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Auditor Report of Lanco Infratech Ltd.

Mar 31, 2015

Report on the Financial Statements

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

Management's Responsibility for the Financial Statements

The Company's Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding 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 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, but not for the purpose of expressing an opinion on whether the Company has in place an adequate internal financial controls system over financial reporting and operating effectiveness of such controls. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company's Directors, as well as evaluating the overall presentation of the financial statements.

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

Opinion

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

Emphasis of Matters

Attention is invited to

a) Note No.43 to the financial statements, which explain the transaction entered by the Company along with its step down subsidiaries for sale of their 100% stake in Udupi Power Corporation Limited (UPCL), as per the agreed terms, with effect from August 18, 2014 on closure of the transaction, the result of operations of the UPCL, shall belong to the Buyers. The possible effects of this transaction is not considered in this financial statements.

b) Note No.51 to the financial statements, which explain the structuring undertaken by the management during the year ended March 31, 2012. The Company's investment as of March 30, 2012 in various subsidiaries and associates was transferred to wholly owned step down subsidiaries and to an associate of wholly owned step down subsidiary aggregating to Rs. 6,815.51 Crores that require lenders and customer approvals. Management has received many such approvals aggregating to 96% in value, of the lenders consenting to the restructuring, the management is confident of receiving balance approvals from lenders and customer in near future and has taken the effect of these transfers while preparing these financial statements. In case any of these residual approvals are not granted, the management will have to revisit the structure and the consequential impact would then be recorded in the financial statements.

c) Note No.53 to the financial statements, regarding the adequacy of disclosure concerning the Company's ability to meet its financial obligations including loans, overdue loans, unpaid interest and ability to fund obligations pertaining to operations including unpaid creditors, repayment of advances for ensuring normal operations and investments in ongoing projects. During the year, the Company incurred a Net Loss of Rs. 672.23 Crores and has loans aggregating Rs. 267.63 Crores falling due over next twelve months period which also includes unpaid dues of the Company as at March 31, 2015. These matters essentially require the Company to garner such additional cash flows to fund the operations as well as for meeting the investment obligations towards various on-going projects comprising power and other infrastructure projects which are currently going through low level of implementation activities. In this regard the Company approached Corporate Debt Restructuring (CDR) Cell with a scheme seeking certain reliefs in relation to repayment timelines of loans and accumulated unpaid interest and additional funding for its operations. The restructuring envisages certain sacrifices from lenders and commitments from Company towards infusion of additional funds through divestment of existing assets or otherwise. In the financial year 2013-14, CDR Empowered Group approved the Debt Restructuring Scheme. The Company has completed the required obligations under the scheme to enable the infusion of additional funds from lenders and the lenders have disbursed partially. Notwithstanding certain variances in contracted terms under CDR scheme in relation to partial disbursements so far made and their utilization thereon, together with delay in implementation of CDR scheme did not still enable the Company to achieve the anticipated performance levels of operations at EPC and Project Companies which has consequential impact on financial statements in the form of incurrence of further losses and cost overruns due to delayed execution at the Project level which is currently not quantifiable and as explained by management steps have been initiated to recommence the EPC operations as well as the implementation of projects under construction. However, the financial statements have been prepared under the assumption, considering the management assessment to recover the balance dues from various State Electricity Boards including those of which under litigations and management plan to get requisite further funding from various other sources including the CDR scheme, cost overrun approvals by the lenders for the under construction projects and the Company's efforts in disposing few more assets. These submissions and assertions by the management as evaluated by lenders envisage that the Company has the ability to garner the required cash flows, which have not been independently assessed by us. Relying on the above, no adjustments have been made in these financial statements towards any possible impact on account of low key operations and delayed execution of projects under implementation.

d) Note No.54 to the financial statements, in relation to the carrying value of the assets held by Lanco Anpara Power Limited (LAnPL), a step down subsidiary of the Company. Though LAnPL has been incurring losses ever since the commencement of commercial operation and accumulated losses incurred so far eroded the net worth significantly, taking into consideration LAnPL management's assessment of the situation including efforts towards seeking revision in tariff pending before the regulator, the management of the Company is of the view that the carrying value of the asset of LAnPL is realizable at the value stated therein. Accordingly no adjustments have been made in these financial statements.

e) Note No.55 to the financial statements, dealing with cancellation of coal blocks by the Hon'ble Supreme Court, which included coal mine jointly allotted to Tamil Nadu Electricity Board and Maharashtra State Mining Corporation Limited, the Allottees. Mahatamil Mining and Thermal Energy Limited (MMTEL), a subsidiary of the Company, entered into Coal Mining Services Agreement with the Allottees of the mine, pursuant to which, the amount invested amounting to Rs. 170.94 Crores, the realizability of which is dependent on the compensation to be awarded under the Ordinance issued by Government of India. The Company obtained a legal opinion in this regard based on which, the investment is considered to be recoverable and, hence no adjustments have been made in these financial statements.

f) Note No.56 to the financial statements, in relation to the carrying value of investment held by the Company in Lanco Resources International Pte Limited (LRIPL) a subsidiary of the Company, where the accumulated losses exceeded the net worth of LRIPL, taking into account the management's assessment of the situation including short term initiatives to be implemented to significantly enhance the profitability in the medium to long run, the management of the Company is of the view that the carrying value of the assets are realizable at the value stated therein. Accordingly no adjustments have been made in these financial statements.

g) Note No.57 to the financial statements, in relation to Lanco Kanpur Highways Limited (LKHL), a subsidiary of the Company, has received a notice of termination to the Concession Agreement from National Highways Authority of India (NHAI) and LKHL has also issued a notice of termination to NHAI. Arbitration proceedings have been initiated to settle the claims and the counter claims associated with the termination as per the Concession Agreement. As on March 31, 2015 LKHL and its EPC contractor have incurred certain costs towards the project, the reliability of these amounts is dependent on the outcome of the arbitration proceedings.

h) Note No.58 to the financial statements, which explains the payment of managerial remuneration aggregating to Rs. 1.69 Crores which is in excess of the permissible limits of remuneration payable under the provisions of the Companies Act, 2013 read with rules notified thereon. The Company approached the Central Government seeking its approval for payment of such remuneration in excess of limits and the Central Government in this regard directed the Company to obtain a No Objection from the CDR lenders for granting required approval. The Company is in the process of seeking the required No Objection from lenders and accordingly no adjustments have been made in these financial statements.

Our opinion is not qualified in the respect of the above matters.

Report on Other Legal and Regulatory Requirements

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

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

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

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

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

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

e) The matters described in the Clause (c) and Clause (f) of the Emphasis of Matter Paragraph above, in our opinion, may have an adverse effect on the functioning of the Company.

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

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

i. The Company has disclosed the impact of pending litigations on its financial position in its financial statements. Refer Note No.40 (A) to the financial statements.

ii. The Company has made provisions, as required under applicable laws or accounting standards in respect of the material foreseeable losses on the long term contract. The Company did not have any long term derivative contracts.

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

The Annexure referred to in Clause 1 of "Report on Other Legal and Regulatory Requirements" Paragraph of the Independent Auditor's Report of even date to the members of Lanco Infratech Limited on the financial statements as of and for the year ended March 31, 2015

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

(b) The Company has a regular programme of physical verification of its fixed assets by which fixed assets are verified in a phased manner over a period of three years. In accordance with this programme, certain fixed assets were verified during the year and no material discrepancies were noticed on such verification. In our opinion, this periodicity of physical verification is reasonable having regard to the size of the Company and the nature of its assets.

(ii) (a) The management has conducted physical verification of inventory at reasonable intervals during the year. In respect of inventories lying with third parties, these have substantially been confirmed by them.

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

(c) The Company is maintaining proper records of inventory and no material discrepancies were noticed on physical verification of inventory.

(iii) According to the information and explanations given to us, the Company has not granted any loans secured or unsecured to companies, firms or other parties covered in the register maintained under Sec 189 of the Companies Act, 2013. Accordingly, the provisions of clause (iii),(iii) (a) and (iii) (b) of Paragraph 3 of the Order are not applicable to the Company.

(iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the company and the nature of its business, for the purchase of inventory and fixed assets and for the sale of goods and services. Further, on the basis of our examination of the books and records of the Company, and according to the information and explanations given to us, we have neither come across nor have been informed of any continuing failure to correct major weakness in internal control system.

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

(vi) We have broadly reviewed the books of account maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under section 148 (1) of the Companies Act, 2013 and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained.

(vii) (a) The Company is regular in depositing the undisputed statutory dues including provident fund, employee's state insurance, income tax, sales tax, wealth tax, service tax, duty of customs, duty of excise, value added tax, cess and other statutory dues with the appropriate authorities though there have been delays in some instances.

According to the information and explanations given to us,no undisputed statutory dues payable in respect of provident fund, employee's state insurance, income tax, sales tax, wealth tax, service tax, duty of customs, duty of excise, value added tax, cess and other statutory dues with the appropriate authorities which were outstanding at the year end for a period of more than six months from the date they became payable except as follows:-

Name of the Statute Nature of the Dues Amount (Rs. in Crores)

The Building and Other Labour Building and Other 0.25 Construction Workers Construction Workers Welfare Cess Welfare Cess Act, 1996

The Income Tax Act, 1961 Interest on Tax Deducted at Source 0.00** Name of the Statute Due Date Date of Payment

The Building and Other Construction Workers FY 2012-13 to FY 2014-15 Yet to be remitted

The Income Tax Act, 1961 30th April 2014 Yet to be remitted

**Amount involved is Rs. 41,363.

(b) According to the records of the Company, the dues outstanding of income tax or sales tax or wealth tax or service tax or duty of custom or duty of excise or value added tax or cess, that have not been deposited, on account of dispute are as follows:

Name of the Statute Nature of the Amount Amount paid Dues (Rs. in under Protest Crores) (Rs. in Crores)

Income Tax Act, 1961 Income Tax 3.74 -

Income Tax Act, 1961 Income Tax 0.11 -

Income Tax Act, 1961 Income Tax 11.85 -

Income Tax Act, 1961 Income Tax 0.02 -

Income Tax Act, 1961 Income Tax 2.26 -

Income Tax Act, 1961 Income Tax 0.13 -

Income Tax Act, 1961 Income Tax 0.41 -

Income Tax Act, 1961 Income Tax 245.90 -

Andhra Pradesh Tax Entry Tax 0.02 - on Entry of Goods Act 2001

Andhra Pradesh Sales Tax 0.03 - General Sales Tax Act 1956

Andhra Pradesh Value Sales Tax 0.01 - added Tax Act 2005

Tamil Nadu Value Sales Tax 0.38 - Added Tax Act 2006 (Including Penalty)

Tamil Nadu Value Sales Tax 0.89 - Added Tax Act 2006

Tamil Nadu Value Value Added 0.46 - Added Tax Act 2006 Tax

Tamil Nadu Value Value Added 0.85 - Added Tax Act 2006 Tax

Tamil Nadu Value Value Added 17.18 - Added Tax Act 2006 Tax

Tamil Nadu Value Value Added 49.78 - Added Tax Act, 2006 Tax

Tamil Nadu Value Value Added 19.99 - Added Tax Act, 2006 Tax

Tamil Nadu Value Value Added 3.80 - Added Tax Act, 2006 Tax

The Central Sales Tax Central Sales 0.20 - Act, 1956 Tax

Maharashtra Value Sales Tax 2.34 - Added Tax Act, 2002

Bihar Value Added Tax Sales Tax 1.08 - Act, 2005

Rajasthan Value Added Sales Tax 1.09 - Tax Act

Andhra Pradesh Value Penalty 0.06 - added Tax Act, 2005

West Bengal Value Value Added 0.10 - Added Tax Tax

Tamil Nadu Value Value Added 0.11 - Added Tax Act, 2006 Tax

Maharashtra Value Value Added 0.12 - Added Tax Act, 2002 Tax

Maharashtra Value Sales Tax 1.09 - Added Tax Act, 2002

Andhra Pradesh Value Sales Tax 0.17 - added Tax Act, 2005

Gujarat Value Added Value Added 1.06 - Tax Act, 2003 Tax

Madhya Pradesh Value Value Added 74.29 - Added Tax Act, 2002 Tax

Madhya Pradesh Value Sales Tax 13.41 - Added Tax Act, 2002

Madhya Pradesh Value Entry Tax 11.95 - Added Tax Act 2002

The Finance Act, 1994 Service Tax 0.14 -

The Finance Act, 1994 Service Tax 0.16 -

The Finance Act, 1994 Service Tax 15.58 2.66

The Finance Act, 1994 Service Tax 3.86 -

The Finance Act, 1994 Service Tax 15.47 -

The Finance Act, 1994 Service Tax 0.01 0.01

The Finance Act, 1994 Service Tax 0.38 0.38

The Finance Act, 1994 Service Tax 6.58 -

The Finance Act, 1994 Service Tax 8.98 -

The Finance Act, 1994 Service Tax 0.11 -

The Finance Act, 1994 Service Tax 64.42 -

The Finance Act, 1994 Service Tax 0.48 -

The Finance Act, 1994 Service Tax 0.00** -

The Finance Act, 1994 Service Tax 18.02 -

The Finance Act, 1994 Service Tax 6.01 -

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

Income Tax Act, 1961 Assessment year Commissioner of Income Tax 2009-10 (Appeals)

Income Tax Act, 1961 Assessment year Commissioner of Income Tax 2010-11 (Appeals)

Income Tax Act, 1961 Assessment year Commissioner of Income Tax 2010-11 (Appeals)

Income Tax Act, 1961 Assessment Year Commissioner of Income Tax 2012-13 (Appeals)

Income Tax Act, 1961 Assessment Year Honorable High Court- 2003-04 Hyderabad

Income Tax Act, 1961 Assessment Year Honorable High Court- 2004-05 Hyderabad

Income Tax Act, 1961 Assessment Year Honorable High Court- 2007-08 Hyderabad

Income Tax Act, 1961 Assessment Year Dispute Resolution Panel- 2011-12 Hyderabad

Andhra Pradesh Tax on Entry of Goods Act 2001 Financial Year 2007- Commercial Tax Ofcer, 08 Begumpet

Andhra Pradesh General Sales Tax Act 1956 Financial Year 2001- The Sales Tax Appellate 02 Tribunal, Hyderabad

Andhra Pradesh Value added Tax Act 2005 Financial Year 2009- The Appellate Deputy 10 Commissioner, CT. Panjagutta-Hyderabad

Tamil Nadu Value Added Tax Act 2006 Financial Year 2007- The Appellate Deputy 08 Commissioner, CT Chennai

Tamil Nadu Value Added Tax Act 2006 Financial Year 2010- Joint Commissioner (North) 11 Chennai

Tamil Nadu Value Added Tax Act 2006 Financial Year 2007- Assistant Commissioner (CT), 08 T. Nagar (East) Assessment Circle, Chennai

Tamil Nadu Value Added Tax Act 2006 Financial Year 2008- Assistant Commissioner (CT), 09 T. Nagar (East) Assessment Circle, Chennai

Tamil Nadu Value Added Tax Act 2006 Financial Year 2009- Assistant Commissioner (CT), 10 T. Nagar (East) Assessment Circle, Chennai

Tamil Nadu Value Added Tax Act 2006 Financial Year 2010- Assistant Commissioner (CT), 11 T. Nagar (East) Assessment Circle, Chennai

Tamil Nadu Value Added Tax Act 2006 Financial Year 2011- Assistant Commissioner (CT), 12 T. Nagar (East) Assessment Circle, Chennai

Tamil Nadu Value Added Tax Act, 2006 Financial Year 2012- Assistant Commissioner (CT) T.Nagar (East) 13 Assessment Circle, Chennai

The Central Sales Tax Act, 1956 Financial Year 2011- Assistant Commissioner (CT), 12 T. Nagar (East) Assessment Circle, Chennai

Maharashtra Value Added Tax Act, 2002 Financial Year 2009- Deputy Commissioner of 10 Sales Tax, Mumbai

Bihar Value Added Tax Act, 2005 Financial Year 2007- The Joint Commissioner of 08 Commercial Taxes (Appeals) Central Division, Patna

Rajasthan Value Added Tax Act Financial Year 2011- Commercial Tax Ofcer, 12 Chittorgarh

Andhara Pradesh Value added Tax Act, 2005 Financial Year 2011- ACTO, Begumpet Circle, 12 Hyderabad

West Bengal Value Added Tax Financial Year 2010- Assistant Commissioner 11 of Commercial Taxes, CTO, Raiganj

Tamil Nadu Value Added Tax Act, 2006 Financial Year 2013- Assistant Commissioner, T. 14 Nagar East Assessment Circle, Chennai

Maharashtra Value Added Tax Act, 2002 Financial Year 2010- Assistant Commissioner, 11 Audit Wing – 2

Maharashtra Value Added Tax Act, 2002 Financial Year 2010- Assistant Commissioner, 11 Audit Wing – 2

Andhra Pradesh Value added Tax Act, 2005 Financial Year 2010- Commercial Tax Ofcer, 11 Begumpet

Gujarat Value Added Tax Act, 2003 Financial Year 2010- ACCT, Vyara, Gujarat 11

Madhya Pradesh Value Added Tax Act, 2002 Financial Year 2012- Deputy Commissioner of 13 Commercial Taxes, Jabalpur, Division 1

Madhya Pradesh Value Added Tax Act, 2002 Financial Year 2012- Deputy Commissioner of 13 Commercial Taxes, Jabalpur, Division 1

Madhya Pradesh Value Added Tax Act, 2002 Financial Year 2012- Deputy Commissioner of 13 Commercial Taxes, Jabalpur, Division 1

The Finance Act, 1994 April 2005 - March CESTAT, Bengaluru 2008

The Finance Act, 1994 June 2005 - August CESTAT, Bengaluru 2008

The Finance Act, 1994 June 2007- March CESTAT, Bengaluru 2008

The Finance Act, 1994 June 2007- July 2008 CESTAT, Bengaluru

The Finance Act, 1994 April 2005 - March CESTAT, Bengaluru 2008

The Finance Act, 1994 April 2008 - March CESTAT, Bengaluru 2009

The Finance Act, 1994 July 2008- CESTAT, Bengaluru September 2009

The Finance Act, 1994 April 2008 - June CESTAT, Bengaluru 2009

The Finance Act, 1994 July 2009- March CESTAT, Bengaluru 2010

The Finance Act, 1994 October 22, 2009 - CESTAT, Bengaluru February 28, 2011

The Finance Act, 1994 April 2010 - March The Commissioner-Delhi 2011

The Finance Act, 1994 March 2011 - March The Commissioner-Delhi 2012

The Finance Act, 1994 April 2008 - March The Commissioner-Delhi 2009

The Finance Act, 1994 April 2011 - March The Commissioner-Delhi 2012

The Finance Act, 1994 April 2012 - March The Commissioner-Delhi 2013

**Amount involved is Rs. 16,927.

(c) The Company is not required to transfer any amount to the Investor Education and Protection Fund.

(viii) The Company has no accumulated losses as at the end of the financial year and it has incurred cash losses during the current financial year and in the immediately preceding financial year.

(ix) According to the records of the Company examined by us and the information and explanations given to us, the Company has not paid principal and interest of Rs. 0.49 Crores and Rs. 52.22 Crores respectively to banks and financial institutions as at the balance sheet date.

(x) According to the information and explanations given to us, the Company has given guarantee for loans taken by others from bank or financial institutions, the terms and conditions whereof in our opinion are not prima facie prejudicial to the interest of the Company.

(xi) Based on the information and explanations given to us by the management, term loans disbursed, including Priority Loan under CDR scheme have been utilized for the purposes of CDR Scheme cash flows envisaged as approved by lenders under the CDR package.

(xii) Based on the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the year, nor have we been informed of such case by the management.

For Brahmayya & Co.

Chartered Accountants

Firm registration Number: 000511S

Lokesh Vasudevan

Place: Gurgaon Partner

Date: May 29, 2015 Membership Number: 222320


Mar 31, 2013

Report on Financial Statements

We have audited the accompanying financial statements of Lanco Infratech 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 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 fair presentation of the financial statements that 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 judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. 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 qualified audit opinion.

Basis for Qualified Opinion

a) Attention is invited to Note 48 of the accompanying financial statements, which explains the reorganising undertaken by the management during the year ended March 31, 2012. The Company''s investment as of March 30, 2012 in various subsidiaries and associates was transferred to wholly owned step down subsidiaries and to an associate of wholly owned step down subsidiary aggregating to Rs. 6,81,550.87 lakhs that require lenders and customer approvals. Management having received many such approvals is confident of receiving balance approvals from lenders and customer in near future and has taken the effect of these transfers while preparing financial statements. In case of any of these residual approvals are not granted, the management will have to revisit the structure and the consequential impact would then be recorded in financial statements, pending the final outcome of residual lenders and customer approvals, we are unable to comment on the consequential effects of the foregoing should such approval not be received on these financial statements. This had also been qualified in our audit report for the year ended March 31, 2012.

b) Attention is invited to Note 52 of the accompanying financial statements, which explain the payment of managerial remuneration amounting to Rs. 1,506.30 lakhs was paid in excess of the permissible remuneration under Schedule XIII of the Companies Act, 1956, during the year ended March 31, 2013. The Company proposes to apply to the Central Government for the approval of such excess remuneration and is also subject to the approval of the members. Pending the final outcome of this matter, we are unable to comment on consequential adjustments, if any, required in the accompanying financial statements in this regard.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph, the 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 Statement of Profit and Loss, of the profit 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.

Emphasis of Matter

Without qualifying our opinion, your attention is invited to

a) In forming our opinion on the financial statements, we have considered the adequacy of disclosure made in Note 50 of the accompanying financial statements, as at March 31, 2013, concerning the Company''s ability to continue the operations for the foreseeable future. During

the year, the Company has loans aggregating to Rs. 33,361.92 lakhs falling due over next twelve months period and also unpaid dues of Rs. 61,591.44 lakhs of the Company as at March 31, 2013. This apart the Company has commitments to support its various ongoing projects. These matters require the Company to garner such additional cash flows to fund the operations as well as investment obligations to ongoing projects. However the accompanying financial statements have been prepared under the assumption, considering the management assessment and plan to get requisite funding from various other sources as contemplated. These submissions and assertions by the management envisage that the Company has the ability to garner the required cash flows. Relying on the above, no adjustments have been made in the accompanying financial statements.

b) Note 51 to the accompanying financial statements, in relation to the carrying value of assets held by Lanco Anpara Power Limited (LAnPL), a step down subsidiary of the Company. Though LAnPL has been incurring losses ever since the commencement of commercial operations and accumulated losses incurred so far eroded the net worth significantly, taking into consideration LAnPL management''s assessment of the situation including efforts towards seeking revision in tariff etc. pending before the regulators, the management of the Company is of the view that the carrying value of Assets of LAnPL is realizable at the value stated therein. Accordingly no adjustments have been made in the accompanying financial statements.

Our opinion is not qualified in the above matters.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2003 ("the Order") issued by the Central Government 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 under provisions of section 227(3) of the Companies Act, 1956, 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 Act;

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 Act.

Annexure to the Independent Auditor''s Report to the Members of Lanco Infratech Limited

Referred to in Clause (1) of "Report on Other Legal and Regulatory Requirements" paragraph of the Independent Auditor''s Report of even date

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

(b) Fixed assets have been physically verified by the management during the year in accordance with a planned programme of verifying them once in three years 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) There was no substantial disposal of fixed assets during the year.

2. (a) The management has conducted physical verification of inventory at reasonable intervals during the year. In respect of inventory

lying with third parties, these have substantially been confirmed by them.

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

(c) The Company is maintaining proper records of inventory and no material discrepancies were noticed on physical verification.

3. (a) According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly, the provisions of clause 4 (iii) (a) to (d) of the Companies (Auditor''s Report) Order, 2003 (as amended) are not applicable to the Company and hence not commented upon.

(b) According to the information and explanations given to us, the Company has not taken any loans, secured or unsecured from companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Accordingly, the provisions of clause 4 (iii) (e) to (g) of the Companies (Auditor''s Report) Order, 2003 (as amended) are not applicable to the Company and hence not commented upon.

4. In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business, for the purchase of inventory, fixed assets and for the sale of goods and services. During the course of our audit, no major weakness has been noticed in the internal control system in respect of these areas. During the course of our audit, we have not observed any continuing failure to correct major weakness in internal control system of the Company in respect of these areas.

5. (a) According to the information and explanations provided by the management, we are of the opinion that the particulars of contracts or arrangements referred to in Section 301 of the Act that need to be entered into the register maintained under section 301 have been so entered.

(b) In respect of transactions made in pursuance of such contracts or arrangements exceeding value of Rupees five lakhs entered into during the financial year, because of the unique and specialized nature of the items involved and absence of any comparable prices, we are unable to comment whether the transactions were made at prevailing market prices at the relevant time.

6. The Company has not accepted any deposits from the public.

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

8. We have broadly reviewed the books of account maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under Section 209(1) (d) of the Companies Act, 1956, and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained.

9. (a) The Company is regular in depositing with appropriate authorities 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 material statutory dues applicable to it except delays in few cases.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, investor education and protection fund, employees'' state insurance, income-tax, wealth-tax, service tax, sales-tax, customs duty, excise duty, cess and other undisputed statutory dues were outstanding, at the year end, for a period of more than six months from the date they became payable.

(c) According to the records of the Company, the dues outstanding of income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty and cess on account of any dispute, are as follows:

Name of the statute Nature of dues Amount (Rs. in lakhs)

Income Tax Act, 1961 Income Tax 373.63

Income Tax Act, 1961 Income Tax 10.72

Andhra Pradesh Tax on Entry of Entry Tax 1.83 Goods Act, 2001

Andhra Pradesh General Sales Tax Sales Tax 2.68 Act, 1956

Andhra Pradesh Value Added Tax Sales Tax 1.29 Act, 2005

Tamil Nadu Value Added Tax, 2006 Sales Tax 38.26 (including penalty)

Tamil Nadu Value Added Tax, 2006 Sales Tax 88.64

The Finance Act, 1994 Service Tax 13.76

The Finance Act, 1994 Service Tax 15.91

The Finance Act, 1994 Service Tax 1,292.36

The Finance Act, 1994 Service Tax 385.92

The Finance Act, 1994 Service Tax 1,547.37

The Finance Act, 1994 Service Tax 37.80

The Finance Act, 1994 Service Tax 657.84

The Finance Act, 1994 Service Tax 897.86

The Finance Act, 1994 Service Tax 11.16

The Finance Act, 1994 Service Tax 6,442.49

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

Income Tax Act, 1961 Financial year 2008-09 Commissioner of Income Tax (Appeals)

Income Tax Act, 1961 Financial year 2009-10 Commissioner of Income Tax (Appeals)

Andhra Pradesh Tax on Entry of Financial Year 2007-08 Commercial Tax Officer, Begumpet

Andhra Pradesh Tax on Entry of Financial Year 2001-02 The Sales Tax Appellate Tribunal, Hyderabad

The Finance Act, 1994 Financial Year 2009-10 The Appellate Deputy Commissioner CT, Panjagutta-Hyderabad

The Finance Act, 1994 Financial Year 2007-08 The Appellate Deputy Commissioner CT, Chennai

The Finance Act, 1994 Financial Year 2010-11 Joint Commissioner (North) Chennai

The Finance Act, 1994 April 2005 Customs, Central Excise and Service Tax to March 2008 Appellate Tribunal

The Finance Act, 1994 June 2005 Customs, Central Excise and Service Tax to August 2008 Appellate Tribunal

The Finance Act, 1994 June 2007 Customs, Central Excise and Service Tax to March 2008 Appellate Tribunal

The Finance Act, 1994 June 2007 Customs, Central Excise and Service Tax to July 2008 Appellate Tribunal

The Finance Act, 1994 April 2005 Customs, Central Excise and Service Tax to March 2008 Appellate Tribunal

The Finance Act, 1994 July 2008 Customs, Central Excise and Service Tax to September 2009 Appellate Tribunal

The Finance Act, 1994 April 2008 Customs, Central Excise and Service Tax to June 2009 Appellate Tribunal

The Finance Act, 1994 July 2009 Customs, Central Excis and Service Tax to March 2010 Appellate Tribunal

The Finance Act, 1994 October 2009 Customs, Central Excise and Service Tax to February 2011 Appellate Tribunal

The Finance Act, 1994 April 2010 Commissioner of Centra Excise to March 2011

10. The Company has no accumulated losses at the end of the financial year and it has not incurred cash losses in the current and immediately preceding financial year.

11. According to the records of the Company examined by us and the information and explanation given to us, the Company has not paid principal, interest and other dues of Rs. 32,444.38 lakhs, Rs. 4,349.62 lakhs and Rs. 24,797.44 lakhs respectively to banks and financial institutions as at the balance sheet date. Rs. 1,233.15 lakhs, Rs. 1,990.80 lakhs and Rs. 12,341.71 lakhs pertaining to principal, interest and other dues have been paid subsequently.

12. According to the information and explanations given to us and based on the documents and records produced 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.

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 (as amended) 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 Companies (Auditor''s Report) Order, 2003 (as amended) are not applicable to the Company.

15. According to the information and explanations given to us, the Company has given guarantee for loans taken by others from bank or financial institutions, the terms and conditions whereof in our opinion are not prima facie prejudicial to the interest of the Company.

16. Based on information and explanations given to us by the management, term loans were applied for the purpose for which the loans were obtained.

17. According to the information and explanations given to us and on an overall examination of the balance sheet of the Company taking cognizance of the extension of time granted to parties from whom amounts were due in relation of reorganisation mentioned in Note 48 of the accompanying financial statements and placing reliance on the reasonable assumptions made by the Company for the classification of long-term and short-term usages of funds, we are of the opinion that prima facie, no funds raised on short-term basis have been used for long-term investment.

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

19. The Company did not have any outstanding debentures during the year.

20. The Company has not raised any money by public issues and accordingly, provisions of clause 4(xx) of the Companies (Auditor''s Report) Order, 2003 (as amended) are not applicable to the Company.

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

For Brahmayya & Co

Chartered Accountants

Firm Registration Number: 000511S

N. Sri Krishna

Place: Gurgaon Partner

Date: May 29, 2013 Membership Number: 26575


Mar 31, 2012

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

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

3. As required by the Companies (Auditor's Report) Order, 2003 (as Amended) 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. Attention is invited to Note 38 of financial statements, which Explains the restructuring undertaken by the Company during the year. The Company's investment in various subsidiaries and associates have Been transferred to wholly owned step down subsidiaries and an Associate of wholly owned step down subsidiary aggregating to f 6,81,550.87 lakhs. Management is confident of receiving the approvals From various lenders and customer in near future and has recorded these Transfers in these financial statements. In case of any of these Approvals are not granted, the management will have to revisit the Structure and the consequential impact would then be recorded in these Financial statements. Pending the final outcome of lenders and customer Approvals, we are unable to comment on the consequential effects of the Foregoing should such approval not be received on these financial Statements.

5. Further to our comments in the Annexure referred to above, we Report that:

I. We have obtained all the information and explanations, which to the Best of our knowledge and belief were necessary for the purposes of our Audit;

Ii. In our opinion, proper books of account as required by law have Been kept by the Company so far as appears from our examination of Those books;

Iii. The Balance Sheet, statement of Profit and Loss and Cash Flow Statement dealt with by this report are in agreement with the books of Account;

Iv. In our opinion, the Balance Sheet, statement of Profit and Loss 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;

V. On the basis of the written representations received from the Directors, as on March 31, 2012, and taken on record by the Board of Directors, except for Mr. P. Narasimharamulu who has deceased prior to Furnishing the representation, we report that none of the other 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;

Vi. Subject to the matters referred to in paragraph 4 above, the Consequential effects of which are currently not ascertainable, in our Opinion and to the best of our information and according to the Explanations given to us, the said accounts give the information Required by the Companies Act, 1956, in the manner so required and give A true and fair view in conformity with the accounting principles Generally accepted in India;

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

B) in the case of the statement of Profit and Loss, of the profit for The year ended on that date; and

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

Re: Lanco Infratech Limited ('the Company')

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

(b) All fixed assets were physically verified by the management in the Previous year in accordance with a planned programme of verifying them Once in three years 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) There was no substantial disposal of fixed assets during the year.

(ii) (a) The management has conducted physical verification of Inventory at reasonable intervals during the year. In respect of Inventory lying with third parties, these have substantially been Confirmed by them.

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

C) The Company is maintaining proper records of inventory and no Material discrepancies were noticed on physical verification.

(iii) (a) According to the information and explanations given to us, The Company has not granted any loans, secured or unsecured to Companies, firms or other parties covered in the register maintained Under section 301 of the Companies Act, 1956. Accordingly, the Provisions of clause 4 (iii) (a) to (d) of the Companies (Auditor's Report) Order, 2003 (as amended) are not applicable to the Company and Hence not commented upon.

(b) According to the information and explanations given to us, the Company has not taken any loans, secured or unsecured from companies, Firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Accordingly, the provisions of clause 4 (iii) (e) to (g) of the Companies (Auditor's Report) Order, 2003 (as Amended) are not applicable to the Company and hence not commented Upon.

(iv) In our opinion and according to the information and explanations Given to us, there is an adequate internal control system commensurate With the size of the Company and the nature of its business, for the Purchase of inventory and fixed assets and for the sale of goods and Services. During the course of our audit, no major weakness has been Noticed in the internal control system in respect of these areas. During the course of our audit, we have not observed any continuing Failure to correct major weakness in internal control system of the Company in respect of these areas.

(v) (a) According to the information and explanations provided by the Management, we are of the opinion that the particulars of contracts or Arrangements referred to in section 301 of the Act that need to be Entered into the register maintained under section 301 have been so Entered.

(b) In respect of transactions made in pursuance of such contracts or Arrangements exceeding value of Rupees five lakhs entered into during The financial year, because of the unique and specialised nature of the Items involved and absence of any comparable prices, we are unable to Comment whether the transactions were made at prevailing market prices At the relevant time

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

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

(viii) We have broadly reviewed the books of account maintained by the Company pursuant to the rules made by the Central Government for the Maintenance of cost records under section 209(1 )(d) of the Companies Act, 1956, and are of the opinion that prima facie, the prescribed Accounts and records have been made and maintained.

(ix) (a) The Company is regular in depositing with appropriate Authorities 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 material statutory dues applicable to it.

(b) According to the information and explanations given to us, no Undisputed amounts payable in respect of provident fund, investor Education and protection fund, employees' state insurance, income-tax, Wealth-tax, service tax, sales- tax, customs duty, excise duty, cess And other undisputed statutory dues were outstanding, at the year end, For a period of more than six months from the date they became payable.

(c) According to the records of the Company, the dues outstanding of Income-tax, sales-tax, wealth-tax, service tax, customs duty, excise Duty and cess on account of any dispute, are as follows:

Name of the Statute Nature of Amount Period to Rs. Lakhs which the Forum where Dispute is Dues amount relates pending

Income Tax Act, 1961 Income Tax 294.7 Assessment Year 2002-03 Commissioner of Income Tax (Appeals)

Income Tax Act, 1961 Income Tax 222.2 Assessment year 2003-04 Commissioner of Income Tax (Appeals)

Income Tax Act, 1961 Income Tax 20.6 Assessment year 2004-05 Commissioner of Income Tax (Appeals)

Income Tax Act, 1961 Income Tax 221.7 Assessment year 2005-06 Commissioner of Income Tax (Appeals)

Income Tax Act, 1961 Income Tax 1.7 Assessment year 2006-07 Commissioner of Income Tax (Appeals)

Income Tax Act, 1961 Income Tax 193.2 Assessment year 2007-08 Commissioner of Income Tax (Appeals)

Income Tax Act, 1961 Income Tax 373.6 Assessment year 2009-10 Commissioner of Income Tax (Appeals)

Income Tax Act, 1961 Income Tax 10.7 Assessment year 2010-11 Commissioner of Income Tax (Appeals)

Andhra Pradesh General Sales Tax 8.5 Financial Year 2000-01 High court of Andhra Sales Tax Act, 1956 Pradesh

Andhra Pradesh Tax on Entry Tax 1.8 Financial Year 2007-08 Commercial Tax Officer, Entry of Goods Act, 2001 Begumpet

Andhra Pradesh General Sales Tax 2.7 Financial Year 2001-02 The Sales Tax Appellate Sales Tax Act, 1956 Tribunal, Hyderabad

Andhra Pradesh Value Sales Tax 1.3 Financial Year 2009-10 The Appellate Deputy Added Tax Act, 2005 Commissioner CT, Panjagutta- Hyderabad

Tamil Nadu Value Added Sales Tax 38.3 Financial Year 2007-08 The Appellate Deputy Tax, 2006 (including Commissioner CT, Chennai Penalty)

The Finance Act, 1994 Service Tax 13.8 April 2005- March 2008 Customs, Central Excise And Service Tax Appellate Tribunal

The Finance Act, 1994 Service Tax 15.9 June 2005- August 2008 Customs, Central Excise And Service Tax Appellate Tribunal

The Finance Act, 1994 Service Tax 1,292.4 June 2007-March 2008 Customs, Central Excise And Service Tax Appellate Tribunal

The Finance Act, 1994 Service Tax 385.9 June 2007-July 2008 Customs, Central Excise And Service Tax Appellate Tribunal

The Finance Act, 1994 Service Tax 1,547.4 April 2005-March 2008 Customs, Central Excise And Service Tax Appellate Tribunal

The Finance Act, 1994 Service Tax 37.8 July 2008-September 2009 Commissioner of Central Excise (Appeals)

The Finance Act, 1994 Service Tax 657.8 April 2008-June 2009 Customs, Central Excise And Service Tax Appellate Tribunal

The Finance Act, 1994 Service Tax 897.9 July 2009-March 2010 Commissioner of Central Excise The Finance Act, 1994 Service Tax 65 October 2009- February Commissioner of Central 2011 Excise

The Finance Act, 1994 Service Tax 6,442.5 April 2010-March 2011 Commissioner of Central Excise

(x) The Company has no accumulated losses at the end of the Financial year and it has not incurred cash losses in the current and Immediately preceding financial year.

(xi) Based on our audit procedures and as per the information and Explanations given by the management, we are of the opinion that the Company has not defaulted in repayment of dues to a financial Institution, bank or debenture holders.

(xii) According to the information and explanations given to us and Based on the documents and records produced 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) 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 (as amended) Are not applicable to the Company.

(xiv) 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 Companies (Auditor's Report) Order, 2003 (as amended) are not applicable to the Company.

(xv) According to the information and explanations given to us, the Company has given guarantee for loans taken by others from bank or Financial institutions, the terms and conditions whereof in our opinion Are not prima- facie prejudicial to the interest of the Company.

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

(xvii) According to the information and explanations given to us and on An overall examination of the balance sheet of the Company, we report That no funds raised on short-term basis have been used for long-term Investment.

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

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

(xx) The Company has not raised any money by public issues and Accordingly, provisions of clause 4(xx) of the Companies (Auditor's Report) Order, 2003 (as amended) are not applicable to the Company.

(xxi) Based upon the audit procedures performed for the purpose of Reporting the true and fair view of the financial statements and as per The information and explanations given by the management, we report That no fraud on or by the Company has been noticed or reported during The course of our audit.

For S. R. Batliboi & Associates For Brahmayya & Co.

Firm registration number: 101049W Firm registration number: 000511S

Chartered Accountants Chartered Accountants

Per Sanjay Vij per N.Sri Krishna

Partner Partner

Membership No.: 95169 Membership No.: 26575

Place: Gurgaon Place: Gurgaon

Date: May 29, 2012 Date: May 29, 2012


Mar 31, 2011

1. We have audited the attached Balance Sheet of Lanco Infratech Limited (‘the Company') as at March 31, 2011 and also the Profit and Loss account and the cash flow statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

3. As required by the Companies (Auditor's Report) Order, 2003 (as amended) issued by the Central Government of India in terms of sub- section (4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4. Further to our comments in the Annexure referred to above, we report that:

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

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

iii. The balance sheet, profit and loss account and cash flow statement dealt with by this report are in agreement with the books of account;

iv. 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;

v. On the basis of the 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;

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

a) in the case of the balance sheet, of the state of affairs of the Company as at March 31, 2011;

b) in the case of the profit and loss account, of the profit for the year ended on that date; and

c) in the case of cash flow statement, of the cash flows for the year ended on that date.

Annexure referred to in paragraph 3 of our report of even date Re: Lanco Infratech Limited (‘the Company')

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

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

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

(ii) (a) The management has conducted physical verification of inventory (except stocks lying with third parties) at reasonable intervals during the year. In respect of inventory lying with third parties, these have substantially been confirmed by them.

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

(c) The Company is maintaining proper records of inventory and no material discrepancies were noticed on physical verification.

(iii) (a) According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly, the provisions of clause 4(iii)(a) to (d) of the Order are not applicable to the Company and hence not commented upon.

(b) According to information and explanations given to us, the Company has not taken any loans, secured or unsecured, from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly, the provisions of clause 4(iii)(e) to (g) of the Order are not applicable to the Company and hence not commented upon.

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

(v) (a) According to the information and explanations provided by the management, we are of the opinion that the particulars of contracts or arrangements referred to in Section 301 of the Act that need to be entered into the register maintained under Section 301 have been so entered.

(b) In respect of transactions made in pursuance of such contracts or arrangements exceeding value of Rupees five lakhs entered into during the financial year, because of the unique and specialized nature of the items involved and absence of any comparable prices, we are unable to comment whether the transactions were made at prevailing market prices at the relevant time.

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

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

(viii) We have broadly reviewed the books of account maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under Section 209(1)(d) of the Companies Act, 1956, related to the generation of power and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained.

(ix) (a) The Company is regular in depositing with appropriate authorities 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 material statutory dues applicable to it.

There are no dues on account of cess under Section 441 A of the Companies Act,1956, since the aforesaid section has not yet been made effective by Central Government of India.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, investor education and protection fund, employees' state insurance, income-tax, wealth-tax, service tax, sales-tax, customs duty, excise duty, cess and other undisputed statutory dues were outstanding, at the year end, for a period of more than six months from the date they became payable.

(c) According to the records of the Company, the dues outstanding of income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty and cess on account of any dispute, are as follows:

Name of the statute Nature of Amount Period to which the Forum where dispute is pending dues ( in lakhs) amount relates

Income Tax Act, 1961 Income Tax 18.0 Assessment year 2003-04 Income Tax Appellate Tribunal and with The Honourable High Court, Andhra Pradesh

Andhra Pradesh General Sales Tax 8.5 Financial Year 2000-01 The Sales Tax Appellate Tribunal, Sales Tax Act, 1956 Hyderabad

Andhra Pradesh Tax on Entry Tax 1.8 Financial Year 2007-08 The Appellate Deputy Commiss -ioner CT, Entry of Goods Act,2001 Panjagutta- Hyderabad

Andhra Pradesh General Sales Tax 2.7 Financial Year 2001-02 The Sales Tax Appellate Tribunal, Sales Tax Act, 1956 Hyderabad

Andhra Pradesh Value Sales Tax 1.3 Financial Year 2009-10 The Appellate Deputy Commiss -ioner CT, Added Tax Act, 2005 Panjagutta- Hyderabad

The Finance Act, 1994 Service Tax 13.8 April 2005- March 2008 Customs, Central Excise and Service Tax Appellate Tribunal The Finance Act, 1994 Service Tax 15.9 June 2005- August 2008 Customs, Central Excise and Service Tax Appellate Tribunal The Finance Act, 1994 Service Tax 1,292.4 June 2007- March 2008 Customs, Central Excise and Service Tax Appellate Tribunal The Finance Act, 1994 Service Tax 385.9 June 2007- July 2008 Customs, Central Excise and Service Tax Appellate Tribunal

The Finance Act, 1994 Service Tax 1,547.4 April 2005- March 2008 Customs, Central Excise and Service Tax Appellate Tribunal The Finance Act, 1994 Service Tax 1.3 April 2008- March 2009 Commissioner of Central Excise (Appeals) The Finance Act, 1994 Service Tax 37.8 July 2008- September 2009 Commissioner of Central Excise (Appeals)

The Finance Act, 1994 Service Tax 657.8 April 2008- June 2009 Customs, Central Excise and Service Tax Appellate Tribunal

The Finance Act, 1994 Service Tax 897.9 July 2009- March 2010 Commissioner of Central Excise

(x) The Company has no accumulated losses at the end of the financial year and it has not incurred cash losses in the current and immediately preceding financial year.

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

(xii) According to the information and explanations given to us and based on the documents and records produced 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) 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 (as amended) are not applicable to the Company.

(xiv) 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 Companies (Auditor's Report) Order, 2003 (as amended) are not applicable to the Company.

(xv) According to the information and explanations given to us, the Company has given guarantee for loans taken by others from bank or financial institutions, the terms and conditions whereof in our opinion are not prima-facie prejudicial to the interest of the Company.

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

(xvii) According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we report that no funds raised on short-term basis have been used for long-term investment.

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

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

(xx) The Company has not raised any money by public issues and accordingly, provisions of clause 4(xx) of the Companies (Auditor's Report) Order, 2003 (as amended) are not applicable to the company.

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

For S. R. Batliboi & Associates For Brahmayya & Co.

Firm Registration Number: 101049W Firm Registration Number: 000511S

Chartered Accountants Chartered Accountants

per Sanjay Vij per N. Sri Krishna

Partner Partner

Membership Number: 95169 Membership Number: 26575

Place: Gurgaon Place: Gurgaon

Date: May 29, 2011 Date: May 29, 2011


Mar 31, 2010

1. We have audited the attached Balance Sheet of Lanco Infratech Limited (the "Company") as at March 31, 2010, and the related Profit and Loss Account and Cash Flow Statement for the year ended on that date annexed thereto, which we have signed under reference to this report. These financial statements are the responsibility of the Companys Management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

3. As required by the Companies (Auditors Report) Order, 2003, as amended by the Companies (Auditors Report) (Amendment) Order, 2004 (together the "Order"), issued by the Central Government of India in terms of sub-section (4A) of Section 227 of ‘The Companies Act, 1956 of India (the ‘Act) and on the basis of such checks of the books and records of the Company as we considered appropriate and according to the information and explanations given to us, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the 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 appears from our examination of those books;

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

d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Act;

e) On the basis of written representations received from the directors, as on March 31, 2010 and taken on record by the Board of Directors, 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 Act;

f) In our opinion and to the best of our information and according to the explanations given to us, the said financial statements together with the notes thereon and attached thereto give, in the prescribed manner, the information required by the Act, 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.

Annexure to Auditors Report Referred to in paragraph 3 of the Auditors Report of even date to the members of Lanco Infratech Limited on the financial statements for the year ended March 31, 2010

1. (a) The Company is maintaining records showing particulars, including quantitative details and situation, of fixed assets other than for certain assets in respect of which Company is in the process of affixing identification numbers.

(b) The fixed assets are physically verified by the Management according to a phased programme designed to cover all the items over a period of 3 years which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. Pursuant to the programme, a portion of the fixed assets has been physically verified by the Management during the year and no material discrepancies between the book records and the physical inventory have been noticed.

(c) In our opinion and according to the information and explanations given to us, a substantial part of fixed assets has not been disposed of by the Company during the year.

2. (a) The inventory (excluding stocks with third parties) has been physically verified by the Management during the year. In respect of inventory lying with third parties, these have substantially been confirmed by them. In our opinion, the frequency of verification is reasonable.

(b) In our opinion, the procedures of physical verification of inventory except for certain construction and project work in progress, followed by the Management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) On the basis of our examination of the inventory records, in our opinion, the Company is maintaining proper records of inventory except for certain construction and project work in progress. The discrepancies noticed on physical verification of inventory as compared to book records were not material.

3. (a) The Company has not granted any loans, secured or unsecured, to companies, firms or other parties covered in the register maintained under Section 301 of the Act. Accordingly clause (iii) (b), (c) and (d) of paragraph 4 of the Companies (Auditors Report) Order, 2003 as amended by Companies (Auditors Report) (Amendment) Order, 2004 are not applicable for the current year.

(b) The Company had taken an unsecured loan, from a company covered in the register maintained under Section 301 of the Act in earlier years. The maximum amount involved during the year and the year-end balance of such loan aggregates to Rs.200 Million.

(c) In our opinion, the rate of interest and other terms and conditions of such loans are not prima facie prejudicial to the interest of the Company.

(d) In respect of the aforesaid loan, the principal amount has not fallen due for repayment as stipulated and the Company is regular in payment of interest.

4. In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business for the purchase of inventory, fixed assets and for the sale of goods and services. Further, on the basis of our examination of the books and records of the Company, and according to the information and explanations given to us, we have neither come across nor have been informed of any continuing failure to correct major weaknesses in the aforesaid internal control system.

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

(b) In our opinion and according to the information and explanations given to us, the transactions for sale of services made in pursuance of such contracts or arrangement and exceeding the value of Rupees Five Lakhs in respect of certain parties during the year were of special nature for which no comparable market prices were available as explained by the management of the company.

6. The Company has not accepted any deposits from the public within the meaning of Sections 58A and 58AA of the Act and the rules framed there under.

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

8. We have broadly reviewed the books of account maintained by the Company in respect of Electrical energy produced, pursuant to the Rules made by the Central Government of India, the maintenance of cost records has been prescribed under clause (d) of sub-section (1) of Section 209 of the Act, and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the records with a view to determine whether they are accurate or complete.

9. (a) According to the information and explanations given to us and the records of the Company examined by us, the Company has generally been regular in depositing undisputed statutory dues including provident fund (other than provident fund pertaining to contract works), investor education and protection fund, employees state insurance, income-tax, wealth tax, sales tax, service tax, works contract tax, customs duty, Cess and other material statutory dues as applicable, with the appropriate authorities though

(b) According to the information and explanations given to us and the records of the Company examined by us, the particulars of dues of income-tax, service tax and sales-tax as at March 31, 2010 which have not been deposited on account of a dispute are as follows:

Name of the statute Nature of Disputed Amount

dues Amount in Paid under Rs. Million protest in Rs. Million

Income Tax Act, 1961 Income Tax 3.66 1.86

Income Tax Act, 1961 Income Tax 22.24 13.75

Income Tax Act, 1961 Income Tax 7.38 -

Income Tax Act, 1961 Income Tax 6.65 -

Income Tax Act, 1961 Income Tax 2.29 -

Andhra Pradesh General Sales Tax 1.69 0.84 Sales Tax Act, 1956

Andhra Pradesh General Sales Tax 0.24 0.24 Sales Tax Act, 1956

Andhra Pradesh Tax on Entry Tax 0.21 0.03 Entry of Goods Act, 2001

Andhra Pradesh General Sales Tax 0.27 - Sales Tax Act, 1956

Andhra Pradesh General Sales Tax 0.53 0.39 Sales Tax Act, 1956

The Finance Act, 1994 Service Tax 1.38 -

The Finance Act, 1994 Service Tax 1.59 -

The Finance Act, 1994 Service Tax 155.84 -

The Finance Act, 1994 Service Tax 38.59 -

The Finance Act, 1994 Service Tax 154.74 -

The Finance Act, 1994 Service Tax 0.13 -

The Finance Act, 1994 Service Tax 3.78 -

Name of the statute Period to which the Forum where the

amount relates dispute is pending

Income Tax Act, 1961 Assessment Year 2003-04 Income Tax Appellate Tribunal and with The Honourable High Court, Andhra Pradesh

Income Tax Act, 1961 Assessment Year 2004-05 Income Tax Appellate Tribunal

Income Tax Act, 1961 Assessment Year 2005-06 Commissioner of Income Tax (Appeals)

Income Tax Act, 1961 Assessment Year 2006-07 Commissioner of Income Tax (Appeals)

Income Tax Act, 1961 Assessment Year 2007-08 Commissioner of Income Tax (Appeals)

Andhra Pradesh General Financial Year 2000-01 The Sales Tax Sales Tax Act, 1956 Appellate

Tribunal, Hyderabad

Andhra Pradesh General Financial Year 2001-02 The Sales Tax Sales Tax Act, 1956 Appellate

Tribunal, Hyderabad

Andhra Pradesh Tax on Financial Year 2007-08 The Appellate Deputy Entry Good Act,2001 Commissioner CT, Panjagutta- Hyderabad

Andhra Pradesh General Financial Year 2001-02 The Sales Tax Sales Tax Act, 1956 Appellate Tribunal, Hyderabad

Andhra Pradesh General Financial Year 2002-03 The Sales Tax Sales Tax Act, 1956 Appellate

Tribunal, Hyderabad

The Finance Act, 1994 April 2005-March 2008 Commissioner of Central

Excise (Appeals)

The Finance Act, 1994 June 2005-August 2008 Commissioner of Central Excise (Appeals)

The Finance Act, 1994 June 2007-March 2008 Customs, Central Excise and

Service Tax Appellate Tribunal

The Finance Act, 1994 June 2007-July 2008 Customs, Central Excise and

Service Tax Appellate Tribunal

The Finance Act, 1994 April 2005-March 2008 Commissioner of Central

Excise (Appeals)

The Finance Act, 1994 April 2008-March 2009 Commissioner of Central

Excise (Appeals)

The Finance Act, 1994 July 2008-September 2009 Commissioner of Central Excise (Appeals)



July 2008-September 2009 Commissioner of Central Excise (Appeals)

10. The Company has no accumulated losses as at March 31, 2010 and it has not incurred any cash losses in the financial year ended on that date or in the immediately preceding financial year.

11. According to the records of the Company examined by us and the information and explanation given to us, the Company has not defaulted in repayment of dues to any financial institution or bank or debenture holders as at the balance sheet date.

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

13. The provisions of any special statute applicable to chit fund / nidhi / mutual benefit fund/ societies are not applicable to the Company.

14. In our opinion, the Company is not a dealer or trader in shares, securities, debentures and other investments.

15. 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 or financial institutions during the year, are not prejudicial to the interest of the Company.

16. In our opinion, and according to the information and explanations given to us, on an overall basis, pending utilization for the stated purpose certain loan funds were invested in short term investments and / or held as bank balances till the stated end use.

17. On the basis of an overall examination of the balance sheet of the Company, in our opinion and according to the information and explanations given to us, there are no funds raised on a short-term basis which have been used for long-term investment.

18. The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Act during the year.

19. The Company has not issued any debentures during the year and there are no debentures outstanding as at the year end. Accordingly clause (xix) of paragraph 4 of the Companies (Auditors Report) Order, 2003 as amended by Companies (Auditors Report) (Amendment) Order, 2004 are not applicable for the current year.

20. The Company has not raised any money by public issues during the year.

21. During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have not come across any instance of fraud on or by the Company, noticed or reported during the year, nor have we been informed of such cases by the Management, except for

- inappropriate actions by certain employees of the Company (who have since been reprimanded) that involved unauthorised renegotiation of insurance premium collected by the Company from its contracting principals (customers) and paid to insurance companies, and inappropriate retention of the insurance premium, aggregating Rs. 19.7 million, so refunded by insurance companies on Companys account, rather than crediting the customers. The reported amounts, as above, have since been paid to customers, and new internal controls have since been introduced by the Company,

- suspected fraud by some of the employees of the company relating to steel scrap in one of its units, quantum of which is not ascertainable at this point of time (which in the opinion of the management might not be material) and for which management has lodged a complaint and the matter is under investigation, and

- misappropriation (reported by the management) of construction material at one of its sites by the contractor which as confirmed by management has since been recovered.

For Price Waterhouse For Brahmayya & o. Firm Registration Number:07568S Firm Registration Number:00511S Chartered Accountants Chartered Accountants Avijit Mukerji N. Sri Krishna Partner Partner Membership Number:56155 Membership Number:6575

Place: Gurgaon Place: Gurgaon Date: June 11,2010 Date: June 11,2010

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