on account basis. In the absence of agreements for these loans, the terms and conditions, their impact on the interests of the Company cannot be ascertained.

c) The Company has given advances / loans to its wholly owned subsidiaries (including foreign companies) during the year. In respect of the said advances / loans, the maximum amount outstanding at any time during the year is Rs.181.54 lakhs and the year end balance is Rs.181.54 lakhs.

d) In the absence of agreements, the transactions were made on an on-account basis and hence the question of regularity of payment of principal and interest dose not arise.

e) In the absence of specific agreements for these transactions, the question of over- dues does not arise for these transactions.

f) The Company has taken unsecured loans during the year from other parties covered in the Register maintained under Section 301 of the Companies Act, 1956. There are no specific agreements for these transactions and were made on an on- account basis. In the absence of agreements, the transactions were made on an on-account basis and hence the regularity of payment of principal and interest dose not arise.

iv) In our opinion and according to the information and explanations given to us, the company has internal control system commensurate with its size and the nature of its business for the purchase of inventory and fixed assets.

v) In respect of contracts or arrangements entered in the register maintained in pursuance of section 301 of the Companies Act, 1956 to the best of our knowledge and belief and according to the information and explanations given to us:

a) the Particulars of contracts or arrangements referred to in section 301 that needs to be entered into the register maintained under the said section have been so entered.

b) in our opinion , the transactions ( excluding loans reported under paragraph(iii) above) exceeding the value of Rs.5 lakhs in respect of any party during the year have been made at prices which are prima facie reasonable having regard to the prevailing market prices at the relevant time where such market prices are available.

vi) In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits from the public. Accordingly, the provisions of clause 4(vi) of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company.

vii) In our opinion, the internal audit functions carried out during the year by a firm of Chartered Accountants appointed by the management have been commensurate with the size of the Company and the nature of its business.

viii) In our opinion and according to the information and explanations given to us, the Central Government has not prescribed the maintenance of cost records for any of the products or activities of the company.

ix) In respect of statutory dues:

a) According to the Information and explanations given to us, the Company has been generally regular in depositing undisputed statutory dues including Provident Fund, Employees State Insurance, Income Tax, Wealth Tax, Sales Tax, Service Tax, Custom Duty, Excise Duty, Cess and any other material statutory dues applicable to it with the appropriate authorities during the year.

b) According to the Information and explanations given to us, there were no undisputed amounts payable in respect of wealth tax, customs duty, excise duty and cess which were in arrears as at March 31, 2011 for a period of more than six months from the date they became payable, expect Income Tax dues amounting to Rs. 44.56 lakhs relating to the financial year 2002-03.

c) The disputed statutory dues that have not been deposited on account of matters pending before appropriate authorities are as under:

Name of statute Nature of dues Rupees in lakhs

Income Tax Act, 1961 Income Tax 13.52

Income Tax 2096.70

Income Tax 223.37

Andhra Pradesh Sales Tax 21.39 Sales Tax Act, 1957

Andhra Pradesh VAT 323.92 Value Added Tax Act, 2005

VAT 503.67 Karnataka VAT 100.00 Value Added Tax Act, 2005

VAT 30.52

VAT 81.52

VAT 12.16

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

Income Tax Act, 1961 F.Y 2005-06 Deputy Commissioner of Income Tax , Circle 2(1), Hyderabad

F.Y 2006-07 Commissioner of Income Tax (Appeals) – III, Hyderabad

F.Y 2007-08 Commissioner of Income Tax (Appeals) – III, Hyderabad

Andhra Pradesh F.Y 2000-01 Sales Tax Tribunal, Sales Tax Act, 1957 General Hyderabad

Andhra Pradesh F.Y 2008-09 Appellate Deputy Value Added Commissioner (CT), Tax Act, 2005 Punjagutta Division, Hyderabad

F.Y 2009-10 Appellate Deputy Commissioner (CT), Punjagutta Division, Hyderabad

Karnataka F.Y 2005-06 Joint Commissioner of Value Added Commercial Taxes, Tax Act, 2005 (Appeals), Bangalore.

F.Y 2006-07 Joint Commissioner of Commercial Taxes, (Appeals), Bangalore.

F.Y 2008-09 Joint Commissioner of Commercial Taxes, (Appeals), Bangalore.

F.Y 2009-10 Joint Commissioner of Commercial Taxes, (Appeals), Bangalore.

Note: Company has given bank guarantees for Rs 241.63 lakhs to the Karnataka State Government against disputed demands.

x) The Company does not have accumulated losses and has not incurred cash losses during the financial year covered by our audit and the immediately preceding financial year.

xi) In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to financial institutions and banks.

xii) In our opinion and 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 and debentures and other securities. Accordingly, the provisions of clause 4(xii) of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company

xiii) In our opinion, the Company is not a Chit Fund or a Nidhi or Mutual Benefit Fund/Society. Accordingly, the provisions of clause 4(xiii) of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company.

xiv) In our opinion and according to the information and explanations given to us, the Company does not deal or trade in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company.

xv) In our opinion and according to the information and explanations given to us, the terms and conditions of the guarantees given by the Company for loans taken by others from banks and financial institutions are not prima facie prejudicial to the interests of the Company.

xvi) To the best of our knowledge and belief and according to the information and explanations given to us, in our opinion, term loans availed by the Company were prima facie applied by the Company during the year for the purposes for which the same were obtained.

xvii) According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, funds raised on short-term basis have, prima facie, not been used for long-term investment.

xviii) According to the information and explanations given to us, the Company has not made preferential allotment of shares or warrants during the year to a company covered in the register maintained under section 301 of the Companies Act, 1956.

xix) According to the information and explanations given to us, no debentures have been issued by the Company. Accordingly the provisions of clause 4(xix) of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company.

xx) During the year covered by our audit report, the company has not raised any money by public issues.

xxi) To the best of our knowledge and belief and according to the information and explanations given to us, no fraud on or by the Company was noticed or reported during the year.

For Sukumar Babu & Co Chartered Accountants (ICAI Registration No.004188S)

Sd/- C. Sukumar Babu Partner M.No: 200/24293

Place: Hyderabad Date : 08-08-2011


Mar 31, 2010

1. We have audited the attached Balance Sheet of KNR Constructions Limited as at March 31, 2010, the profit and Loss Account for the year ended on that date and the Cash Flow Statement for the year ended on that date both annexed thereto. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test check 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, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditors Report) Order, 2003 (CARO) issued by the Central Government 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 in paragraph 3 above, we report that:

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

b) 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 and proper returns, adequate for the purposes of our audit have been received from the branches not visited by us. ;

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

d) in our opinion, the Balance Sheet, Profit and Loss Account and 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;

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

(i) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2010 ;

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

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

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

Annexure to the Auditors Report (Referred to in Paragraph 3 of our Report of even date)

i) In respect of its fixed assets

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

b) As explained to us, all the fixed assets have been physically verified by the management during the year in a phased periodical manner, which in our opinion is reasonable having regard to the size of the Company and nature of its assets. No material discrepancies were noticed on such physical verification.

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

ii) In respect of its inventories

a) According to the information and explanations given to us, the Management has physically verified the inventory during the year. In our opinion, having regard to the nature of business and location of stocks, the frequency of verification is reasonable.

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

c) In our pinion and according to the information and explanations given to us, the Company has maintained proper records of its inventories. The discrepancies noticed on verification between the physical stocks and the book records were not material and have been properly dealt with in the books of account.

iii) a) According to the information and explanations given to us, the Company has granted unsecured loans to Companies covered in the Register maintained under Section 301 of the Companies Act, 1956. There are companies under the same management as defined under Sub-section (1-B) of section 370 of the Companies Act, 1956.

b) There are no specific agreements for these transactions and were made on account basis. In the absence of agreements for these loans, the terms and conditions, their impact on the interests of the Company cannot be ascertained.

c) The Company has given loans to its wholly owned subsidiary during the year. In respect of the said loans, the maximum amount outstanding at any time during the year is Rs. 81.03 lakhs and the year end balance is Rs. 124.92 lakhs.

d) In the absence of agreements, the transactions were made on an account basis and hence the regularity of payment of principal and interest dose not arise.

e) In the absence of specific agreements for these transactions, the question of over- dues does not arise for these transactions.

f) The Company has taken unsecured loans during the year from other parties covered in the Register maintained under Section 301 of the Companies Act, 1956. There are no specific agreements for these transactions and were made on account basis. In the absence of agreements, the transactions were made on an account basis and hence the regularity of payment of principal and interest dose not arise.

iv) In our opinion and according to the information and explanations given to us, the company has internal control system commensurate with its size and the nature of its business for the purchase of inventory and fixed assets.

v) In respect of contracts or arrangements entered in the register maintained in pursuance of section 301 of the Companies Act, 1956 to the best of our knowledge and belief and according to the information and explanations given to us:

a) The Particulars of contracts or arrangements referred to in section 301 that needs to be entered into the register maintained under the said section have been so entered.

b) In our opinion , the transactions ( excluding loans reported under paragraph(iii) above) exceeding the value of Rs.5 lakhs in respect of any party during the year have been made at prices which are prima facie reasonable having regard to the prevailing market prices at the relevant time where such market prices are available.

vi) In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits from the public. Accordingly, the provisions of clause 4(vi) of the Companies (Auditors Report) Order, 2003 are not applicable to the Company.

vii) In our opinion, the internal audit functions carried out during the year by a firm of Chartered Accountants appointed by the management have been commensurate with the size of the Company and the nature of its business.

viii) In our opinion and according to the information and explanations given to us, the Central Government has not prescribed the maintenance of cost records for any of the products or activity of the company.

ix) In respect of statutory dues

a) According to the Information and explanations given to us, the Company has been generally regular in depositing undisputed statutory dues including Provident Fund, Employees State Insurance, Income Tax, Wealth Tax, Sales Tax, Service Tax, Custom Duty, Excise Duty, Cess and any other material statutory dues applicable to it with the appropriate authorities during the year.

b) According to the Information and explanations given to us, there were no undisputed amounts payable in respect of income tax, wealth tax, customs duty, excise duty and cess which were in arrears as at March 31, 2010 for a period of more than six months from the date they became payable .

c) The disputed statutory dues that have not been deposited on account of matters pending before appropriate authorities are as under:

Name of statute Nature of dues Rupees in lakhs Period to which the amount relates

Income Tax Act, 1961 Income Tax 44.55 F.Y 2002-03

Andhra Pradesh Sales Tax 49.68 F.Y 2000-01 Sales Tax Act, 1957 78.00 F.Y 1999-00

28.82 F.Y 1998-99

Name of Statue Forum where dispute is pending

IOncome TAx Act, 1961 Appellate Tribunal, Hyderabad

Andhra Pradesh, Sales Tax Sales Tax Act, 1957 Tribunal, Hyderabad

x) The Company does not have accumulated losses and has not incurred cash losses during the financial year covered by our audit and the immediately preceding financial year.

xi) In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to financial institutions and banks.

xii) In our opinion and 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 and debentures and other securities. Accordingly, the provisions of clause 4(xii) of the Companies (Auditors Report) Order, 2003 are not applicable to the Company.

xiii) In our opinion, the Company is not a Chit Fund or a Nidhi or Mutual Benefit Fund/Society. Accordingly, the provisions of clause 4(xiii) of the Companies (Auditors Report) Order, 2003 are not applicable to the Company.

xiv) In our opinion and according to the information and explanations given to us, the Company does not deal or trade in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Companies (Auditors Report) Order, 2003 are not applicable to the Company.

xv) In our opinion and according to the information and explanations given to us, the terms and conditions of the guarantees given by the Company for loans taken by others from banks and financial institutions are not prima facie prejudicial to the interests of the Company.

xvi) To the best of our knowledge and belief and according to the information and explanations given to us, in our opinion, term loans availed by the Company were prima facie applied by the Company during the year for the purposes for which the same were obtained.

xvii) According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, funds raised on short-term basis have, prima facie, not been used for long-term investment.

xviii) According to the information and explanations given to us, the Company has not made preferential allotment of shares or warrants during the year to a company covered in the register maintained under section 301 of the Companies Act, 1956.

xix) According to the information and explanations given to us, no debentures have been issued by the Company. Accordingly the provisions of clause 4(xix) of the Companies (Auditors Report) Order, 2003 are not applicable to the Company.

xx) The end use of money raised through IPO has been disclosed by the management and the same has been verified.

xxi) To the best of our knowledge and belief and according to the information and explanations given to us, no fraud on or by the Company was noticed or reported during the year.

for Sukumar Babu & Co., Chartered Accountants (ICAI Registration No.004188S)

Sd/- C. Sukumar Babu Partner

M.No: 200/24293

Place: Hyderabad Date: 29-05-2010

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