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Auditor Report of Lyka Labs Ltd.

Jun 30, 2015

We have audited the accompanying financial statements of LYKA LABS LIMITED (the Company), which comprise the Balance Sheet as at June 30 2015, and the Statement of Profit and Loss and Cash Flow Statement for the year ended on that date (in which are incorporated the accounts of the company's branches at Ankleshwar and Tarapur audited by other auditor's after making such changes as were considered necessary for the purpose of incorporation), and a summary of significant accounting policies and other explanatory information.

Management's Responsibility for the Financial Statements

The Company's Board of Director is responsible for the matters stated in section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provision 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.

Auditors' Responsibility

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

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

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

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

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

Basis for Qualified Opinion

We draw attention to Note No.28 relating to non compliance of the provisions of Section 74 of the Companies Act, 2013 to the extent of such non repayment of overdue Fixed Deposits.

Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matters 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 June 30, 2015;

(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.

Reason for Qualification

The Company has not been able to repay overdue Fixed Deposits aggregating to Rs, 108,586,000 and interest due thereon Rs, 14,889,768 up to 30th June, 2015. Consequently, the Company has not complied with provision of Section 74 of the Companies Act, 2013 to the extent of such non repayment of overdue Fixed Deposits. Hence we have qualified the same. The liability, if any arising on account of delayed payments/non-payment of dues will be provided for in the year in which finality is reached .

Emphasis of Matters

1. The Company continues to be under severe financial stress as reflected by:

(a) Overdue Fixed Deposits and Debentures (including interest accrued and due) (Refer Note Nos. 28 and 29)

(b) Overdue loans from banks (Refer Note No. 30).

(c) Statutory dues of Rs, 29,738,746 remaining unpaid (Refer Note No. 10(B)(i))

(d) Fire Ankleshwar Plant (Refer Note No. 32).

(e) Overdue receivables (Refer Note No. 36).

2. Restructuring of Business Operations:

The Management of the Company is in the process of restructuring its business operations as also those of its subsidiaries in which it has substantial investments by:- (a) The Company sold its manufacturing facilities for formulations at Tarapur, Maharashtra (Refer Note No. 31)

(b) Infusion of funds by promoters through subscription of Preferential issue of convertible warrants.

(c) Expanding business volumes.

3. Note No. 36 regarding Sundry Debtors outstanding for more than six months aggregating to Rs, 129,639,709 considered good for recovery by the company.

4. Note No. 37 regarding pending balance confirmation from Sundry Debtors, Sundry Creditors, Fixed Deposits, Group Companies and Loans & Advances.

5. Note No. 38 regarding non provision for diminution in value of investments.

6. Note No. 39 relating to Capital Work-in-Progress of Intangible Assets aggregating to Rs, 109,643,183.

7. Note No. 41 regarding slow/non-moving material aggregating to Rs, 12,560,316. Our opinion is not qualified in respect of all these 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 Companies Act, 2013, we give in the Annexure a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.

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

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

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

(c) The reports on the accounts of the branch offices of the Company audited under Section 143(8) of the Act by branch auditors have been sent to us and have been properly dealt with by us in preparing this report;

(d) 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;

(e) 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;

(f) On the basis of written representations received from the directors as on June 30, 2015, and taken on record by the Board of Directors, none of the directors is disqualified as on June 30, 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 litigation on its financial position in its financial statements – Refer to Note No. 27 (i) to 27(vi) of other notes to the financial statements.

(ii) The company does not have any long-term contracts including derivatives contracts and hence there are no material foreseeable losses.

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

ANNEXURE TO THE INDEPENDENT AUDITORS' REPORT

(Referred to in paragraph 1 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 fixed assets.

(b) There is a phased programme of verification which, in our opinion, is reasonable having regard to the size of the company and the nature of its assets. The discrepancies noticed on such verification which are not material have been suitably dealt with in the books of account.

(ii) In respect of its Inventories:

(a) As explained to us, inventories were physically verified during the year by the management at regular intervals except the inventories lying with the third parties from whom confirmations have been obtained.

(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 and discrepancies noticed on physical verification which are not material have been properly dealt with in the books of account.

(iii) The Company has not granted any loan to any party, covered in the register maintained under section 189 of the Companies Act, 2013 and hence clause 3(iii) of the Order is not applicable.

(iv) In our opinion and according to the information and explanations given to us, there are internal control procedures 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.

(v) The Company has not been able to repay overdue Fixed Deposits aggregating to Rs, 108,586,000 and interest due thereon Rs, 14,889,768 up to 30th June, 2015 (excluding Short Term Loans in respect of which, the Company has been legally advised that such loans are not deposits, as defined, in the Companies (Acceptance of Deposits) Rules, 2014). Consequently, the Company has not complied with the provisions of Section 74 of the Companies Act, 2013 to the extent of such non repayment of overdue Fixed Deposits.

The Company has filed a petition with the Company Law Board on 31st March, 2015 to seek extension of time for repayment of principal and interest (dues) thereon up to March, 2020.

(vi) We have broadly reviewed the books of account and records, to the extent, maintained by the Company relating to the manufacture of Bulk Drugs and Formulations, pursuant to the Order 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 most of the prescribed accounts and records have generally been made and maintained. We have, however, not made a detailed examination of the records with a view to determining whether they are accurate or complete.

(vii) According to the information and explanations given to us and as per the relevant records produced before us in respect of statutory and other dues:

(a) During the year Company has not been regular in depositing undisputed statutory dues relating to Provident Fund, Professional Tax, E.S.I.C., Service Tax, Income-tax, Value Added Tax and Sales- tax. The arrears of the said dues as at the last day of the financial year and outstanding for more than six months from the date they become payable are as follows:

Sr. Amount No. Nature of Dues (Rs,)

1. Tax Deducted at Source 2,941,780

2. E.S.I.C. 1,664,306

3. Provident Fund 697,318 4. Professional Tax 390,360

5. Central Sales Tax 85,868

6. Service Tax Payable 1,885,314

7. Maharashtra Labor Welfare Fund 2,150

8. Gujarat Labor Welfare Fund 2,515

9. Sales Tax deferral Scheme-SICOM 4,629,990

(b) Following disputed dues have not been deposited since the matters are pending with the respective forums:

Sr. Nature of dues Amount Period to which No. (Rs,) the amount relates

1. Demand under Drugs 209,440,565 Demands raised in Price Control Order 1987, 1990 and 1995

2. Purchase Tax 1,600,442 1991-96

3. Excise Duty 1,122,138 Since August 22, 2006

6,015,116 2008-2013

10,875,257 Since September 1995 to February 2000

4. Bombay Sales Tax 6,186,400 1998-99

9,824,035 2000-01

420,682 2002-03

379,164 2004-05

5. Maharashtra Value 792,379 2006-07 Added Tax

3,513,662 2007-08

8,825,968 2011-12

6. Central Sales Tax 7,299,596 2007-08

3,812,330 2011-12

1,795,241 1998-99

1,096,776 2000-01

7. Service Tax 1,809,830 2011-12

8. Gujarat Sales Tax 8,545,195 2002-03

9,740,372 2010-11

1,370,850 2006-07

673,902 2007-08

6,455,421 2009-10

Nature of dues Name of Forum Remark

Demand under Drugs Gujarat High Refer Note Price Control Order Court No. 27(i)

Purchase Tax Gujarat Sales Tax - Appellate Tribunal

Excise Duty Commissioner of - Excise & Customs

Commissioner of - Excise & Customs

Customs, Excise & Refer Note Service Tax 27(iii)(a) Appellate Tribunal

Bombay Sales Tax Appellate Tribunal -

Maharashtra Value Appellate Tribunal - Added Tax

Dy. Commissioner - of Sales Tax Appeal

Jt. Commissioner - of Sales Tax Appeal

Central Sales Tax D. Commissioner of Sales Tax Appeal

Jt. Commissioner - of Sales Tax Appeal

Appellate Tribunal -

Service Tax Adl. Commissioner -

Gujarat Sales Tax Commissioner of Refer Note Sales Tax Appeal No. 27(ii)(a)

(c) According to the information and explanations given to us, the Company does not have any amount which is pending to be transferred to the Investor Education and Protection Fund in accordance with the relevant provisions of the Companies Act ,1956 (1 of 1956) and rules made thereunder.

(viii) The accumulated losses of the Company have not exceeded fifty per cent of its net worth as at the end of the year. The Company has not incurred cash losses during the year. In the immediately preceding financial period, the Company had incurred cash losses.

(ix) Based on our audit procedures and according to the information and explanations given by the management, during the year, the Company, has defaulted in repayment of dues to Bank, the defaults whereof are stated hereunder.

Period of Delay Bank

Principal Interest

January, 2015 to June 2015 16,000,000 7,491.211

(x) In our opinion and according to the information and explanations given to us, the terms and conditions on which the company has given a guarantee for loan taken by its subsidiary from a bank are prima facie not prejudicial to the interests of the Company.

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

(xii) To the best of our knowledge and belief, and according to the information and explanations given to us, and considering the size and nature of the Company's operations, no fraud of material significance on or by the Company has been noticed or reported during the year.

For M. A. Parikh & Co.

Chartered Accountants

Firm Reg. No. 107556W

MUKUL PATEL

Place: Mumbai Partner

Date:29th August, 2015 Membership No. 32489


Jun 30, 2014

We have audited the accompanying financial statements of LYKA LABS LIMITED (the Company), which comprise the Balance Sheet as at June 30 2014, and the Statement of Profit and Loss and Cash Flow Statement for the period ended on that date (in which are incorporated the accounts of the Company''s branches at Ankleshwar and Tarapur audited by other auditor''s after making such changes as were considered necessary for the purpose of incorporation), and a summary of significant accounting policies and other explanatory information.

Management''s Responsibility for the Financial Statements

The Company''s 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") read with General Circular 15/2013 dated 13th September, 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013. 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.

Auditors'' Responsibility

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

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

We draw attention to Note No. 38, relating to Capital Work In Progress of Intangible Assets aggregating to Rs. 97,257,847. Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matters 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 June 30, 2014;

(b) in the case of the Statement of Profit and Loss, of the loss for the period ended on that date; and;

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

Emphasis of Matters

1. Note No. 35 regarding Sundry Debtors outstanding for more than six months aggregating to Rs. 112,999,170 considered good for recovery by the Company.

2. Note No. 36 regarding pending balance confirmation from Sundry Debtors, Sundry Creditors, Loan Licensees and Loans & Advances.

3. Note No. 37 regarding non provision for diminution in value of investments.

Our opinion is not qualified in respect of all these matters.

Other Matters

1. Note No. 34 regarding unsecured loan to a party amounting to Rs. 52,321,737 considered good for recovery by the Company.

2. Note No. 40 regarding slow/non-moving material aggregating to Rs. 7,998,296.

Our opinion is not qualified in respect of all these matters.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2003, as amended by the Companies (Auditor''s Report) (Amendment) Order, 2004 ("the said Order'') issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, on the basis of such checks of the books and records of the Company as we considered necessary and appropriate, and according to the information and explanations given to us during the course of the audit, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said 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 and proper returns adequate for the purposes of our audit have been received from branches not visited by us;

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 and with the Audited returns received from the branches;

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

e. On the basis of written representations received from the directors as on June 30, 2014, and taken on record by the Board of Directors, none of the directors is disqualified as on June 30, 2014, from being appointed as a director in terms of section 164 of the Companies Act, 2013.

ANNEXURE TO THE AUDITORS'' REPORT

(Referred to in paragraph 1 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 fixed assets except for Ankleshwar Division.

(b) There is a phased programme of verification which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. The discrepancies noticed on such verification which are not material have been suitably dealt with in the books of account.

(c) In our opinion, a substantial part of the fixed assets has not been disposed off during the period hence the question of affecting the going concern status of the Company does not arise.

(ii) In respect of its Inventories:

(a) As explained to us, inventories were physically verified during the period by the management at regular intervals except the inventories lying with the third parties from whom confirmations have been obtained.

(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 and discrepancies noticed on physical verification which are not material have been properly dealt with in the books of account.

(iii) (a) The Company had granted interest bearing unsecured loan in earlier years to a party covered in the register maintained under section 301 of the Companies Act, 1956 (the Act) Rs. 10,000,000 which is repaid during the period. The Company has not granted any loan during the period. The maximum amount outstanding at any time during the period and the period end balance is Rs. 10,000,000 and Rs. Nil respectively.

(b) In our opinion, the rate of interest and other terms and conditions of unsecured loans given by the Company, are prima facie not prejudicial to the interests of the Company.

(c) Since the loan/interest is fully repaid during the year there is no overdue and hence, the question of Company taking reasonable steps for recovery thereof does not arise.

(d) Since the loan/interest is fully repaid, the question of regular receipt of the principal amounts and interest does not arise.

(e) According to information and explanations given to us, during the period, the Company has received unsecured loan from 7 parties covered in the register maintained under section 301 of the Companies Act, 1956 aggregating to Rs. 12,710,990. The maximum balance outstanding at any time during the period and the period end balance are Rs. 6,276,850 and Rs. 650,694 respectively.

(f) The rate of interest and other terms and conditions of such unsecured loans are, in our opinion, prima facie not prejudicial to the interest of the Company.

(g) Since the principal and interest thereon are payable on demand, the question of payment of the same being regular does not arise.

(iv) In our opinion and according to the information and explanations given to us, there are internal control procedures 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 except that procedure for confirmation and reconciliation of party balance needs to be strengthened.

(v) (a) 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 maintained thereunder.

(b) According to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangement have been made at prices which are prima facie reasonable having regard to the prevailing market prices at the relevant time except that, the prices at which sales of branded pharma products made to the aforesaid parties during the period, as informed to us, are not comparable in view of marginal presence of the Company in branded pharma products.

(vi) In our opinion and according to the information and explanations given to us, the Company has generally complied with the provisions of Sections 58A and 58AA and other relevant provisions of the Act, and the rules framed thereunder and the directives issued by the Reserve Bank of India, where applicable, with regard to the deposits accepted from the public.

(vii) In our opinion, the scope and extent of internal audit is commensurate with the size of the Company and the nature if its business.

(viii) We have broadly reviewed the books of account and records, to the extent, maintained by the Company relating to the manufacture of Bulk Drugs and Formulations, pursuant to the Order made by the Central Government for the maintenance of cost records under Section 209(1)(d) of the Act, and are of the opinion that prima facie most of the prescribed accounts and records have generally been made and maintained. We have, however, not made a detailed examination of the records with a view to determining whether they are accurate or complete.

(ix) According to the information and explanations given to us and as per the relevant records produced before us in respect of statutory and other dues:

(a) During the year Company has not been regular in depositing undisputed statutory dues relating to Provident Fund, Professional Tax, E.S.I.C., Service Tax, Income-tax, Value Added Tax and Sales-tax. The arrears of the said dues as at the last day of the Financial Period and outstanding for more than six months from the date they become payable are as follows:

Sr. Nature of Dues Amount No. (Rs. )

1. Sales Tax deferral Scheme-SICOM 2,314,995

2. Professional Tax 304,219

3. Service Tax Payable 195,629

(b) Following disputed dues have not been deposited since the matters are pending with the respective forums:

Sr. Nature of dues Amount Period to which the No. (Rs. ) amount relates

1. Demand under Drugs Price 209,440,565 Demands raised in Control Order 1987, 1990 and 1995

2. Purchase Tax 1,600,442 1991-96

3. Excise duty 1,122,138 Since August 22, 2006. 10,875,257 Since September, 1995 to February, 2000. 4. Bombay Sales Tax 6,186,400 1998-99

9,824,035 2000-01

420,682 2002-03

379,164 2004-05

792,379 2006-07

5. Central Sales Tax 1,795,241 1998-99

1,096,776 2000-01

6. Service Tax 1,809,830 2011-12

7. Gujarat Sales Tax 8,545,195 2002-03

1,370,850 2006-07

673,902 2007-08

6,455,421 2009-10

Sr. Nature of dues Name of Forum No.

1. Demand under Drugs Price Gujarat High Court Control Order

2. Purchase Tax Gujarat Sales Tax Appellate Tribunal

3. Excise duty Commissioner of Excise & Customs

Customs, Excise & Service Tax Appellate Tribunal

4. Bombay Sales Tax Appellate Tribunal.

5. Central Sales Tax Appellate Tribunal

6. Service Tax Additional Commissioner

7. Gujarat Sales Tax Commissioner of

Sales Tax Appeal

(x) The accumulated losses of the Company have not exceeded fifty per cent of its net worth as at the end of the period. The Company has incurred cash losses during the period. In the immediately preceding Financial Year, the Company had not incurred cash losses.

(xi) According to the information and explanations given to us and based on our audit procedures, the Company has generally not defaulted in the repayment of dues to banks.

(xii) According to the information and explanations given to us, the Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities. Therefore, the provisions of clause 4 (xii) of the "Order", are not applicable to the Company.

(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 "Order'' are not applicable to the Company.

(xiv) The Company is not dealing in or trading in shares, securities, debentures and other investments. The shares held by the Company stratigic investments, are held in its own name.

(xv) In our opinion and according to the information and explanations given to us, the terms and conditions on which the Company has given a guarantees for loan taken by its subsidiary from a bank are prima facie not 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, term loans availed by the Company were, prima facie, applied by the Company during the period for the purposes for which the loans were obtained.

(xvii) According to the records examined by us and the information and explanations given to us, on an overall basis, funds raised on short-term basis have not been generally used for long term purposes.

(xviii) The Company has not made preferential allotment of shares during the period to parties covered under section 301 of the Act. Therefore, the provisions of clause 4 (xviii) of the "Order'', are not applicable to the Company.

(xix) According to the information and explanations given to us and the records examined by us, the Company has created a charge in respect of the privately placed Non Convertible Debentures issued during the period aggregating to Rs. 6,300,000.

(xx) The Company has not raised money by public issue during the period and accordingly the question of disclosure of end use of money raised does not arise.

(xxi) To the best of our knowledge and belief, and according to the information and explanations given to us, and considering the size and nature of the Company''s operations, no fraud of material significance on or by the Company has been noticed or reported during the period.

For M. A. Parikh & Co. Chartered Accountants Firm Reg. No. 107556W

Mukul M. Patel Place: Mumbai Partner Date: 28th August, 2014 Membership No: 32489


Mar 31, 2013

Report on the Financial Statements

We have audited the accompanying financial statements of LYKA LABS 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 ended on that date (in which are incorporated the accounts of the company''s branches at Ankleshwar and Tarapur which are audited by other auditor''s making such changes as were considered necessary for the purpose of incorporation), 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.

Auditors'' 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 qualified audit opinion.

Basis of Qualified Opinion

We, having obtained sufficient appropriate audit evidence; conclude that misstatements, individually or in the aggregate, are material, but not pervasive to the financial statements.

In our opinion and to the best of our information and according to the explanations given to us, attention is drawn to the following, in respect of these financial statements:

A. In respect of non compliances:

1. Note No. 29 relating to AS 5 "Net Profit or Loss for the period, Prior Period Items and Changes in Accounting Policies" and AS 10 "Accounting for Fixed Assets".

2. Note No. 29(B)(iii) relating to Sundry debtors and Loans and Advances written-off aggregating to Rs.27,239,600 to the Revaluation Reserve instead of Statement of Profit and Loss which is not in accordance with Generally Accepted Accounting Practice(GAAP).

3. Note No. 39 relating to AS 29 "Provisions, Contingent Liabilities and Contingent Assets" in respect of non provision of interest and penalties on delays in deposit of statutory dues with Government, Semi-Government and Local Authorities.

4. Note No. 41(iii) relating to AS 15" Employee Benefit" in respect of non disclosure of defined obligation.

B. In respect of those wherein we are unable to express our opinion:

1. Note No. 31 regarding unsecured loan to a party amounting to Rs.93,499,068 considered good for recovery by the company.

2. Note No. 32 regarding sundry debtors outstanding for more than six months aggregating to Rs. 318,187,410 which are considered good for recovery by the company.

3. Note No. 33 regarding pending balance confirmations from Sundry Debtors, Sundry Creditors, Loan Licensees and Loans & Advances.

4. Note No. 34 regarding non provision for diminution in the value of investments.

5. Note No. 35(iii) regarding CWIP Intangible amounting to Rs. 85,322,215.

6. Note No. 38 regarding slow/non moving raw materials and packing materials amounting to Rs 6,576,549.

Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the effects/

possible effects of the matters described in the Basis of 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 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 and proper returns adequate for the purposes of our audit have been received from branches not visited by us.

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 and with the Audited returns received from the branches.

d. Except for the effects of the matter described in the Basis for Qualified Opinion paragraph, in our opinion, the Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statement 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, 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.

(Referred to in paragraph 1 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 fixed assets.

(b) There is a phased programme of verification which, in our opinion, is reasonable having regard to the size of the company and the nature of its assets. The discrepancies noticed on such verification which are not material have been suitably dealt with in the books of account.

(c) In our opinion, a substantial part of the fixed assets has not been disposed off during the year hence the question of affecting the going concern status of the company does not arise.

(ii) In respect of its Inventories:

(a) As explained to us, inventories were physically verified during the year by the management at regular intervals except the inventories lying with the third parties for whom confirmations have been obtained.

(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 and discrepancies noticed on physical verification which are not material have been properly dealt with in the books of account.

(iii) (a) The Company has granted interest bearing unsecured loan in earlier years to a party covered in the register maintained under section 301 of the Companies Act, 1956 (the Act) Rs. 50,000,000 of which Rs. 40,000,000 were repaid during the year. The Company has not granted any loan during the year. The maximum amount outstanding at any time during the year and the yearend balance is Rs. 50,000,000 and Rs. 10,000,000 respectively.

(b) In our opinion, the rate of interest and other terms and conditions of unsecured loans given by the Company, are prima facie not prejudicial to the interests of the Company.

(c) Since the loans/interest are repayable on demand there is no overdue and hence, the question of Company taking reasonable steps for recovery thereof does not arise.

(d) Since the loans/interest is repayable on demand, the question of regular receipt of the principal amounts and interest does not arise.

(e) According to information and explanations given to us, during the year, the Company has received unsecured loan from 6 parties covered in the register maintained under section 301 of the Companies Act, 1956 aggregating to Rs. 5,395,000. The maximum balance outstanding at any time during the year and the yearend balance is Rs. 6,002,000 and Rs. 647,340 respectively.

(f) The rate of interest and other terms and conditions of such unsecured loans are, in our opinion, prima facie not prejudicial to the interest of the Company.

(g) Since the principal and interest thereon are payable on demand, the question of payment of the same being regular does not arise.

(iv) In our opinion and according to the information and explanations given to us, there are internal control procedures 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 except that procedure for confirmation and reconciliation of party balance needs to be strengthened.

(v) (a) 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 maintained thereunder.

(b) According to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangement have been made at prices which are prima facie reasonable having regard to the prevailing market prices at the relevant time except that, the prices at which sales of branded pharma products made to the aforesaid parties during the year, as informed to us, are not comparable in view of marginal presence of the company in branded pharma products.

(vi) In our opinion and according to the information and explanations given to us, the Company has generally complied with the provisions of Sections 58A and 58AA and other relevant provisions of the Act, and the rules framed there under and the directives issued by the Reserve Bank of India, where applicable, with regard to the deposits accepted from the public.

(vii) In our opinion, the scope and extent of internal audit is commensurate with the size of the Company and the nature if its business.

(viii) We have broadly reviewed the books of account and records, to the extent, maintained by the Company relating to the manufacture of Bulk Drugs and Formulations, pursuant to the Order made by the Central Government for the maintenance of cost records under Section 209(1)(d) of the Act, and are of the opinion that prima facie most of the prescribed accounts and records have generally been made and maintained. We have, however, not made a detailed examination of the records with a view to determining whether they are accurate or complete.

(ix) According to the information and explanations given to us and as per the relevant records produced before us in respect of statutory and other dues:

(a) During the year Company has not been regular in depositing undisputed statutory dues relating to Provident Fund, Professional Tax, E.S.I.C., Service Tax, Income Tax, Value Added Tax and Sales Tax. The arrears of the said dues as at the last day of the financial year and outstanding for more than six months from the date they become payable are as follows:

Sr. No. Nature of Dues Amount (Rs.)

1. Central Sales Tax Payable 304,219

2. Service Tax Payable 46,655

(b) Following dues have not been deposited since the matters are pending with the respective forums:

Sr. Nature of dues Amount Period to which the Name of Forum No. (Rs.) amount relates

1. Demand under Drugs Price 209,440,565 Demands raised in Gujarat High Court Control Order 1987, 1990 and 1995

2. Purchase Tax 1,600,442 1991-96 Gujarat Sales Tax Appellate Tribunal

3. Excise duty, penalties & 1,122,138 Since August 22, 2006. Commissioner of interest thereon Excise & Customs

4. Bombay Sales Tax 6,186,400 1998-99 Appellate Tribunal

9,824,035 2000-01

420,682 2002-03

379,164 2004-05

792,379 2006-07

5 Central Sales Tax 1,795,241 1998-99 Appellate Tribunal 1,096,776 2000-01

6 Service Tax 1,809,830 2011-12 Additional Commissioner

7 Gujarat Sales Tax 8,545,195 2002-03 Commissioner of

1,370,850 2006-07 Sales Tax Appeal

673,902 2007-08

2,044,064 2008-09

(x) The accumulated losses of the Company have not exceeded fifty per cent of its net worth as at the end of the year. The Company has not incurred cash losses during the year. In the immediately preceding financial period, the Company had incurred cash losses.

(xi) During the year, the Company''s banker has granted re-schedulement of loans. In view of the same and as also based on our audit procedures and on the basis of information and explanations given by the management, the Company has not defaulted in the repayment of dues to banks.

(xii) According to the information and explanations given to us, the Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities. Therefore, the provisions of clause 4 (xii) of the "Order", are not applicable to the Company.

(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 "Order" are not applicable to the Company.

(xiv) The Company is not dealing in or trading in shares, securities, debentures and other investments. The shares held by the Company are in its own name.

(xv) In our opinion and according to the information and explanations given to us, the terms and conditions on which the company has given guarantees for loan taken by its associate company from a bank are prima facie not 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, term loans availed by the Company were prima facie, applied by the Company during the year for the purposes for which the loans were obtained.

(xvii) According to the records examined by us and the information and explanations given to us, on an overall basis, funds raised on short-term basis have not been used for long term purposes.

(xviii)The Company has not made preferential allotment of shares during the year to parties covered under section 301 of the Act. Therefore, the provisions of clause 4 (xviii) of the "Order", are not applicable to the Company.

(xix) According to the information and explanation given to us and the records examined by us, the Company has created a charge in respect of the privately placed Non Convertible Debentures issued during the year aggregating to Rs. 86,500,000.

(xx) The Company has not raised money by public issue during the year and accordingly the question of disclosure of end use of money raised does not arise.

(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 M. A. Parikh & Co.

Chartered Accountants

Firm Reg. No. 107556W



Mukul Patel

Place: Mumbai Partner

Date: 30th May, 2013 Membership No.: 32489


Mar 31, 2012

We have audited the attached Balance Sheet of LYKA LABS LIMITED as at 31st March, 2012 and also the Profit and Loss Account and the Cash Flow Statement for the period ended on that date annexed thereto (in which are incorporated the accounts of the company's branches at Ankleshwar and Tarapur audited by other auditors making such changes as were considered for the purpose of incorporation). 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.

We have conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on 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.

1 As required by the Companies (Auditor's Report) Order, 2003, issued by the Central Government in terms of sub- section (4A) of section 227 of the Companies Act, 1956 as amended by the Company (Auditors Report) (Amendment) Order 2004, we give in the Annexure a statement on the matters specified in the said "Order' as amended.

2 Further to our comments in the annexure referred to in paragraph 1 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 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. Proper returns adequate for the purpose of our audit have been received from the Branches not visited by us. The Branch Auditor's Reports have been forwarded to us and have been 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 account 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, except Accounting Standard 5 (AS-5) "Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies'' and Accounting Standard 10 (AS-10) "Accounting for Fixed Assets" as referred to in Para 3(B) herein.

e) On the basis of written representation received from the Directors as on 31st March, 2012 and taken on record by the Board of Directors, we report that none of the Directors are disqualified as on 31st March, 2012 for being appointed as a Director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

3 Attention is invited to the following Notes in Schedule 15 :

(A) In respect of which are enable to express an opinion:

i. Certain unsecured loans and advances referred to in notes 7(ii), (Hi) and (iv) amounting to Rs. 77,633,760, Rs.48,606,065 and Rs.50,000,000 respectively, considered by the company as good for recovery.

ii. Note No 9 regarding non provision for diminution in value of cost of investments.

iii. The Company has incurred an aggregate expenditures of Rs.80,004,844 on "New products Developments" and "Applied Research", which has been held in Intangible Capital Work-In-Progress pending recognition as Intangibles Viz. Technical Know How or Trade Marks, as referred to in note No. 10

(B) During the previous year the Company had written off / adjusted the slow and non- moving raw and packing material, certain long overdue debts, loans & advances and deferred revenue expenses, aggregating to Rs.243,576,752 to the Revaluation Reserve instead of the Profit and Loss Account, which was not in accordance with the Generally Accepted Accounting Practice (GAAP) and requirements of Accounting Standard 5 (AS-5) "Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies". Further, the recognition of profit on sale of Revalued Fixed Assets is not in accordance with Accounting Standard 10 (AS-10), as referred to in note No. 6(B)(ii).

4 In our opinion and to the best of our information and according to the explanations given to us, we further report that, without considering items mentioned in para (3)(A) (i), (ii), and (Hi), the effect of which we are unable to express an opinion on and subject to the consequential effects of the item referred to in para 3(B) of not increasing the loss for the period, the said accounts read with Significant Accounting Policies and other notes thereon, while giving the information required by the Companies Act, 1956, in the manner so required to give a true and fair view in conformity with the accounting principles generally accepted in India:

(a) in the case of the Balance Sheet, of the state of affairs of the company as at 31st March, 2012;

(b) in the case of the Profit and Loss Account, of the loss for the period ended on that date; and

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

ANNEXURE TO THE AUDITORS' REPORT

(Referred to in paragraph 1 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 fixed assets.

(b) There is a phased programme of verification which, in our opinion, is reasonable having regard to the size of the company and the nature of its assets. The discrepancies noticed on such verification which are not material have been suitably dealt with in the books of account.

(c) In our opinion, a substantial part of the fixed assets has been disposed off during the period. However it has not affected the going concern status of the company.

(ii) In respect of its inventories:

(a) As explained to us, inventories were physically verified during the period by the management at regular intervals except the inventories lying with the third parties for which confirmations have been obtained.

(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 and discrepancies noticed on physical verification which are not material have been properly dealt with in the books of account.

(iii) (a) The Company has granted interest bearing unsecured loans in earlier years to two parties covered in the register maintained under section 301 of the Companies Act, 1956 (the Act). Further, during the period the Company has granted interest bearing unsecured loan amounting to Rs. 20,000,000 repayable on demand, to a subsidiary. The maximum amount outstanding at any time during the period and the year end balance is Rs. 98,606,065 and Rs. 98,606,065 respectively.

(b) In our opinion, the rate of interest and other terms and conditions of unsecured loans given by the Company, are prima facie not prejudicial to the interests of the Company.

(c) Since the loans / interest are repayable on demand there is no overdue and hence, the question of Company taking reasonable steps for recovery thereof does not arise.

(d) Since the loans / interest are repayable on demand, the question of regular receipt of the principal amounts and interest does not arise.

(e) The Company had taken interest bearing unsecured loans in earlier years from two parties, covered in the register maintained under section 301 of the Act, the amount outstanding at the beginning of the year was Rs. 2,355,000. During the period Company borrowed Rs. 205,000 from one of the parties and repaid an aggregate of Rs. 600,000 to both the parties.

The maximum balance outstanding at any time during the period and the period end balance is Rs. 2,355,000 and Rs. 1,960,000 respectively.

(f) The rate of interest and other terms and conditions of such unsecured loans are, in our opinion, prima facie not prejudicial to the interest of the Company.

(g) Since the principal and interest thereon are payable on demand, the question of payment of the same being regular does not arise.

(iv) In our opinion and according to the information and explanations given to us, there are internal control procedures 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.

(v) (a) 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 maintained thereunder.

(b) According to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangement have been made at prices which are prima facie reasonable having regard to the prevailing market prices at the relevant time except that, the prices at which sales of branded pharma products made to the aforesaid parties during the period, as informed to us, are not comparable in view of marginal presence of the company in branded pharma products.

(vi) In our opinion and according to the information and explanations given to us, the Company has generally complied with the provisions of Sections 58A and 58AA and other relevant provisions of the Act, and the rules framed there under and the directives issued by the Reserve Bank of India, where applicable, with regard to the deposits accepted from the public.

(vii) In our opinion, the scope and extent of internal audit is commensurate with the size of the Company and the nature if its business.

(viii) We have broadly reviewed the books of account and records, to the extent, maintained by the Company relating to the manufacture of Bulk Drugs and Formulations, pursuant to the Order made by the Central Government for the maintenance of cost records under Section 209(1)(d) of the Act, and are of the opinion that prima facie most of the prescribed accounts and records have generally been made and maintained. We have, however, not made a detailed examination of the records with a view to determining whether they are accurate or complete.

(ix) According to the information and explanations given to us and as per the relevant records produced before us in respect of statutory and other dues:

(a) During the period Company has not been regular in depositing undisputed statutory dues relating to Provident Fund, Professional Tax, E.S.I.C., Service Tax, Income-tax and Sales-tax. The arrears of the said dues as at the last day of the financial period and outstanding for more than six months from the date they become payable are as follows:

Sr. Nature of Dues Amount No. (Rs.)

1. Tax Deducted at Source 2,211,304

2. Sales Tax Payable 3,434,738

(b) Following dues have not been deposited since the matters are pending with the respective forums:

Sr. Nature of dues Amount Period to which the Name of Forum No. (Rs.) amount relates

1. Demand under Drugs Price 209,440,565 Demands raised in Gujarat High Court Control Order 1987, 1990 and 1995

2. Purchase Tax 1,600,442 1991-96 Gujarat Sales Tax Appellate Tribunal

3. Excise duty, penalties & 1,122,138 Since August 22, Commissioner of interest thereon 2006. Excise & Customs

4. Bombay Sales Tax 6,186,400 1998-99 Appellate Tribunal.

1,007,436 2000-01

420,682 2002-03

379,164 2004-05

792,379 2006-07

5 Sales Tax - Tarapur 50,714 2004-05 Joint Commissioner

6 Central Sales Tax 1,795,241 1998-99 Appellate Tribunal 1,060,992 2000-01

7 Service Tax 1,809,830 2011-12 Additional Commissioner

8 Gujrat Sales Tax 8,545,195 2002-03 Commissioner of

1,370,850 2006-07 Sales Tax Appeal

673,902 2007-08

(x) The accumulated losses of the Company have not exceeded fifty per cent of its net worth as at the end of the period. The Company has incurred cash losses during the period. In the immediately preceding financial year the Company had not incurred cash losses.

(xi) During the period, the Company's Banker has granted reschedulement and repayment of loans. In the view of the same and as also based on our audit procedures and on the basis of information and explanations given by the management, the Company has not defaulted in the repayment of dues to Banks.

(xii) According to the information and explanations given to us, the Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities. Therefore, the provisions of clause 4 (xii) of the "Order', are not applicable to the Company.

(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 "Order", are not applicable to the Company.

(xiv) The Company is not dealing in or trading in shares, securities, debentures and other investments. The shares held by the Company are in its own name.

(xv) According to the information and explanations given to us, the Company has not given guarantee for loans taken by others from banks or financial institutions. Therefore, the provisions of clause 4 (xv) of the "Order', are not applicable to the Company.

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

(xvii) According to the records examined by us and the information and explanations given to us, on an overall basis, funds raised on short-term basis have not been used for long term purposes.

(xviii)The Company has not made preferential allotment of shares during the period to parties covered under section 301 of the Act. Therefore, the provisions of clause 4 (xviii) of the "Order", are not applicable to the Company.

(xix) According to the information and explanation given to us and the records examined by us, the Company has created a charge in respect of the Non Convertible Debentures (privately placed) issued during the period aggregating to Rs. 98,200,000.

(xx) The Company has not raised money by public issue during the period and accordingly the question of disclosure of end use of money raised does not arise.

(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 period.

For M. A. Parikh & Co.

Chartered Accountants

Firm Reg. No. 107556W

Mukul Patel

Partner

Membership No. 32489

Place: Mumbai

Date: 31st August, 2012


Sep 30, 2010

We have audited the attached Balance Sheet of LYKA LABS LIMITED as at 30th September, 2010 and also the Profit and Loss Account and the Cash Flow Statement for the year ended on that date annexed thereto (in which are incorporated the accounts of the companys branches at Ankleshwar and Tarapur audited by other auditors making such changes as were considered for the purpose of incorporation). 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.

We have conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material mis-statement. 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.

1 As required by the Companies (Auditors Report) Order, 2003, issued by the Central Government in terms of sub-section (4A) of section 227 of the Companies Act, 1956 as amended by the Company (Auditors Report) (Amendment) Order, 2004, we give in the Annexure a statement on the matters specified in the said "Order" as amended.

2 Further to our comments in the annexure referred to in paragraph 1 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 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. Proper returns adequate for the purpose of our audit have been received from the Branches not visited by us. The Branch Auditors Reports have been forwarded to us and have been 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 account 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, except Accounting Standard 5 (AS-5) "Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies as referred to in Para 3(B) herein.

e) On the basis of written representation received from the Directors as on 30th September, 2010 and taken on record by the Board of Directors, we report that none of the Directors are disqualified as on 30th September, 2010 for being appointed as a Director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

3 Attention is invited to the following:

(A) In respect of which we are unable to express an opinion:

i. The Company, during the year, has incurred an aggregate expenditure of Rs.31,102,207 on "New Product Development" and "Applied Research" , which has been held in Capital Work-in-Progress, pending recognition as Intangibles viz. technical know how or trade marks, as referred to in Note No.10.

ii. Note no. 9 regarding non- provision for diminution in value of cost of investments.

iii. Certain Unsecured Loans and Advances referred to in notes 7(iii)and 7(iv) amounting to Rs.41,185,843 and Rs.30,000,000 respectively, considered by the Company as good for recovery.

(B) The Company has again revalued its fixed assets as on 30th September, 2010 at its "Current Replacement Costs" on the basis of the Valuation Report from an approved valuer and has credited an amount of Rs.489,551,141 as Revaluation Reserve, representing the difference between their "Current Replacement Costs" j and "Written Down Values", as referred to in Note No 6(B)(i). The Company has written off / adjusted the Slow and Non-Moving Raw and Packing Materials, certain long overdue Debts, Loans and Advances and Deferred Revenue Expenses, aggregating to Rs.243,576,752/- to the Revaluation Reserve instead of the Profit and Loss Account, which is not in accordance with the Generally Accepted Accounting Practices (GAAP) and requirements of Accounting Standard 5 (AS-5) "Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies".

4 In our opinion and to the best of our information and according to the explanations given to us, we further report that, without considering items mentioned in para 3(A)(i), (ii) and (Hi) above, the effect of which we are unable to express an opinion and subject to the consequential effect of the item referred to in para 3(B) of not reducing the profit for the year, the said accounts read with Significant Accounting Policies and other notes thereon, while giving the information required by the Companies Act, 1956, in the manner so required 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 30"1 September, 2010;

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

(vii) Company has an internal audit system commensurate with the size of the company and the nature if its business.

(viii) We have broadly reviewed the books of account and records, to the extent, maintained by the Company relating to the manufacture of Bulk Drugs and Formulations, pursuant to the Order 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 generally been made and maintained. We have, however, not made a detailed examination of the records with a view to determining whether they are accurate or complete.

(ix) According to the information and explanations given to us and as per the relevant records produced before us in respect of statutory and other dues:

a) During the year there have been delays in some cases in depositing undisputed statutory dues relating to Provident Fund, Professional Tax, E.S.I.C, Service Tax, Income-tax and Sales-tax. However, there are no arrears of the said dues as at the last day of the financial year except for the Sales Tax Payable amounting to f 6,354,148 which are outstanding for a period of more than six months from the date they became payable.

(b) Following disputed dues have not been deposited since the matters are pending with the relevant forum:

Sr. No. Nature of dues Amount Period to which Rs. the amount relates

1. Demand under Drugs 83,565,226 Demands raised in 1987, Price Control Order 1990 and 1995

2. Purchase Tax 1,600,442 Since February 20,2001

3. Excise duty, penalties 1,122,138 Since August 22, 2006 & interest thereon

4. Bombay Sales 5,385,724 Since June 19,2003 Tax 98-99

5. Central Sales 995,221 Since June 19,2003 Tax 98-99

6. Bombay Sales 1,007,436 Since February 08,2007 Tax 00-01

7 Central Sales 1,060,992 Since February 08,2007 Tax 00-01

8. Gujarat Sales Tax 8,545,195 Since Financial year 2002-03

Nature of dues Name of Forum

Demand under Drugs Price Control Order Three member committee appointed by Government of India

Purchase Tax Gujarat Sales Tax Tribunal Appellate

Excise duty, penalties & interest thereon Commissioner of Excise & Customs

Bombay Sales Tax 98-99 Appellate Tribunal

Central Sales Tax 98-99 Appellate Tribunal

Bombay Sales Tax 00-01 Appellate Tribunal

Central Sales Tax 00-01 Appellate Tribunal

Gujarat Sales Tax Commissioner of Sales Tax Appeal(Vadodara)

(x) The accumulated losses of the Company have not exceeded fifty per cent of its net worth as at the end of the year. The Company has not incurred cash losses during the current year. In the immediately preceding financial period the company had incurred cash losses.

(xi) Based on our audit procedures and on the basis of information and explanations given by the management, the company has not defaulted in the repayment of dues to its Banks.

(xii) According to the information and explanations given to us, the company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities. Therefore, the provisions of clause 4 (xii) of the "Order", are not applicable to the company.

(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 "Order" are not applicable to the company.

(xiv) The company is not dealing in or trading in shares, securities, debentures and other investments. The shares held by the company are in its own name.

(xv) According to information and explanations given to us, the company has not given guarantees for loans taken by others from banks or financial institutions. Therefore, the provisions of clause 4 (xv) of the Order, are not applicable to the company.

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

(xvii) According to the records examined by us and the information and explanations given to us, on an overall basis, funds raised on short-term basis have not been used for long-term purposes.

(xviii) The Company has not made preferential allotment of shares during the year to parties covered under section 301. Therefore, the provisions of clause 4 (xviii) of the Order, are not applicable to the company.

(xix) According to the information and explanation given to us and the records examined by us, the Company has not issued any debentures during the year. Therefore, the provisions of clause 4 (xix) of the Order, are not applicable to the company.

(xx) The Company has not raised money by public issue during the year and accordingly, the question of disclosure of end use of money raised does not arise.

(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 M. A. Parikh & Co.

Chartered Accountants Firm Reg. No. 107556W

AJIT C. SHAH

Partner Membership No. 13097 Place: Mumbai Date: 25th March, 2011


Sep 30, 2009

We have audited the attached Balance Sheet of LYKA LABS LIMITED as at 30th September, 2009 and also the Profit and Loss Account and the Cash Flow Statement for the period ended on that date annexed thereto (in which are incorporated the accounts of the companys branches at Ankleshwar and Tarapur audited by other auditors). 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.

We have conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on 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.

1 As required by the Companies (Auditors Report) Order, 2003, issued by the Central Government in terms of sub- section (4A) of section 227 of the Companies Act, 1956, we give in the Annexure a statement on the matters specified in the said Order.

2 Further to our comments in the annexure referred to in paragraph 1 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 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. Proper returns adequate for the purpose of our audit have been received from the Branches not visited by us. The Branch Auditors Reports have been forwarded to us and have been 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 account 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 subject to Note No. 11 regarding deferment of Research & Development expenses of Rs.46,132,009/- which is not in compliance with Accounting Standard 26 on Intangible Assets.

e) On the basis of written representation received from the Directors as on 30lh September, 2009 and taken on record by the Board of Directors, we report that none of the Directors are disqualified as on 30lh September, 2009 for being appointed as a Director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

3 We draw attention to para (5) regarding the cumulative effect of our qualifications as well as qualifications where the effect cannot be determined.

4 Attention is invited to the following Notes in Schedule 15 :

i Note no. 7 regarding Sundry debtors Rs. 50,259.495/- (Previous year Rs. 35,713,330/-) not acknowledged by the party as debt.

ii. Note no.8(H) regarding Rs.56,331,520/- (Previous year Rs.61,331,520/-) and Note no.8(iv) regarding Rs.37,185,843/- (Previous year Rs. 73,585.843/-) being Unsecured Loans and Advances granted being not in compliance with section 372A(3) of the Companies Act, 1956.

iii. Note no. 9(i) regarding confirmation of balances sought in respect of Loans and Advances, Sundry Debtors and Sundry Creditors, which are subject to adjustments, on receipt of confirmation of such balances from the concerned parties.

iv. Note no. 9(H) regarding Rs. 10,174,965/- (Previous year Rs. Nil-) relating to non provision for Sundry Debtors.

v. Note no. 10 regarding non provision of diminution in Long Term Strategic Investment as explained therein.

vi. Note no. 13 regarding Rs. 12,270,023/- (Previous year Rs. 12,168,172/-) for slow/non-moving inventories.

5) We further report that, without considering items mentioned in para (4) (i), (ii), (Hi) and (v) above being items on which we are unable to express an opinion. Had the observations made by us in Para (2)(d), 4(iv) and 4(vi) been considered, there would be loss ofRs. 133,018,672/- for the period ended 30.09.09 (as against the reported loss for the period ended 30.09.09 of Rs.64,441,675/-), the accumulated losses as at 30.09.09 would have been Rs.358,541,597/- (as against the reported accumulated loss as at 30.09.09ofRs.289,964,600/-), Manufacturing and other expenses for the period ended 30.09.09 would ha ve beenRs.1,522,916,038 /- (as against the reported figures for the period ended 30.09.09 of Rs.1,454,339,041/-), Miscellaneous expenditure to the extent not written off as at 30.09.2009 would have been Rs.27,647,974/- (as against the reported figure as on 30.09.09 of Rs.73,779,983/-) and current assets, loans and advances as at 30.09.09 would have been Rs 935,464,122/- (as against the reported figure as on 30.09.09 of Rs.957,909,110/-).

In our opinion and to the best of our information and according to the explanations given to us, subject to the matters referred to in para (4) and the effects of the said matters discussed in para (5) above, the said accounts read with Significant Accounting Policies and other notes thereon, while giving the information required by the Companies Act, 1956, in the manner so required 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 30th September, 2009;

(b) in the case of the Profit and Loss Account, of the loss for the period ended on that date; and

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

ANNEXURE TO THE AUDITORS REPORT

(Referred to in paragraph 1 of our report of even date) (i) In respect of its fixed assets:

(a) The Company has maintained proper records except atAnkleshwar and Tarapur which are under compilation, showing full particulars, including quantitative details and situation of fixed assets.

(b) All the assets have not been physically verified by the management during the period 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. The discrepancies noticed on such verification which are not material have been suitably dealt with in the books of accounts.

(c) As a substantial part of fixed assets has not been disposed off during the period, the question of sale of substantial part of fixed assets affecting going concern does not arise.

(ii) In respect of its inventories:

(a) As explained to us, inventories were physically verified during the period by the management at half yearly 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 according to the information and explanations given to us, the Company has maintained proper records of its inventories and any discrepancies noticed on physical verification have been properly dealt with in the books of accounts.

(iii) (A) During the period, the Company has not granted any loans to Companies, Firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956.

(B) (a) According to information and explanations given to us, the balance of unsecured interest bearing loans repayable on demand taken from two parties covered in the register maintained under section 301 of the Companies Act 1956 during the period aggregate to Rs.66,00,000/-. The maximum balance outstanding during the period and at the period end amounted to Rs. 65,00,000/- and Rs. 22,05,000/- respectively.

(b) The rate of interest and other terms and conditions of such unsecured loans are, in our opinion, prima facie not prejudicial to the interest of the Company.

(c) Since the principal and interest thereon are payable on demand, the question of repayment of the same on regular basis does not arise.

(iv) In our opinion and according to the information and explanations given to us, there are internal control procedures 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, except that procedures for confirmation and reconciliation of party balances need to be strengthened. In our opinion steps need to be taken to correct the said continuing failure of internal control.

(v) (a) According to the information and explanations given to us, the particulars of contracts or arrangements referred to in section 301 of the Companies Act, 1956 have been entered in the register maintained there under.

(b) According to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangement have been made at prices which are prima facie reasonable having regard to the prevailing market prices at the relevant time except that, the prices at which sales of branded pharma products made to the aforesaid parties during the period, as informed to us, are not comparable in view of marginal presence of the company in branded pharma products.

(vi) In our opinion and according to the information and explanations given to us, the Company has complied with the provisions of Sections 58A and 58AA or any other relevant provisions of the Companies Act, 1956 and the rules framed there under and the directives issued by the Reserve Bank of India, where applicable, with regard to the deposits accepted from the public.

(vii) In our opinion, the scope and extent of the internal audit needs to be strengthened in respect of certain areas in order that the same is commensurate with the size of the company and the nature of its business.

(viii) We have broadly reviewed the books of account and records, to the extent, maintained by the Company relating to the manufacture of Bulk Drugs and Formulations, pursuant to the Order 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 most of the prescribed accounts and records have generally been made and maintained. We have, however, not made a detailed examination of the records with a view to determining whether they are accurate or complete.

(ix) According to the information and explanations given to us in respect of statutory and other dues:

a) During the period there have been occasional delays by Company in depositing undisputed statutory dues relating to Provident Fund, Professional Tax, E.S.I.C, Service Tax, Investor Education and Protection Fund, Income-tax and Sales-tax, indicated below with the appropriate authorities. There are no arrears of the said dues as at the last day of the financial period which are outstanding for a period of more than six months from the date they became payable except for the Sales Tax Payable amounting to Rs. 25,62.965/-.

(b) Following disputed dues have not been deposited since the matters are pending with the relevant torum:

Sr. No. Nature of dues Amount Period to which Name of Forum the amount relates

1. Demand under Drugs 83,565.226 Demands raised in 1987, Three member committee Price Control Order 1990 and 1995 appointed by Government of India

2. Purchase Tax 1,600,442 Since February 20, 2001 Gujarat Sales Tax Tribunal Appellate

3. Excise duty, penalties 29,872,690 From Financial Year Commissioner of Excise & interest thereon 1994-95 to 2005-06. & Customs

4. Excise duty, penalties 1,122,138 Since August 22, 2006. Commissioner of Excise & interest thereon & Customs

5. Excise Duty 3,814,652 Since March 17, 2002. Central Excise Service Tax Appellate Tribunal.

6. Bombay Sales 5,385,724 Since June 19,2003 Appellate Tribunal. Tax 98-99

7. Central Sales 995,221 Since June 19,2003 Appellate Tribunal Tax 98-99

8. Bombay Sales 1,007,436 Since February 08,2007 Appellate Tribunal Tax 00-01

9. Central Sales 1,060.992 Since February 08. 2007 Appellate Tribunal Tax 00-01

10.Central Sales 980,127 Since January 15,2009 Appellate Tribunal Tax 02-03

12 Gujarat Sales Tax 127,822.950 Since Financial year Commissioner of Sales 2002-03 TaxAppeal(Vadodara)

Total 257,227,598

(x) The accumulated losses of the Company have not exceeded fifty per cent of its net worth as at the end of the period. The Company has incurred cash losses during the current period. In the immediately preceding financial year the company had not incurred cash losses.

(xi) Based on our audit procedures and on the basis of information and explanations given by the management that the company has defaulted in the repayment of dues to a Bank, which has been fully settled as on the date of signing of this report.

(xii) According to the information and explanations given to us, the company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities. Therefore, 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 mutual benefit fund / society. Therefore, the provisions of clause 4 (xiii) of the Companies (Auditors Report) Order, 2003 are not applicable to the company.

(xiv) The company is not dealing in or trading in shares, securities, debentures and other investments. The shares held by the company are in its own name.

(xv) According to information and explanations given to us, the company has not given guarantees for loans taken by others from banks or financial institutions. Therefore, the provisions of clause 4 (xv) of the Companies (Auditors Report) Order, 2003 are not applicable to the company.

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

(xvii) According to the records examined by us and the information and explanations given to us, on an overall basis, funds raised on short-term basis have, prima facie, not been used during the period for long-term purposes.

(xviii) The Company has made preferential allotment of shares during the period to parties covered under section 301. In our opinion and according to the informatioi i arid explanations given to us, the price at which the allotment has been made is not prejudicial to the interest oi the Company.

(xix) According to the information and explanation given to us and the records examined by us, the Company has not issued any debentures during the period. Therefore, the provisions of clause 4 (xix) of the Companies (Auditors Report) Order, 2003 are not applicable to the company.

(xx) The Company has not raised money by public issue during the period and accordingly the question of disclosure of end use of money raised does not arise.

(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 period.

For M. A. Parikh & Co.

Chartered Accountants

AJIT C. SHAH

Partner

Membership No. 13097 Place: Mumbai Date : 23,d February, 2010.



 
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