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Auditor Report of Mafatlal Industries Ltd.

Mar 31, 2017

To The Members of Mafatlal Industries Limited

Report on the Standalone Financial Statements

We have audited the accompanying standalone financial statements of MAFATLAL INDUSTRIES LIMITED ("the Company"), which comprise the Balance Sheet as at 31st March, 2017, the Statement of Profit and Loss and the Cash Flow Statement for the year then ended, and a summary of the significant accounting policies and other explanatory information, in which are incorporated the Returns for the year ended on that date audited by the branch auditors of the Company''s branches located at Ahmedabad and Nadiad.

Management''s Responsibility for the Standalone Financial Statements

The Company''s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards prescribed under section 133 of the Act.

This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor''s Responsibility

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

In conducting 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 of the standalone financial statements 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 standalone financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the standalone financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the standalone 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 standalone financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company''s Directors, as well as evaluating the overall presentation of the standalone financial statements.

We believe that the audit evidence obtained by us and the audit evidence obtained by the branch auditors in terms of their reports referred to in the Other Matter paragraph below, is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, and based on the consideration of reports of the branch auditors on separate financial information of the branches referred to in the Other Matter paragraph below, the aforesaid standalone financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at 31st March, 2017, and its loss and its cash flows for the year ended on that date.

Other Matter

We did not audit the financial information of two branches included in the standalone financial statements of the Company whose financial information reflect total assets of Rs. 31,342.78 lakhs as at 31st March, 2017 and total revenues of Rs. 33,508.94 lakhs for the year ended on that date, as considered in the standalone financial statements. The financial information of these branches have been audited by the branch auditors whose reports have been furnished to us, and our opinion in so far as it relates to the amounts and disclosures included in respect of these branches and our report in terms of subsection (3) of Section 143 of the Act, in so far as it relates to the aforesaid branches, is based solely on the report of such branch auditors.

Our opinion on the standalone financial statements and our report on Other Legal and Regulatory Requirements below is not modified in respect of this matter.

Report on Other Legal and Regulatory Requirements

1. As required by Section 143 (3) of the Act, based on our audit and on the consideration of the reports of the branch auditors on the separate financial information of the branches, referred to in the Other Matter paragraph above we report, to the extent applicable 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 and proper returns adequate for the purposes of our audit have been received from the branches not visited by us.

c) The reports on the accounts of the branch offices of the Company audited under Section 143(8) of the Act by the 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 and with the returns received from the branches not visited by us.

e) In our opinion, the aforesaid standalone financial statements comply with the Accounting Standards prescribed under section 133 of the Act.

f) On the basis of the written representations received from the directors as on 31st March, 2017 taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2017 from being appointed as a director in terms of Section 164 (2) of the Act.

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g) With respect to the adequacy of the internal financial controls over financial reporting of the Company and its branches and the operating effectiveness of such controls, refer to our separate Report in "Annexure A". Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Company''s internal financial controls over financial reporting.

h) 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, as amended, 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 standalone financial statements. Also refer Note no. 31.1 to the financial statements.

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

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

iv. The Company has provided requisite disclosures in the standalone financial statements as regards its holding and dealings in Specified Bank Notes as defined in the Notification S.O. 3407(E) dated the 8th November, 2016 of the Ministry of Finance, during the period from 8th November, 2016 to 30th December, 2016; and such disclosures are in accordance with the books of accounts maintained by the Company.

2. As required by the Companies (Auditor''s Report) Order,

2016 ("the Order") issued by the Central Government in terms of Section 143(11) of the Act, we give in "Annexure B" a statement on the matters specified in paragraphs 3 and 4 of the Order.

(Referred to in paragraph 1(g) under ''Report on Other Legal and Regulatory Requirements'' section of our report of even date)

ANNEXURE "A" TO THE INDEPENDENT AUDITOR''S REPORT ON THE FINANCIAL STATEMENTS OF MAFATLAL INDUSTRIES LIMITED


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

We have audited the internal financial controls over financial reporting of Mafatlal Industries Limited ("the Company") as of March 31, 2017 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date which includes internal financial controls over financial reporting of the Company''s branches.

Management''s Responsibility for Internal Financial Controls

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

Auditor''s Responsibility

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

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained and the audit evidence obtained by the branch auditors of branches located in India, in terms of their reports referred to in the Other Matter paragraph below, is sufficient and appropriate to provide a basis for our audit opinion on the Company''s internal financial controls system over financial reporting.

Meaning of Internal Financial Controls Over Financial Reporting

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

Inherent Limitations of Internal Financial Controls Over Financial Reporting

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

Opinion

In our opinion, to the best of our information and according to the explanations given to us and based on the consideration of the reports of the branch auditors on internal financial controls system over financial reporting of the branches referred to in the Other Matter paragraph below, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at 31st March, 2017, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.

Other Matter

Our aforesaid report under Section 143(3)(i) of the Act on the adequacy and operating effectiveness of the internal financial controls over financial reporting insofar as it relates to two branches located in India, is based on the corresponding reports of the branch auditors.

Our opinion is not modified in respect of this matter.

ANNEXURE "B" TO THE independent AUDITORS'' REPORT 0N THE FINANCIAL STATEMENTS OF MAFATLAL INDUSTRIES LIMITED

(Referred to in paragraph 2, under ''Report on Other Legal and Regulatory Requirements'' section 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) Some of the fixed assets were physically verified during the year by the Management in accordance with a programme of verification, which in our opinion provides for physical verification of all the fixed assets at reasonable intervals. According to the information and explanation given to us, no material discrepancies were noticed on such verification.

(c) With respect to immovable properties of acquired land and buildings that are freehold and leasehold, according to the information and explanations given to us and the records examined by us and based on the examination of the registered sale deed / transfer deed / conveyance deed / lease deed / court orders approving schemes of arrangements / amalgamations provided to us, we report that, the title deeds of such immovable properties are held in the name of the Company as at the balance sheet date.

(ii) As explained to us, the inventories were physically verified during the year by the Management at reasonable intervals and no material discrepancies were noticed on physical verification.

(iii) According to the information and explanations given to us, the Company has granted loans, secured or unsecured, to companies, firms, Limited Liability Partnerships or other parties covered in the register maintained under section 189 of the Companies Act, 2013, in respect of which:

(a) The terms and conditions of the grant of such loans are, in our opinion, prima facie, not prejudicial to the Company''s interest.

(b) The schedule of repayment of principal and payment of interest has not been stipulated and in the absence of such schedule, we are unable to comment on the regularity of the repayments or receipts of principal amounts and interest.

(c) There is no overdue amount remaining outstanding as at the year-end.

(iv) In our opinion and according to the information and explanations given to us, the Company has complied with the provisions of Sections 185 and 186 of the Companies Act, 2013 in respect of grant of loans, making investments and providing guarantees and securities, as applicable.

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

(vi) The maintenance of cost records has been specified by the Central Government under section 148(1) of the Companies Act, 2013. We have broadly reviewed the cost records maintained by the Company pursuant to the Companies (Cost Records and Audit) Rules, 2014, as amended, prescribed by the Central Government under sub-section (1) of Section 148 of the Companies Act, 2013, and are of the opinion that, prima facie, the prescribed cost records have been made and maintained. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

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

(a) The Company has generally been regular in depositing undisputed statutory dues, including

Provident Fund, Employees'' State Insurance, Income Tax, Sales Tax, Value Added Tax, Service Tax, Customs Duty, Excise Duty, cess and other material statutory dues applicable to it to the appropriate authorities.

(b) There were no undisputed amounts payable in respect of Provident Fund, Employees ‘State Insurance, Income Tax, Sales Tax, Service Tax, Customs Duty, Excise Duty, Value Added Tax, cess and other material statutory dues in arrears as at 31stMarch, 2017 for a period of more than six months from the date they became payable. As at the year end, the arrears of Statutory Dues outstanding for a period of more than six months aggregate to '' 49.02 lakhs in respect of interest on Employees State Insurance dues, Rs. 3.34 lakhs in respect of Excise Duty and Rs. 297.77 lakhs in respect of interest on water charges.

(c) Details of dues of Income-tax, Sales Tax, Service Tax, Customs Duty, Excise Duty, and Value Added Tax which have not been deposited as on 31st March, 2017 on account of disputes are given below:

Name of Statute

Nature of Dues Forum where Dispute is period to which the Amount Amount

pending Relates Involved

(Rs. in lakhs)

Central Excise Act, 1944

Excise Duty

Assistant Commissioner

2006-07 to 2010-11

1.42

Central Excise Act, 1944

Excise Duty

Commissioner

1989-90 to 2003-04

74.58

Central Excise Act, 1944

Excise Duty

CESTAT

1989-90 to 2003-04

63.44

Central Excise Act, 1944

Excise Duty

High Court

1989-90 to 2003-04

14.99

Central Excise Act, 1944

Excise Duty

Supreme Court

1989-90 to 1999-2000

13.42

Central Excise Act, 1944

Excise Duty

Assistant Commissioner

1989-90 to 2003-04

182.11

Central Excise Act, 1944

Excise Duty

Commissioner (Appeals)

1989-90 to 2003-04

54.92

Central Excise Act, 1944

Excise Duty

Commissioner of Central Excise

2007-08 to 2009-10

2,960.55

Customs Act, 1944

Custom Duty

Joint Director General of Foreign Trade

1989-90 to 1999-00

4.79

Bombay Industrial Relations Act, 1946

Labour Dues

Labour Court

1993 to 2013

608.70

Maharashtra Value Added Tax

Sales Tax

Joint Commissioner of Sales Tax (Appeals) - II

1989-90 to 1999-2000

3.22

Central Sales Tax Act, 1956

Sales Tax

Joint Commissioner of Sales Tax (Appeals) - II

1989-90 to 1999-2000

0.04

Mumbai Municipal Corporation Act, 1988

Property Tax [Refer Note No. 31.1(a) (viii)]

Assessor and Collector (City), Assessment and Collection Department

2000-05, 2004-07, 2008-10

3,489.44

Income Tax Act, 1961

Income Tax

Dy. Commissioner of Income Tax

Assessment Year 2012-13

9.48

Income Tax Act, 1961

Income Tax

ITAT

Assessment Years 2003-04, 2004-05, 2006-07, 2007-08

501.61

Income Tax Act, 1961

Income Tax

Commissioner of Income Tax

Assessment Years 1997-98, 1998-99, 2002-03, 2003-04, 2006-07, 2009-10, 2011-12 and 2012-13

1,925.44

Service Tax Rules

Service Tax

CESTAT, Ahmedabad

1997-99

0.70

(viii) In our opinion and according to the information and explanations given to us, the Company has not defaulted in the repayment of loans or borrowings to financial institutions, banks and government. The Company has not issued any debentures.

(ix) The Company has not raised moneys by way of initial public offer or further public offer (including debt instruments). In our opinion and according to the information and explanations given to us, the Company has utilized the money raised by way of term loans during the year for the purposes for which they were raised.

(x) To the best of our knowledge and according to the information and explanations given to us, no fraud by the Company and no fraud on the Company by its officers or employees has been noticed or reported during the year.

(xi) In our opinion and according to the information and explanations given to us, the Company has paid/provided managerial remuneration in excess of the limits and approvals prescribed under section 197 read with Schedule V to the Companies Act, 2013 to the following managerial personnel:

Managerial

Position

Excess amount of remuneration paid/ provided (Rs. in lakhs)

Financial year ending

Treatment of the excess remuneration in the respective year financial statements

Steps taken by the Company for securing refund

Managing Director

228.84

31st March, 2017

Charged to the Statement of Profit and Loss

Special Resolution will be passed at the ensuing Annual General Meeting.

Executive Director

27.56

31st March, 2017

Charged to the Statement of Profit and Loss

Special Resolution will be passed at the ensuing Annual General Meeting.

Director

149.86

31st March, 2017

Charged to the Statement of Profit and Loss

Special Resolution will be passed at the ensuing Annual General Meeting.

(xii) The Company is not a Nidhi Company and hence reporting under clause (xii) of the CARO 2016 is not applicable.

(xiii)In our opinion and according to the information and explanations given to us, the Company is in compliance with Section 177 and 188 of the Companies Act, 2013, where applicable, for all transactions with the related parties and the details of related party transactions have been disclosed in the financial statements etc. as required by the applicable accounting standards.

(xiv)During the year the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures and hence reporting under clause (xiv) of CARO 2016 is not applicable to the Company.

(xv) In our opinion and according to the information and explanations given to us, during the year the Company has not entered into any non-cash transactions with its directors or persons connected with him and hence provisions of section 192 of the Companies Act, 2013 are not applicable.

(xvi)The Company is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934.

For Deloitte Haskins & Sells

Chartered Accountants

(Firm''s Registration Number 117364W)

(Ketan Vora)

Place: Mumbai (Partner)

Date: 5th May, 2017 (Membership Number 100459)


Mar 31, 2014

We have audited the accompanying financial statements of MAFATLAL INDUSTRIES LIMITED ("the Company") which comprise the Balance Sheet as at 31st March, 2014, the Statement of Profit and Loss and the Cash Flow Statement for the year then ended, and a summary of the significant accounting policies and other explanatory information, in which are incorporated the Returns for the year ended on that date audited by the branch auditors of the Company''s branches at Ahmedabad and Nadiad.

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 notified under the Companies Act, 1956 ("the Act") (which continue to be applicable in respect of Section 133 of the Companies Act, 2013 in terms of General Circular 15/2013 dated 13th September, 2013 of the Ministry of Corporate Affairs) and in accordance with the accounting principles generally accepted in India. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

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 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 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 the accounting policies used and the reasonableness of the accounting estimates made by the Management, as well as evaluating the overall presentation of the financial statements.

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

Basis for Qualified Opinion

Attention is invited to Note no.30.5, regarding non – accounting of income from rent and other charges aggregating to Rs. 83.61 lacs upto 31st March, 2014 (Rs. 186.29 lacs upto 31st March, 2013) for the reasons stated therein which constitutes a departure from the Accounting Standard (AS)-1 ''Disclosure of Accounting Policies'' and Accounting Standard (AS)-9 ''Revenue Recognition'' referred to in Section 211(3C) of the Act; if the same is considered, rental income from investment property would be higher by aggregate amount of Rs. 83.61 lacs (aggregate upto 31st March 2013, Rs. 186.29 lacs), income tax, net profit and shareholder''s funds would have been increased by Rs. 17.53 lacs, Rs. 66.08 lacs and by Rs. 66.08 lacs respectively (previous year ended 31st March 2013: increased by Rs. 60.45 lacs, Rs. 125.84 lacs and by Rs. 125.84 lacs respectively). This matter was also qualified in our report on the financial statements for the year ended 31st March 2013.

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 matter described in the Basis for Qualified Opinion paragraph above, the aforesaid financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

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

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

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

Emphasis of Matter

We draw attention to Note no.30.13 to the financial statements regarding managerial remuneration for which the Central Government''s approval is required.

Our opinion is not qualified in respect of this matter.

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 in terms of Section 227(4A) 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 purposes of our audit.

(b) Except for the effects of the matter described in the Basis for Qualified Opinion paragraph above, in our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books and proper returns adequate for the purposes of our audit have been received from the branches not visited by us.

(c) The reports on the accounts of the Ahmedabad and Nadiad branches audited by the branch auditors appointed under Section 228 of the Act have been forwarded 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 and with the returns received from the branches not visited by us.

(e) Except for the effects of the matter described in the Basis for Qualified Opinion paragraph above, in our opinion, the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement comply with the Accounting Standards notified under the Act (which continue to be applicable in respect of Section 133 of the Companies Act, 2013 in terms of General Circular 15/2013 dated 13th September, 2013 of the Ministry of Corporate Affairs).

(f) On the basis of written representations received from the directors as on 31st March, 2014 taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2014 from being appointed as a director in terms of Section 274(1)(g) of the Act.

ANNEXURE TO THE INDEPENDENT AUDITORS'' REPORT (Referred to in paragraph 1 under ''Report on Other Legal and Regulatory Requirements'' section of our report of even date)

(i) Having regard to the nature of the Company''s business/ activities/results during the year, clauses (xiii), (xiv), (xviii), (xix) and (xx) of paragraph 4 of the Order are not applicable.

(ii) 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) The fixed assets were physically verified during the year by the Management in accordance with a regular programme of verification which, in our opinion, provides for physical verification of all the fixed assets at reasonable intervals. According to the information and explanation given to us, no material discrepancies were noticed on such verification.

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

(iii) In respect of its inventories:

(a) As explained to us, the inventories were physically verified during the year by the Management at reasonable intervals.

(b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories followed by the Management were 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 no material discrepancies were noticed on physical verification.

(iv) 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.

In respect of loans, secured or unsecured, granted by the Company to companies, firms or other parties covered in the Register maintained under Section 301 of the Companies Act, 1956, according to the information and explanations given to us:

(a) The Company has granted loans aggregating Rs. 25.00 lacs to one party during the year. At the year-end, the outstanding balances of such loans granted aggregated Rs. 1,113.08 lacs (five parties) and the maximum amount involved during the year was Rs. 1,187.46 lacs (six parties).

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

(c) The receipts of principal amounts and interest have been as per stipulation.

(v) In our opinion and according to the information and explanations given to us, having regard to the explanations that some of the items purchased are of special nature and suitable alternative sources are not readily available for obtaining comparable quotations, there is an adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchases of inventory and fixed assets and the sale of goods and services. During the course of our audit, we have not observed any major weakness in such internal control system.

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

(a) The particulars of contracts or arrangements referred to in Section 301 that needed to be entered in the Register maintained under the said Section have been so entered.

(b) Where each of such transaction (excluding loans reported under paragraph (iv) above),is in excess of Rs. 5 lacs in respect of any party, having regard to our comments in paragraph (v) above, the transactions have been made at prices which are prima facie reasonable having regard to the prevailing market prices at the relevant time, other than certain purchases which are of a special nature for which comparable quotations are not available and in respect of which we are, therefore, unable to comment if the transactions have been carried out at prices having regard to the prevailing market prices at the relevant time.

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

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

(ix) We have broadly reviewed the cost records maintained by the Company pursuant to the Companies (Cost Accounting Records) Rules, 2011 prescribed by the Central Government under Section 209(1)(d) of the Companies Act, 1956 and are of the opinion that, prima facie, the prescribed cost records have been maintained and are being made up. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

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

(a) The Company has generally been regular in depositing undisputed statutory dues, including Investor Education and Protection Fund, Income Tax, Wealth Tax, Customs Duty, Cess and other material

statutory dues applicable to it with the appropriate authorities and has not been regular in depositing interest on Provident Fund, interest on Employees'' State Insurance, Value Added Tax, Excise Duty, Gratuity, Interest on Water charges and Service Tax.

(b) There were no undisputed amounts payable in respect of Investor Education and Protection Fund, Income Tax, Wealth Tax, Customs Duty, Cess and other material statutory dues in arrears as at 31st March, 2014 for a period of more than six months from the date they became payable. As at the year end, the arrears of statutory dues outstanding for a period of more than six months aggregate to Rs. 68.29 lacs in respect of interest on Provident Fund, Rs. 85.66 lacs in respect of interest on Employees'' State Insurance Dues, Rs. 0.36 lacs in respect of Value Added Tax (including interest), Rs. 3.34 lacs in respect of Excise Duty, Rs. 731.34 lacs in respect of Gratuity and Rs. 769.02 lacs in respect of interest on Water Charges.

(c) Details of dues of Excise Duty, Customs Duty, Labour dues, Sales Tax, Property Tax, Income Tax, Service Tax and Cess which have not been deposited as on 31st March, 2014 on account of disputes are given below:

Name of Statute Nature of Dues Forum where Dispute is pending

Central Excise Act, 1944 Excise Duty Assistant Commissioner

Central Excise Act, 1944 Excise Duty Assistant Commissioner

Central Excise Act, 1944 Excise Duty Commissioner

Central Excise Act, 1944 Excise Duty Commissioner (Appeals)

Central Excise Act, 1944 Excise Duty CESTAT

Central Excise Act, 1944 Excise Duty High Court

Central Excise Act, 1944 Excise Duty Supreme Court

Central Excise Act, 1944 Excise Duty Commissioner of Central Excise

Customs Act, 1962 Custom Duty Joint Director General of Foreign Trade

Bombay Industrial Labour Dues Labour Court Relations Act, 1946

Maharashtra Value Sales Tax Joint Commissioner of Added Tax (including Sales Tax (Appeals) - II Interest of Rs 70.55 lacs)

Central Sales Tax Sales Tax Joint Commissioner of Act 1956 (including Sales Tax (Appeals) - II Interest of Rs 15.35 lacs)

Mumbai Municipal Property Tax Assessor and Collecto Corporation Act, 1988 (Refer Note no. (City), Assessment and 30.1(a)(ix)) Collection Departmen

The Income Tax Act,1961 Income Tax Commissioner of Income Tax

The Income Tax Act,1961 Income Tax Income Tax Appellate Tribunal

Service Tax Rules Service Tax CESTAT (Ahmedabad)

Name of Statute Period to which the Amount involved amount Relates (Rs in lacs)

Central Excise Act, 1944 1989-90 to 2003-04 251.80

Central Excise Act, 1944 2006-07 to 2010-11 1.42

Central Excise Act, 1944 1989-90 to 2003-04 2,224.25

Central Excise Act, 1944 1989-90 to 2003-04 54.92

Central Excise Act, 1944 1989-90 to 2003-04 54.10

Central Excise Act, 1944 1989-90 to 2003-04 14.99

Central Excise Act, 1944 1989-90 to 2003-04 13.42

Central Excise Act, 1944 2007-08 to 2009-10 2,960.55

Customs Act 1962 1989-90 to 1999-00 4.79

Bombay Industrial Relation 1993 to 2008 1,172.08 Act 1946

Maharashtra Value Added tax 1999-2000 90.94

Central Sales Tax Act 1956 1999-2000 21.74

Mumbai Municipal 2009-2014 4,266.34 Corporation Act 1988

The Income Tax Act 1961 Assessment Years 458.11 1997-98 to 1998-99, 2002-03 to 2004-05, 2006-07, 2009-10 and 2011 -12

The Income Tax Act 1961 Assessment Year 177.46 2003-04, 2006-07 and 2007-08

Service Tax Rules 1997-99 0.70

(xi) The Company does not have accumulated losses at the end of the financial year and the Company has not incurred cash losses during the financial year covered by our audit and in the immediately preceding financial year.

(xii) In our opinion and according to the information and explanations given to us, the Company has not defaulted in the repayment of dues to financial institutions and banks. The Company has not issued any debentures.

(xiii) 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.

(xiv) In our opinion and according to the information and explanations given to us, the terms and conditions of the guarantees given by the Company for loans taken by others from banks and financial institutions are not, prima facie, prejudicial to the interests of the Company. (Refer Note no. 30.1(b) on guarantee given for a subsidiary).

(xv) In our opinion and according to the information and explanations given to us, the term loans have been

applied by the Company during the year for the purposes for which they were obtained.

(xvi) In our opinion and according to the information and explanations given to us, and on an overall examination of the Balance Sheet of the Company, we report that funds raised on short-term basis have, prima facie, not been used during the year for long-term investment.

(xvii) To the best of our knowledge and according to the information and explanations given to us, no fraud by the Company and no material fraud on the Company has been noticed or reported during the year.

For DELOITTE HASKINS & SELLS Chartered Accountants (Firm''s Registration No. 117364W)

(R. Salivati) (Partner) (Membership No. 34004)

MUMBAI, 30th May, 2014


Mar 31, 2013

Report on the Financial Statements

We have audited the accompanying financial statements of MAFATLAL INDUSTRIES LIMITED ("the Company”) which comprise the Balance Sheet as at 31st March, 2013, the Statement of Profit and Loss and the Cash Flow Statement for the year then ended and a summary of the significant accounting policies and other explanatory information, in which are incorporated the Returns for the year ended on that date audited by the branch auditors of the Company''s branches at Ahmedabad and Nadiad Units / Branches audited by other auditors.

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 Section 211(3C) of the Companies Act, 1956 ("the Act”) and in accordance with the accounting principles generally accepted in India. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

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 the 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, 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 the accounting policies used and the reasonableness of the accounting estimates made by the Management, as well as evaluating the overall presentation of the financial statements.

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

Basis for Qualified Opinion

1. Attention is invited to Note no. 30.8 which was also the subject matter of our report similarly qualified in the previous period, regarding non - accounting of rent/ recovery of expenses for the reasons stated therein which constitutes a departure from the Accounting Standard (AS) 1 ''Disclosure of Accounting Policies'' and Accounting Standard (AS) 9 ''Revenue Recognition'' referred to in Section 211(3C) of the Act; if the same is considered, rental income from investment property would be higher by aggregate amount of Rs. 186.29 lacs (aggregate upto 31st March 2012 Rs. 754.11 lacs), income tax, net profit and shareholder''s funds would have been increased by Rs. 60.45 lacs, Rs. 125.84 lacs and by Rs. 125.84 lacs respectively (previous period ended 31st March 2012: increased by Rs. 244.71 lacs, Rs. 509.40 lacs and Rs. 509.40 lacs respectively).

2. Attention is invited to Note no. 32.1(a) to the financial

statement, in the earlier year, the erstwhile Mafatlal Denim Limited (the Amalgamating Company) had made representation to the ministry of Corporate Affairs against the rejection of application under sections 269, 198, 309 and 310 of the Act, relating to re-appointment and payment of remuneration with effect from 1st April 2011 for two whole-time directors. Total remuneration of Rs. 281.85 lacs was paid to the said directors during the period 1st April, 2011 to 31st March, 2013. The said approval is pending from the Ministry Of Corporate Affairs and accordingly, we are unable to comment on the impact, if any arising out of the same in these financial statements.

Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the effect of the matter described in para 1 of the Basis for Qualified Opinion paragraph above and possible effect of the matter described in para 2 of the Basis for Qualified Opinion paragraph above, and based on the consideration of the report of the other auditors on the financial statements of an amalgamating company referred to below in the Other Matter paragraph, the aforesaid financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

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

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

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

Emphasis of Matter

We draw attention to the Note no. 30.3 (1e) to the financial statements regarding the write-off of Goodwill of Rs. 3,931.71 lacs arising on amalgamation of Mishapar Investments Ltd. with the Company and adjustment thereof from the Securities Premium Account, in accordance with the approved Scheme of Amalgamation as no specific accounting treatment has been prescribed in the Accounting Standards (AS) notified pursuant to the Companies (Accounting Standards) Rules, 2006 as per Section 211(3C) of the Companies Act, 1956.

Our opinion is not qualified in respect of this matter.

Other Matter

We did not audit the financial statement of erstwhile Mafatlal Denim Limited ("the amalgamating company”), which reflect total assets of Rs. 21,946.56 lacs as at 31st March 2013, total revenue of Rs. 29,679.11 lacs and net profit before tax of Rs. 3,919.52 lacs for the year ended on that date, as considered in the financial statements pursuant to amalgamation with the Company (refer Note no. 30.3). These financial statements and other financial information have been audited by other auditors whose report has been furnished to us by the Management and our opinion, in so far as it relates to the amounts and disclosures included in respect of this amalgamating company, is solely based on the reports of other auditors.

Our opinion is not qualified in respect of this matter.

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 in terms of Section 227(4A) 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 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 purposes of our audit.

(b) Except for the effects of the matter described in sub- para 1 of the Basis for Qualified Opinion paragraph, in our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books and audited returns adequate for the purposes of our audit have been received from the branches audited by the branch auditors.

(c) The reports on the accounts of the Ahmedabad and Nadiad branches audited by branch auditors appointed under section 228 have been forwarded 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 and with the returns from the branches audited by the branch auditors.

(e) Except for the effect of the matter described in sub- para 1 of the Basis for Qualified Opinion paragraph above, in our opinion, the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement comply with the Accounting Standards referred to in Section 211(3C) of the Act.

(f) On the basis of written representations received from the directors as on 31st March, 2013 and taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2013 from being appointed as a director in terms of Section 274(1)(g) of the Act.

(i) Having regard to the nature of the Company''s business/activities/ results during the year, clauses (xiii), (xiv), (xviii), (xix) and (xx)of paragraph 4 of the Order are not applicable.

(ii) 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) The fixed assets were physically verified during the year by the Management in accordance with a regular programme of verification which, in our opinion, provides for physical verification of all the fixed assets at reasonable intervals. According to the information and explanation given to us, no material discrepancies were noticed on such verification.

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

(iii) In respect of its inventories:

(a) As explained to us, the inventories were physically verified during the year by the Management at reasonable intervals.

(b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories followed by the Management were 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 no material discrepancies were noticed on physical verification.

(iv) 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.

In respect of loans, secured or unsecured, granted by the Company to companies, firms or other parties covered in the Register maintained under Section 301 of the Companies Act,1956, according to the information and explanations given to us:

(a) The Company has granted loans aggregating Rs. 330.00 lacs to one party during the year. Including balances transferred from the amalgamating companies,at the year-end, the outstanding balances of such loans granted aggregated Rs. 1,096.00 lacs (seven parties) and the maximum amount involved during the year was Rs. 1207.29 lacs (seven parties).

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

(c) The receipts of principal amounts and interest have been as per stipulations.

(v) In our opinion and according to the information and explanations given to us, having regard to the explanations that some of the items purchased are of special nature and suitable alternative sources are not readily available for obtaining comparable quotations, there is an adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchases of inventory and fixed assets and the sale of goods and services. During the course of our audit, we have not observed any major weakness in such internal control system.

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

(a) The particulars of contracts or arrangements referred to in Section 301 that needed to be entered in the Register maintained under the said Section have been so entered.

(b) Where each of such transaction is in excess of Rs. 5 lacs in respect of any party, the transactions have been made at prices which are prima facie reasonable having regard to the prevailing market prices at the relevant time, other than certain purchases which are of a special nature for which comparable quotations are not available and in respect of which we are, therefore, unable to comment.

(vii) According to the information and explanations given to us, the Company has not accepted any deposit from the public during the year in terms of the provisions of Sections 58A and 58AA or any other relevant provisions of the Companies Act, 1956.

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

(ix) We have broadly reviewed the cost records maintained by the Company pursuant to the Companies (Cost Accounting Records) Rules, 2011 prescribed by the Central Government under Section 209(1)(d) of the Companies Act, 1956 and are of the opinion that, prima facie, the prescribed cost records have been maintained and are being made up. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

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

(a) The Company has generally been regular in depositing undisputed statutory dues, including Investor Education and Protection Fund, Income-tax,Wealth Tax, Customs Duty, Cess and other material statutory dues applicable to it with the appropriate authorities and has not been regular in depositing interest on Provident Fund, interest on Employees'' State Insurance, Sales Tax, Value Added Tax, Excise Duty, Gratuity, Interest on Electricity charges, Interest on Water charges and Service Tax.

(b) There were no undisputed amounts payable in respect of Investor Education and Protection Fund, Income-tax, Wealth Tax, Customs Duty, Cess and other material statutory dues in arrears as at 31st March, 2013 for a period of more than six months from the date they became payable. As at the year end, the arrears of statutory dues outstanding for a period of more than six months aggregate to Rs. 486.92 lacs in respect of interest on Provident Fund, Rs. 85.66 lacs in respect of interest on Employees'' State Insurance Dues, Rs. 12.46 lacs in respect of Sales Tax (inclusive of Interest), Rs. 0.33 lacs in respect of Value Added Tax, Rs. 9.90 lacs in respect of Excise Duty, Rs. 555.69 lacs in respect of Gratuity, Rs. 296.88 lacs in respect of Interest on Electricity Charges, Rs. 758.06 lacs in respect of Interest on Water Charges and Rs. 0.02 lacs in respect of Service Tax.

(xi) The Company does not have accumulated losses at the end of the financial year and the Company has not incurred any cash loss during the current financial year but has incurred cash loss during the preceeding period.

(xii) In our opinion and according to the information and explanations given to us, the Company has not defaulted in the repayment of dues to financial institutions and banks except that there were delays upto 48 months in repayment of dues of term loans and interest thereon to a financial institution to the extent of Rs. 2,775.50 lacs and Rs. 1,338.55 lacs respectively by an amalgamating company. The duration of delay spanned from period prior to amalgamation on 1st April 2012 to July 2012. The Company has not issued debentures.

(xiii) In our opinion, the Company has maintained adequate documents and records where it has granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities. No such secured loans and advances are outstanding as at the year end.

(xiv) In our opinion and according to the information and explanations given to us, the terms and conditions of the guarantees given by the Company for loans taken by others from banks and financial institutions are not, prima facie, prejudicial to the interests of the Company. (Refer Note no. 30.1(b) on guarantee given for a subsidiary).

(xv) In our opinion and according to the information and explanations given to us, the term loans have been applied by the Company during the year for the purposes for which they were obtained, other than temporary deployment pending application.

(xvi) In our opinion and according to the information and explanations given to us, and on an overall examination of the Balance Sheet of the Company, we report that funds raised on short-term basis have, prima facie, not been used during the year for long-term investment.

(xvii) To the best of our knowledge and according to the information and explanations given to us, no fraud by the Company and no material fraud on the Company has been noticed or reported during the year.

For DELOITTE HASKINS & SELLS

Chartered Accountants

(Firm Registration No.117364W)

R.SALIVATI

Partner

(Membership No. 34004)

MUMBAI, 30th May, 2013


Mar 31, 2012

1. We have audited the attached Balance Sheet of MAFATLAL INDUSTRIES LIMITED ("the Company") as at 31st March, 2012, the Statement of Profit and Loss and the Cash Flow Statement of the Company for the period from 1st July, 2011 to 31st March, 2012 both annexed thereto, in which are incorporated the Returns from Ahmedabad and Nadiad Units / Branches audited by other auditors. These financial statements are the responsibility of the Company's Management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

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

4. Attention is invited to sub-note 9 of Note 29, which was also the subject matter of our report similarly qualified in the previous period, regarding non-accounting of rent/ recovery of expenses for the reasons stated therein; if the same is considered including the revision awarded by the Hon'ble Small Causes court, rental income from investment property would be higher by Rs. 754.11 lacs (aggregate to 30th June, 2011 Rs. 178.65 lacs),

We further report that had the observation made by us above been considered, in the current period there would have been a loss of Rs 4,431.88 lacs, as against the reported loss of Rs. 5,185.99 lacs (previous period, profit would have been Rs. 38,234.65 lacs, as against the reported profit of Rs. 38,056.00 lacs), reserves and surplus would have been Rs. 30,300.07 lacs, as against the reported figure of Rs. 29,545.96 lacs (as at 36th June, 2011, F;,. 34,900.60 lacs, as against the reported figure of Rs.34,731.Rs.5 lacs), trade receivables (net of provision) would have been Rs. 5,936.10 lacs, as against the reported figure of Rs. 5181.99 lacs (as at 30th June, 2011, Rs. 6,270.35 lacs, as against the reported figure of Rs. 6,091.70 lacs).

5. Further to our comments in the Annexure referred to in paragraph 3 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, subject to our comment in para (4) above, 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 the Ahmedabad and Nadiad Units / Branches audited by other auditors;

(iii) the reports on the accounts of the Ahmedabad and Nadiad Units / Branches audited by other auditors have been forwarded to us and have been dealt with by us in preparing this report;

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

(v) in our opinion, subject to our comment in para (4) above, the Balance Sheet, Statement of Profit and Loss and the Cash Flow Statement dealt with by this report are in compliance with the Accounting Standards referred to in Section 211(3C) of the Companies Act, 1956;

(vi) Subject to our comment in para (4) above, 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 31s< March, 2012;

(b) in the case of the Statement of Profit and Loss, of the loss of the Company for the period from 1st July, 2011 to 31st March, 2012 and

(c) in the case of the Cash Flow Statement, of the cash flows of the Company for the period from 1sl July, 2011 to 31st March, 2012.

6. On the basis of written representations 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 is disqualified as on 31st March, 2012 from being appointed as a director in terms of Section 274(1 )(g) of the Companies Act, 1956.

ANNEXURETO THE AUDITORS'REPORT

(Referred to in paragraph 3 of our report of even date)

(i) Having regard to the nature of the Company's business/activities/result, clauses (vi), (xiii), (xiv), (xviii), (xix) and (xx) of CARO are not applicable.

(ii) In respect of its fixed assets:

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

(b) The fixed assets were physically verified during the period by the Management, in accordance with a regular programme of verification which, in our opinion, provides for physical verification of all the fixed assets at reasonable intervals. According to the information and explanation given to us, no material discrepancies were noticed on such verification.

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

(iii) In respect of its inventory:

(a) As explained to us, the inventories were physically verified during the period by the Management at reasonable intervals.

(b) In our opinion and according to the information and explanation given to us, the procedures of physical verification of inventories followed by the Management were 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 no material discrepancies were noticed on physical verification.

(iv) (a) The Company has not granted any loan, secured or unsecured, to companies, firms or other parties covered in the Register maintained under Section 301. of the Companies Act, 1956. (b) In respect of loans, secured or unsecured, taken by the Company, from companies, firms or other parties listed in the Register maintained under Section 301 of the Companies Act, 1956, according to the information and explanation given to us: (i) The Company has taken loans aggregating Nil frorn parties during the period. At the period end, the outstanding balance of such loan from a party was Nil and 'the maximum amount involved during the period was Rs. 3,443.73 lacs. (ii) The rate of interest and other terms and conditions of such loan are, in our opinion, prima facie not prejudicial to the interests of the Company. (iii) The payment of principal amount and interest in respect of such loan is as per stipulations. (v) In our opinion and according to the information and explanations given to us, having regard to the explanations that some of the items purchased are of special nature and suitable alternative sources are not readily available for obtaining comparable quotations, there is an adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchases of inventory and fixed assets and the sale of goods and services. During the course of our audit, we have not observed any major weakness in such internal control system. (vi) In respect of contracts or arrangements entered in the Register maintained in pursuance of Section 301 of the Companies Act, 1956, to the best of our knowledge and belief and according to the information . and explanations given to us:

(a) The particulars of contracts or arrangements referred to in Section 301 that needed to be entered in the Register maintained under the said Section have been so entered.

(b) Where each of such transaction is in excess of Rs. 5 lacs in respect of any party, the transactions have been made at prices which are prima facie reasonable having regard to the prevailing market prices at the relevant time except in respect of certain purchases for which comparable quotations are not available and in respect of which we are unable to comment.

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

(viii) We have broadly reviewed the cost records maintained by the Company pursuant to the Companies (Cost Accounting Records) Rules, 2011 prescribed by the Central Government under Section 209(1 )(d) of the Companies Act, 1956 and are of the opinion that prima facie the prescribed-cost records have been maintained and are being reconciled with the financial statements for the period. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

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

(a) The Company has been generally regular in depositing undisputed dues, including Investor Education and Protection Fund, Income- tax, Wealth Tax, Service Tax, Custom Duty, Cess and other material statutory dues applicable to it with the appropriate authorities and has not been regular in depositing interest on Provident Fund, interest on Employees' State Insurance, Sales Tax and Excise duty.

(b) There were no undisputed amounts payable in respect of Income-tax, Wealth Tax, Custom Duty, Cess and other material statutory dues in arrears as at 31st March, 2012, for a period of more than six months from the date they became payable. As at the period end, the arrears of statutory dues outstanding for a period of more than six months aggregate to Rs. 187.28 lacs in respect of interest on Provident Fund, Rs. 16.80 lacs in respect of interest on Employees State Insurance dues, Rs. 9.42 lacs in respect of Sales tax, Rs. 51.90 lacs in respect of Gratuity, Rs. 280.25 lacs in respect of Excise duty, Rs. 232.27 lacs in respect of Municipal Water Charges and Rs. 129.61 lacs in respect of interest on Electricity duty.

(c) Details of dues of Excise duty, Customs duty and Labour dues which have not been deposited as on 31st March, 2012 on account of disputes are given below:



Statute Nature of Dues Forum where Period to which Amount involved Dispute is pending the amount relates (Rs. in lacs)

Central Excise Excise Duty Assistant 1989-90 to 2003-04 254.29 Act, 1944 Commissioner

Central Excise Excise Duty Assistant 2006-07 to 2010-11 1.42 Act, 1944 Commissioner

Central Excise Excise Duty Commissioner 1989-90 to 2003-04 2,224.25 Act, 1944

Central Excise Excise Duty Commissioner (A) 1989-90 to 2003-04 133.90 Act, 1944

Central Excise Excise Duty CESTAT 1989-90 to 2003-01 54.95 Act, 1944

Central Excise Excise Duty High Court 1989-90 to 2003-04 14.99 Act, 1944

Central Excise Excise Duty Supreme Court 1989-90 to 2003-04 13.42 Act, 1944

Customs Act, Customs Duty Joint Director 1989-90 to 1999-00 4.79 1962 General of Foreign Trade

Bombay Indus- Labour Dues Labour Court From 1993 to 2008 1,163.29 trial Relations Act, 1946

(x) The Company does not have accumulated losses at the end of the financial period. The Company has incurred cash losses in the financial period and the Company did not incur cash losses in the immediately preceding financial period.

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

(xii) In our opinion, the Company has maintained adequate records where it has granted loans and advances on the basis of security by way of pledge of shares.

(xiii) In our opinion and according to the information and explanations given to us, the terms and conditions of the guarantee given by the Company for loans taken by other from banks and financial institutions are not prima facie prejudicial to the interests of the Company. [Refer note 1(a) of Note 29 on guarantee given for a subsidiary].

(xiv) In our opinion and according to the information and explanations given to us, the term loans have been applied for the purposes for which they were obtained.

(xv) In our opinion and according to the information and explanations given to us and on an overall examination of the Balance Sheet, we report that funds raised on short-term basis have not been used during the period for long- term investment.

(xvi) To the best of our knowledge and according to the information and explanations given to us, no fraud by the Company and no fraud on the Company has been noticed or reported during the period.



For DELOITTE HASKINS & SELLS

Chartered Accountants

(Registration No. 117364W)

R. SALIVATI

Partner

MUMBAI,

10th October, 2012 (Membership No. 34004)


Jun 30, 2011

1. We have audited the attached Balance Sheet of MAFATLAL INDUSTRIES LIMITED ("the Company") as at 30th June, 2011, the Profit and Loss account and the Cash Flow Statement of the Company for the period from 1st June 2011 to 30th June 2011 both annexed thereto, in which are incorporated the Returns from Ahmedabad and Nadiad Units / Branches audited by other auditors. These financial statements are the responsibility of the Company's Management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

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

4. We invite attention to note 18 of schedule 18, which was also the subject matter of our report similarly qualified in the previous period, regarding non- accounting of rent/ recovery of expenses of Rs. 4.72 lacs; aggregate to date, Rs. 178.65 lacs (previous period, Rs. 7.63 lacs; aggregate to date as at 31st May, 2010, Rs. 173.93 lacs).

We further report that had the observation made by us above, been considered, in the current period there would have been a profit of Rs. 38,234.65 lacs, as against the reported profit of Rs. 38,056.00 lacs (previous period, profit would have been Rs. 5,350.23 lacs, as against the reported profit of Rs. 5,176.30 lacs), reserves and surplus would have been Rs. 34,910.60 lacs, as against the reported figure of Rs. 34,731.95 lacs (as at 31st May, 2010, accumulated losses would have been Rs. 25,927.80 lacs, as against the reported figure of Rs.26,101.73 lacs), sundry debtors (net of provision) would have been Rs. 6,270.35 lacs, as against the reported figure of Rs. 6,091.70 lacs (as at 31st May, 2010, Rs.5,196.75 lacs, as against the reported figure of Rs.5,022.82 lacs).

5. Further to our comments in the Annexure referred to in paragraph 3 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, subject to our comment in para (4) above, 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 the Ahmedabad and Nadiad Units / Branches audited by other auditors;

(iii) the reports on the accounts of the Ahmedabad and Nadiad Units / Branches audited by other auditors have been forwarded to us and have been dealt with by us in preparing this report;

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

(v) in our opinion, subject to our comment in para (4) above, the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report are in compliance with the Accounting Standards referred to in Section 211(3C) of the Companies Act, 1956;

(vi) Subject to our comment in para (4) above, 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 30th June 2011;

(b) in the case of the Profit and Loss Account, of the profit of the Company for the period from 1st June 2010 to 30th June 2011 and

(c) in the case of the Cash Flow Statement, of the cash flows of the Company for the period from 1st June 2010 to 30th June 2011.

6. On the basis of written representations received from the Directors, as on 30th June, 2011 and taken on record by the Board of Directors, we report that none of the Directors is disqualified as on 30th June, 2011 from being appointed as a director in terms of Section 274(1)(g) of the Companies Act, 1956.

ANNEXURE TO THE AUDITORS' REPORT (Referred to in paragraph 3 of our report of even date)

(i) Having regard to the nature of the Company's business/activities/result, clauses (vi), (xiii), (x), (xiv), (xviii), (xix) and (xx) of CARO are not applicable.

(ii) In respect of its fixed assets:

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

(b) The fixed assets were physically verified during the period by the Management in accordance with a regular programme of verification which, in our opinion, provides for physical verification of all the fixed assets at reasonable intervals. According to the information and explanation given to us, no material discrepancies were noticed on such verification.

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

(iii) In respect of its inventory:

(a) As explained to us, the inventories were physically verified during the period by the Management at reasonable intervals.

(b) In our opinion and according to the information and explanation given to us, the procedures of physical verification of inventories followed by the Management were 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 no material discrepancies were noticed on physical verification.

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

(b) In respect of loans, secured or unsecured, taken by the Company, from companies, firms or other parties listed in the Register maintained under Section 301 of the Companies Act, 1956, according to the information and explanation given to us:

(i) The Company has taken loans aggregating Nil from parties during the period. At the period end, the outstanding balance of such loan from a party was Rs. 3,420.97 lacs (including interest accrued and due) and the maximum amount involved during the period was Rs.3,420.97 lacs.

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

(iii) The payment of principal amount and interest in respect of such loan is as per stipulations.

(v) In our opinion and according to the information and explanations given to us, having regard to the explanations that some of the items purchased are of special nature and suitable alternative sources are not readily available for obtaining comparable quotations, there is an adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchases of inventory and fixed assets and the sale of goods and services. During the course of our audit, we have not observed any major weakness in such internal control system.

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

(a) The particulars of contracts or arrangements referred to in Section 301 that needed to be entered in the Register maintained under the said Section have been so entered.

(b) Where each of such transaction is in excess of Rs.5 lacs in respect of any party, the transactions have been made at prices which are prima facie reasonable having regard to the prevailing market prices at the relevant time except in respect of certain purchases for which comparable quotations are not available and in respect of which we are unable to comment.

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

(viii) We have broadly reviewed the books of account maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under Section 209(1)(d) of the Companies Act, 1956 in respect of Textiles and we are of the opinion that prima facie the prescribed accounts and records have been made and maintained. The prescribed cost statements are in the process of being compiled for the period. We have, however, not made a detailed examination of the records with a view to determining whether they are accurate or complete. To the best of our knowledge and according to the information and explanations given to us, the Central Government has not prescribed the maintenance of cost records for any other product of the Company.

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

(a) The Company has not been regular in depositing undisputed dues including Provident Fund, Employees' State Insurance dues, Income Tax, Sales Tax, Custom Duty, Excise Duty, Gratuity, Property Tax, Municipal Water Charges and Electricity Duty with the appropriate authorities. In respect of Investor Education & Protection Fund, Wealth Tax, Service Tax, Cess and other material statutory dues, it has generally been regular in depositing undisputed statutory dues with the appropriate authorities.

(b) There were no undisputed amounts payable in respect of Income-tax, Wealth Tax, Custom Duty, Cess and other material statutory dues in arrears as at 30th June, 2011, for a period of more than six months from the date they became payable. As at the period end, the arrears of statutory dues outstanding for a period of more than six months aggregate to Rs. 502.32 lacs in respect of Provident Fund (including interest), Rs. 50.49 lacs in respect of Employees State Insurance dues

(including interest), Rs. 9.41 lacs in respect of Sales tax, Rs. 2,572.52 lacs in respect of Gratuity, Rs. 280.25 lacs in respect of excise duty, Rs. 232.27 lacs in respect of Municipal Water Charges and Rs. 1,345.08 lacs in respect of Electricity duty.

(c) Details of dues of Excise duty, Customs duty and Labour dues which have not been deposited as on 30th June, 2011 on account of disputes are given below:

Statute Nature of Forum where Period to Amount Dues Dispute is which the involved pending amount relates (Rs. in lacs)

Central Excise Excise Duty Assistant 1989-90 to 254.29 Act, 1944 Commissioner 2003-04

Central Excise Excise Duty Assistant 2006-07 to 1.42 Act, 1944 Commissioner 2010-11

Central Excise Excise Duty Commissioner 1989-90 to 2,224.25 Act, 1944 2003-04

Central Excise Excise Duty Commissioner 1989-90 to 133.90 Act, 1944 (A) 2003-04

Central Excise Excise Duty CESTAT 1989-90 to 54.95 Act, 1944 2003-04

Central Excise Excise Duty High Court 1989-90 to 14.99 Act, 1944 2003-04

Central Excise Excise Duty Supreme Court 1989-90 to 13.42 Act, 1944 2003-04

Customs Act, Customs Joint Director 1989-90 to 311.56 1962 Duty General of 1999-00 Foreign Trade Bombay Labour Labour Court From 1993 to 1,101.12 Industrial Dues 2008 Relations Act, 1946

(x) In our opinion and according to the information and explanations given to us, the Company has not defaulted in the repayment of dues to bank.

(xi) In our opinion, the Company has maintained adequate records where it has granted loans and advances on the basis of security by way of pledge of shares.

(xii) In our opinion and according to the information and explanations given to us, the terms and conditions of the guarantee given by the Company for loans taken by other from banks and financial institutions are not prima facie prejudicial to the interests of the Company [Refer note 2(i) of Schedule 18].

(xiii) In our opinion and according to the information and explanations given to us, the term loans have been applied for the purposes for which they were obtained.

(xiv) In our opinion and according to the information and explanations given to us and on an overall examination of the Balance Sheet, we report that funds raised on short-term basis have not been used during the period for long- term investment.

(xv) To the best of our knowledge and according to the information and explanations given to us, no fraud by the Company and no fraud on the Company has been noticed or reported during the period.

For DELOITTE HASKINS & SELLS

Chartered Accountants

(Registration No.117364W)

R. SALIVATI

Partner

(Membership No.34004)

MUMBAI,

8th August, 2011


May 31, 2010

1. We have audited the attached Balance Sheet of MAFATLAL INDUSTRIES LIMITED ("the Company") as at 31st May, 2010, the Profit and Loss account and the Cash Row Statement of the Company for the period from 1st April 2009 to 31st May 2010 both annexed thereto, in which are incorporated the Returns from Ahmedabad and Nadiad Units/ branches 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.

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 the disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditors Report) Order, 2003, 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. We invite attention to note 6 of Schedule 18 regarding accounts of the Company being prepared on a going concern basis; this was also drawn attention to in our report of the previous year.

5. In respect of the following issues, our report was qualified in the previous year, but which are no longer relevant for the current period:

(a) Non-provisior for diminution in the value of certain unquoted investments as the same has been provided during the period [Refer Note 11 of Schedule 18];

(b) Non-provision for overdue debts, loans and advances in view of security created [Refer Note 12 of Schedule 18].

6. We invite attention to note 18 of schedule 18, which was also the subject matter of our report similarly qualified in the previous year, regarding non- accounting of rent/ recovery of expenses of Rs. 7.63 lacs; aggregate to date, Rs.173.93 lacs (previous year, Rs.9.46 lacs; aggregate to date as at 31" March, 2009, Rs. 180.30 lacs).

We further report that had the observation made by us above, been considered, (without considering items (a) and (b) of para 5 above in case of the previous year, the effect of which on the financial statements for the year ended 31* Match, 2009 could not be determined) in the current period there would have been a profit of Rs.5,350.23 lacs, as against the reported profit- of Rs.5,176.30 lacs (previous year, profit would have been Rs.33,931.02 lacs, as against the reported profit of Rs.33,750.72 lacs), the accumulated losses would have been Rs.25,927.80 lacs, as against the reported figure of Rs.26,101.73 lacs (at 31st March, 2009, Rs.31,097.73 lacs, as against the reported figure of Rs.31,278.03 lacs), sundry debtors (net of provision) would have been Rs.5,196.75 lacs, as against the reported figure of Rs.5,022.82 lacs (as at 31st March, 2009, Rs.5,453.98 lacs, as against the reported figure of Rs.5,273.68 lacs).

7. Further to our comments in the annexure referred to in para (3) 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, subject to our comment in para (6) above, 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 the Ahmedabad and Nadiad Branches audited by other auditors;

(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 and with the audited returns from the branches;

(iv) in our opinion, subject to our comment in para (6) above, 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) Subject to our comment in para (6) above (paras 5 & 6 in case of previous year), in our opinion and to the best of our information and . according to the explanations given to us, the said accounts give the information required by the Companies Act, 1956, in the manner so required, and give a true and fair view in conformity with the accounting principles generally accepted in India:

(a) in the case of the Balance sheet, of the state of affairs of the Company as at 31st May, 2010;

(b) in the case of the Profit and Loss account, of the Profit for the period from 1sl April, 2009 to 31" May, 2010; and

(c) in the case of the Cash Flow Statement, of the Cash Flows for the period from 1s1 April, 2009 to 31" May, 2010.

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

ANNEXURE TO THE AUDITORS REPORT (Referred to in paragraph 3 of our report of even date)

(I) Having regard to the nature of the Companys business/activities/ result, clauses (vi), (xii), (xiii), (xiv), (xix) and (xx) of Companies Auditors Report Order, 2003 are not applicable.

(ii) In respect of its fixed assets:

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

(b) Some of the fixed assets were physically verified during the period by the Management in accordance with a regular programme of verification which, in our opinion, provides for physical verification of all for the fixed assets at reasonable intervals. According to the information and explanation given to us, no material discrepancies were noticed on such verification.

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

(iii) In respect of its inventory:

(a) As explained to us, the inventories were physically verified during the period by the Management at reasonable intervals.

(b) In our opinion and according to the information and explanation given to us, the procedures of physical verification of inventories followed by the Management were 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 no material discrepancies were noticed oh physical verification.

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

(b) In respect of loans, secured or unsecured, taken by the Company, from companies, firms or other parties listed in the Register maintained under Section 301 of the Companies Act, 1956, according to the Information and explanation given to us:

(i) The Company has not taken loans from such parties during the period. At the period end, the outstanding balance of such Interest free loan from a party was fis.3,108.96 lacs and the maximum amount involved during the period was Rs.3,108.96 lacs.

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

(iii) The payments of principal amounts in respect of such loan is as per stipulations.

(v) In our opinion and according to the information and explanations given to us, having regard to the explanations that some of the items purchased are of special nature and suitable alternative sources are not readily available for obtaining comparable quotations, there is an adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchases of inventory and fixed assets and the sale of goods and services. During the course of our audit, we have not observed any major weakness in such internal control system.

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

(a) The particulars of contracts or arrangements referred to in Section 301 that needed to be entered in the Register maintained under the said Section have been so entered.

(b) Where each of such transaction is in excess of Rs.5 lacs in respect of any party, the transactions have been made at prices which are prima facie reasonable having regard to the prevailing market prices at the relevant time.

(vij) In our opinion, the Company has an adequate internal audit system commensurate with the size and the 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 in respect of Textiles and we are of the opinion that prima facie the prescribed accounts and records have been made and maintained. The prescribed cost statements are in the process of being compiled for the period. We have, however, not made a detailed examination of the records with a view to determining whether they are accurate or complete. To the best of our knowledge and according to the information and explanations given to us, the Central Government has not prescribed the maintenance of cost records for any other product of the Company.

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

(a) The Company has not been regular in depositing undisputed dues including Provident Fund, Employees State Insurance dues, Sales. Tax, Excise Duty, Customs Duty, Gratuity, Property Tax, Municipal Water Charges & electricity duty with the appropriate authorities. In respect of Investor Education & Protection Fund, Wealth Tax, Income Tax, Service Tax, Cess and other material statutory dues, it has generally been regular in depositing undisputed statutory dues with the appropriate authorities.

(b) There were no undisputed amounts payable in respect of Income- tax, Wealth Tax, Custom Duty, Cess and other material statutory dues in arrears as at 31st May, 2010, for a period of more than six months from the date they became payable. As at the period end, the arrears of statutory dues outstanding for a period of more than six months aggregate to Rs.728.58 lacs in respect of Provident Fund, Rs.66.26 lacs in respect of Employees State Insurance dues, Rs.9.41 lacs in respect of Sales tax, Rs.2,325.19 lacs in respect of Gratuity, Rs.280.25 lacs in respect of excise duty, Rs.68.40 lacs in respect of Property Tax, Rs.254.60 lacs in respect of Municipal Water Charges and Rs.1,960.08 lacs In respect of Electricity duty.

(c) Details of dues of Excise duty, Customs duty and Stamps duty which have not been deposited as on 31" May, 2010 on account of disputes are given below:

Statute Nature of Forum where Period to which Amount

Dues Dispute is the amount Involved

pending relates (Rs. In lacs)

Central Excise Excise Assistant 1989-90 to 69.73

Act, 1944 Duty Commissioner 2003-04

Central Excise Excise Deputy 1989-90 to 15.28

Act, 1944 Duty Commissioner 2003-04

Central Excise Excise Joint 1989-90 to 10.70

Act, 1944 Duty Commissioner 2003-04

Central Excise Excise Additional 1989-90 to 8.11 Act, 1944 Duty Commissioner 2003-04

Central Excise Excise Commissioner 1989-90 to 2,149.67 Act, 1944 Duty 2003-04

Central Excise Excise Commissioner 1989-90 to 295.62 Act, 1944 Duty 2003-04

Central Excise Excise CESTAT 1989-90 to 54.25 Act, 1944 Duty 2003-04

Customs Act, Customs Director 1989-90 to 384.97

1962 Duty General of 1999-00

Foreign Trade

Bombay Labour Labour Court From 1993 to 1,116.95

Industrial Dues 2008

Relations Act,

1946

Bombay Stamp Superintendent 1996-97 1,229.47

Stamps Act, Duty of Stamps

1958

(x) The accumulated losses of the Company at the end of the financial period are more than fifty percent of its net worth and the Company has not incurred cash losses in the financial year and in the immediately preceding financial year.

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

(xii) In our opinion and according to the information and explanations given to us, the terms and conditions of the guarantee given by the Company for loans taken by other from banks and financial institutions are not prima facie prejudicial to the interests of the Company [Refer note 2(i) of Schedule 18].

(xiii) In our opinion and according to the information and explanations given to us, the term loans have been applied for the purposes for which they were obtained.

(xiv) In our opinion and according to the information and explanations given to us and on an overall examination of the Balance Sheet, we report that funds raised on Short-term basis have not been used during the period for long- term investment.

(xv) According to the information and explanations given to us, the Company has made preferential allotment of shares to parties covered in the Register maintained under Section 301 of the Companies Act, 1956 at a price which is prima facie not prejudicial to the interests of the Company.

(xvi) To the best of our knowledge and according to the information and explanations given to us, no fraud by the Company and no fraud on the Company has been noticed or reported during the period.

For DELOITTE HASKINS & SELLS

Chartered Accountants

(Registration No. 117364W)

R. Salivati

Partner

(Membership No.34004)

MUMBAI, Dated, 28th June, 2010

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