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Auditor Report of MIC Electronics Ltd.

Mar 31, 2015

We have audited the accompanying financial statements of M/s. MIC Electronics Ltd, which comprise the Balance Sheet as at March 31, 2015, the Statement of Profit and Loss and Cash Flow Statement for the year ended on that date and a summary of significant accounting policies and other explanatory information.

Management's Responsibility for the Financial Statements

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

Auditor's Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made thereunder. We conducted our audit in accordance with the Standards on Auditing specified under section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

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

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

Basis for Qualified Opinion

(1) Reference is invited to Note 3.05 of the financial statements, The Company has not provided the interest on working capital loan from SBI for Rs 7.21 crores since the account has become NPA. Under accounting principles generally accepted in India, the company should have made a provision for interest expense of Rs 7.21crores. Had the company made a provision for the same the current year profit would have been lower by the said amount.

(2) Reference is invited to Note 3.07 of the financial statements, The Company has not provided the interest on unsecured loans for Rs 4.23 crores and interest on term loans for Rs 3.91 crores for the year ended 31st March 2015, since the company is pursuing the matter for settlement. Under accounting principles generally accepted in India, the company should have made a provision for interest expense of Rs 8.14 crores. Had the company made a provision for the same, the current year profit would have been lower by the said amount.

(3) Reference is invited to Note 3.12 of the financial statements, the Company's Capital Advances to the extent of Rs 11.19 crores, "we are unable to ascertain whether such balances as at balance sheet date are fully recoverable. Accordingly, we are unable to ascertain the impact, if any, that may arise in case any of these advances are subsequently determined to be doubtful of recovery. Had the Company made a provision for the same, the profit for the period would have been lower by the said amount."

(4) Reference is invited to Note 3.15 of the financial statements, the Company's Trade Receivables to the extent of Rs 51.20 crores are more than three years old and "we are unable to ascertain whether such balances as at balance sheet date are fully recoverable. Accordingly, we are unable to ascertain the impact, if any, that may arise in case any of these receivables are subsequently determined to be doubtful of recovery. Had the Company provided provision for the same, the profit for the period would have been lower by the said amount."

(5) Reference is invited to Note 3.17 of the financial statements, the Company's Other Advances to the extent of Rs 5.50 crores, "we are unable to ascertain whether such balances as at balance sheet date are fully recoverable. Accordingly, we are unable to ascertain the impact, if any, that may arise in case any of these advances are subsequently determined to be doubtful of recovery. Had the Company provided provision for the same, the profit for the period would have been lower by the said amount."

(6) Reference is invited to Note 3.31 of the financial statements, the Company has not made a provision for lease rentals for the financial year to the extent of Rs.4.72 crores. Under accounting principles generally accepted in India, the company should have made a provision for lease rentals. Had the company made a provision for the same the current year profit would have been lower by the said amount.

Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the possible effects of the matters described in the Basis for Qualified Opinion paragraph, the financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

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

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

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

Report on Other Legal and Regulatory Requirements:

1. As required by the Companies (Auditor's Report) Order, 2003 ("the Order") issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 3 and 4 of the Order to the extent applicable.

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

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

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

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

d) In our opinion, the aforesaid financial statements comply with the applicable accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014;

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

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

(i) The Company has pending litigations which would impact its financial position.

(ii) The Company did not have any long-term contracts including derivative contracts; as such the question of commenting on any material foreseeable losses thereon does not arise.

(iii) There have been occasions in case of the company during the year under report to transfer any sums to the Investor Education and Protection Fund.

REFERRED TO IN PARAGRAPH (8) IN OUR REPORT OF EVEN DATE FOR THE PERIOD ENDED 31.03.2015.

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

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

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

(ii) (a) The inventories have been physically verified by the management during the year at reasonable intervals.

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

(c) The company has maintained proper records of inventories and the discrepancies noticed on physical verification of inventories as compared to book records were not material.

(iii) In our opinion, the Company has granted unsecured loans to two of its subsidiaries covered in the register maintained under section 189 of the companies Act, 2013.

(a) The receipt of principal amount and interest are also regular.

(b) There is no overdue amount on account of this loan.

(iv) In our opinion and according to the information and explanations given to us, there is adequate internal control system commensurate with the size of the company and the nature of its business, for the purchase of fixed assets and for the sale of services. Further, on the basis of our examination of the books and records of the company and according to the information and explanations given to us, no major weakness has been noticed or reported.

(v) In our opinion and according to the information and explanation given to us, the company has not accepted any deposits from the public covered under section 73 to 76 of the Companies Act, 2013.

(vi) In our opinion and according to the information and explanation given to us, the Central Government has prescribed the maintenance of cost records under sub-section (1) of Section 148 of the Companies Act, 2013. We have broadly reviewed the Cost Records maintained by the Company pursuant to the Company's (Cost Records and Audit) Rules, 2014 prescribed by the Central Government and are of the opinion that prima facie the prescribed cost records have been maintained. However, we have not carried out a detailed examination of the cost records with a view to determine whether they are accurate or complete.

(vii) (a) According to the information and explanations given to us and on the basis of our examination of the records of the company, amounts deducted/accrued in the books of account in respect of undisputed statutory dues including Provident Fund, Income Tax, Sales Tax, Wealth Tax, Service Tax, Duty of Customs, Value added tax, cess and other material statutory dues have not been regularly deposited during the year by the company with the appropriate authorities.

According to the information and explanations given to us, the following are the undisputed amounts payable in respect of Provident Fund, Income Tax, Wealth Tax, Service Tax, Sales Tax, Duty of Customs, Excise Duty, Value added tax and Other material statutory dues were in arrears as at March 31, 2015 for a period of more than six months from the date they became payable.

Sl. No. Nature of the dues Amount (Rs)

1. Service Tax 3,847,784/-

2. Excise Duty 8,196,806/-

3. Provident Fund 14,224,778/-

4. Employee State Insurance 3,604,185/-

5. Professional Tax 988,360/-

6. TDS 14,317,283/-

7. Sales Tax 4,318,796/-

(b) According to the information and explanations given to us, the following are disputed dues relating to Wealth tax, Duty of Customs and Cess which have not been deposited with the appropriate authorities on account of any dispute.

Name of Nature of Amount Period to the Statue the Dispute (Rs) which the amounts relate (F.Y)

Central Excise Duty 3,896,982/- 2008-2009 Excise Act, 1944

Customs Customs Duty 1,801,111/- 2008-2009 Act, 1962

The A.P. APVAT 840,705/- 2008-2009 VAT Act, 2005

The A.P. APVAT 545,677/- 2007-2008 VAT Act, 2005

The A.P. APVAT 1,809,145/- 2005-2006 VAT Act, 2005

Name of the Statute Forum where the dispute is pending and amount deposited

Central Excise Act, 1944 Customs, Excise & Service Tax Appelate tribunal, south zonal bench, Bangalore vide appeal No.C/2303 of 2010 Amt. deposited : Rs. 2,896,982/-

Customs Act, 1962 0/o.The Commissioner of Customs, Central Excise and Service Tax, Hyderabad III Commissionerate vide Appeal No.C/2302 of 2010

The A P VAT Act, 2005 Appelate Deputy Commissioner (CT), Secunderabad Division vide Appeal No.S/23/09-10/V Amt. deposited : Rs. 840,705/-

The A P VAT Act, 2005 Appelate Deputy Commissioner (CT), Secunderabad Division Amt. deposited : Rs. 545,677/-

The A P VAT Act, 2005 WP No.14764/2009 filed with High Court, AP. Amt. deposited : Rs. 1,809,145/-

(c) According to the information and explanations given to us the amounts which were required to be transferred to the Investor Education and Protection Fund in accordance with the relevant provisions of the Companies Act, 1956 (1 of 1956) and rules there under has not been transferred to such fund within time.

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

(ix) In our opinion and according to the information and explanations given to us, the Company has defaulted in repayment of its dues to banks and financial institution including interest and principal as on 31st March 2015.

Sl. No. Name of the bank/institution Amount (Rs.) Due since

1. UCO Bank 72,044,205/- Since June 2013

2. Technology Development Board 167,326,657/- Since January 2013

3. L&T Finance Ltd 19,847,154/- Since October 2014

4. State Bank of India 597,993,829/- Since November 2014

5. Srei Equipment Finance Pvt Ltd 169,748,167/- Since July 2013

6. Reliance Capital Limited 36,602,000/- Since March 2013

(x) According to the information and explanations given to us, the company has given guarantee for loans taken by others from banks, and financial institutions.

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

(xii) According to the information and explanations given to us, no material fraud on or by the company has been noticed or reported during the course of our audit.

For PAVULURI & Co.

Chartered Accountants

Firm Reg. No:012194S

Sd/-

(CA N. RAJESH)

Place: Hyderabad PARTNER

Date: 16.05.2015 M.No : 223169


Jun 30, 2010

We have audited the attached Balance Sheet of M/s.MIC Electronics Limited, as at 30th June 2010 and also the Profit and Loss Account and the Cash Flow Statement of the Company for the year ended on that date annexed hereto. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

1. As required by the Companys (Auditors Report) Order, 2003 issued by the Department of Company Affairs, 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.

2. Further to above, we report that :

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

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

iii. The Balance sheet, Profit and Loss Account and Cash Flow statement dealt with by this report are in agreement with the books of account.

iv. In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement comply with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956.

v. Based on information and explanations given to us and representations received from the directors of the Company, as on 30th June 2010 and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 30th June 2010 from being appointed as a director in terms of clause (g) of sub section (1) of section 274 of the Companies Act, 1956.

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

(a) In the case of the Balance Sheet, of the state of affairs of the Company as at 30th June, 2010 and

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

And

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

Annexed to Auditors Report Referred to in Paragraph (1) in our Report of even date for the year ended 30.06.2010.

1. (a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets. The fixed assets have been physically verified by the management. There is annual verification of fixed assets, which in our opinion is reasonable having regard to the size of the company and the nature of its assets. No material discrepancies have been noticed on such verification. (b) During the year the company has not disposed off substantial part of the assets. According to the information and explanations given to us, we are of the opinion that no transactions are effected involving disposal of assets so as to effect going concern status of the company.

2. (a) The stocks of finished goods , stores , spare parts and raw materials have been physically verified during the year by the management. In our opinion, the frequency of the verification is reasonable.

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

(c) The discrepancies noticed on verification between the physical stocks and book records , which have been properly dealt with in the books of account , were not material.

(d) On the basis of our examination of stock records, we are of the opinion that the valuation of stocks is fair and proper in accordance with the normally accepted accounting principles and is on the same basis as in the preceding year.

3. (a) The Company has taken loans from Companies, Firms or other parties listed in the registers maintained under Section 301 or from Companies under the same management within the meaning of Section 370 (1B) of the Companies Act, 1956. According to the information and explanations given to us the terms and conditions of these loans are not prima facie prejudicial to the interests of the Company.

(b) The Company has granted loans, secured or unsecured to Companies, firms or other parties listed in the registers maintained under Section 301 or to Companies under the same management within the meaning of Section 370(1B) of the Companies Act, 1956. According to the information and explanations given to us the terms and conditions of these loans are not prima facie prejudicial to the interests of the Company.

(c) Parties to whom loans and advances (Interest free/Interest bearing) in the nature of loans have been given by the company are generally repaying the principal amounts and have also been generally regular in repayment of interest where ever applicable.

(d) There is no overdue amount of loans taken from or granted to Companies, firms or other parties listed in the Register maintained under Section 301 of the Companies Act, 1956

4. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business with regard to purchases of the stores, raw materials including components, plants and machinery, equipment and other assets and with regard to the sale of goods.

5. In our opinion and according to the information and explanations given to us, the transactions of purchase of goods and materials and sale of goods, materials and services, made in pursuance of contracts or arrangements entered in the registers maintained under Section 301 of the Companies Act, 1956 and aggregating during the year to Rs.5,00,000/- or more in respect of each party, have been made at prices which are reasonable having regard to prevailing market prices for such goods , materials or services or the prices at which transactions for similar goods, materials or services have been made with other parties.

6. In our opinion and according to the information and explanations given to us, the provisions of Section 58-A of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975, do not apply to this Company, as it has not accepted deposits from the public other than directors of the company.

7. The Company has an adequate internal Audit system commensurate with the size and nature of the business.

8. As per the information given to us the Central Government has not prescribed maintenance of Cost records under Section 209(1)(d) of the Companies Act, 1956.

9. (a) According to the information and explanations given to us, undisputed statutory dues including provident funds, , employees state insurance, income-tax have not generally been regularly deposited with the appropriate authorities though the delays in deposit have not been serious.

(b) According to the information and explanations given to us following are the disputed dues relating to Income Tax, Wealth Tax, Customs Duty, Sales Tax and Excise Duty as on 30th June, 2010.

Name of the Statue Nature of the Amount Period to which the Dispute (Rs.) amounts relate (F.Y)

Central Excise Act, 1944 Excise Duty 21,223,061.00 2002-2003

Central Excise Act, 1944 Excise Duty 3,896,982.00 2008-2009

Central Excise Act, 1944 Excise Duty 7,697,400.00 2008-2009

Customs Act, 1962 Customs Duty 1,801,111.00 2008-2009

The A.P.VAT Act, 2005 VAT 840,705.00 2008-2009

The A.P.VAT Act, 2005 VAT 545,677.00 2007-2008

The A.P.VAT Act, 2005 VAT 1,809,145.00 2005-2006



Name of the Statue Forum where the dispute is pending

Central Excise Act, 1944 Customs, Excise & Service Tax Appelate tribunal, south zonal bench, Banglore

Central Excise Act, 1944 Customs, Excise & Service Tax Appelate tribunal, south zonal bench, Banglore

Central Excise Act, 1944 Commissioner (Appeals), Customs & Central Excise, Basheerbagh, Hyderabad

Customs Act, 1962 O/o.The Commissioner of Customs, Central Excise and Service Tax, Hyderabad III Commissionerate

The A.P.VAT Act, 2005 Appelate Deputy Commissioner (CT), Secunderabad Division

The A.P.VAT Act, 2005 Appelate Deputy Commissioner (CT), Secunderabad Division

The A.P.VAT Act, 2005 WP No.14764/2009 filed with High Court, AP

10. In our opinion, the company neither accumulated losses at the end of the year exceeding fifty percent of its net worth, nor incurred cash losses during the financial year covered by our audit and in the immediately preceding financial year.

11. As per the records of the Company and according to the information and explanations given to us, we are of the opinion that the company has not defaulted in repayment of dues to financial institutions, banks or debenture holders however some delays are occurred in servicing the instalment and interest of the loans.

12. According to the information and explanations given to us, the company has not given any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

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

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

15. In our opinion, the terms and conditions on which the company has given guarantees for loans taken by the subsidiaries/associates from banks or financial institutions are not prejudicial to the interest of the company.

16. In our opinion, the term loans taken by the company were applied for the purpose for which they were taken.

17. In our opinion, according to the information and explanations given to us and on an overall examination of statements and records of the company, that the funds raised on short-term basis have, prima facie, not been used during the year for long-term investment. No long term funds have been used to finance short term assets except permanent working capital.

18. According to the information and explanations given to us, the company has made preferential allotment of share warrants during the year to parties covered in the register maintained under section 301 of the Companies Act, 1956. In our opinion the price at which shares have been issued is not prejudicial to the interest of the company.

19. In our opinion, according to the information and explanations given to us, the company has not issued debentures during the period covered by our report.

20. According to the information and explanation given to us, the company has not raised money by way of public issue during the year.

21. According to the information and explanations given to us and based on audit procedures performed, no fraud on or by the Company has been noticed during the year.

for Pinnamaneni & Co., Chartered Accountants

Sd/-

P.V.V. Satyanarayana

Partner Place : Hyderabad M. No. 026600

Dated : 30th November 2010 Firm Reg. No. 002661S


Jun 30, 2009

We have audited the attached Balance Sheet of M/s.MIC Electronics Limited, as at 30th June 2009 and also the Profit and Loss Account and the Cash Flow Statement of the Company for the year ended on that date annexed hereto. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

1. As required by the Companys (Auditors Report) Order, 2003 issued by the Department of Company Affairs, 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.

2. Further to above, we report that :

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

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

iii. The Balance sheet, Profit and Loss Account and Cash Flow statement dealt with by this report are in agreement with the books of account.

iv. In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement comply with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956.

v. Based on information and explanations given to us and representations received from the directors of the Company, as on 30th June 2009 and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 30th June 2009 from being appointed as a director in terms of clause (g) of sub section (1) of section 274 of the Companies Act, 1956.

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

(a) In the case of the Balance Sheet, of the state of affairs of the Company as at 30th June, 2009 and

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

And

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

Annexure to Auditors Report

Referred to In Paragraph (1) In Our Report of Even Date for the Year Ended 30.06.2009.

1. (a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets. The fixed assets have been physically verified by the management. There is annual verification of fixed assets, which in our opinion is reasonable having regard to the size of the company and the nature of its assets. No material discrepancies have been noticed on such verification.

(b) During the year the company has not disposed off substantial part of the assets. According to the information and explanations given to us, we are of the opinion that no transactions are effected involving disposal of assets so as to effect going concern status of the company.

2. (a) The stocks of finished goods, stores, spare parts and raw materials have been physically verified during the year by the management. In our opinion, the frequency of the verification is reasonable.

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

(c) The discrepancies noticed on verification between the physical stocks and book records, which have been properly dealt with in the books of account, were not material.

(d) On the basis of our examination of stock records, we are of the opinion that the valuation of stocks is fair and proper in accordance with the normally accepted accounting principles and is on the same basis as in the preceding year.

3. (a) The Company has taken loans from Companies, Firms or other parties listed in the registers maintained under Section 301 or from Companies under the same management within the meaning of Section 370 (1B) of the Companies Act, 1956. According to the information and explanations given to us the terms and conditions of these loans are not prima facie prejudicial to the interests of the Company.

(b) The Company has granted loans, secured or unsecured to Companies, firms or other parties listed in the registers maintained under Section 301 or to Companies under the same management within the meaning of Section 370(1 B) of the Companies Act, 1956. According to the information and explanations given to us the terms and conditions of these loans are not prima facie prejudicial to the interests of the Company.

(c) Parties to whom loans and advances (Interest free/Interest bearing) in the nature of loans have been given by the company are generally repaying the principal amounts and have also been generally regular in repayment of interest where ever applicable.

(d) There is no overdue amount of loans taken from or granted to Companies, firms or other parties listed in the Register maintained under Section 301 of the Companies Act, 1956

4. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business with regard to purchases of the stores, raw materials including components,plantsand machinery, equipment and other assets and with regard to the sale of goods.

5. In our opinion and according to the information and explanations given to us, the transactions of purchase of goods and materials and sale of goods, materials and services, made in pursuance of contracts or arrangements entered in the registers maintained under Section 301 of the Companies Act, 1956 and aggregating during the year to Rs.5,00,000/- or more in respect of each party, have been made at prices which are reasonable having regard to prevailing market prices for such goods, materials or services or the prices at which transactions for similar goods, materials or services have been made with other parties.

6. In our opinion and according to the information and explanations given to us, the provisions of Section 58- A of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975, do not apply to this Company, as it has not accepted deposits from the public other than directors of the company.

7. The Company has an adequate internal Audit system commensurate with the size and nature of the business.

8. As per the information given to us the Central Government has not prescribed maintenance of Cost records under Section 209(1)(d) of the Companies Act, 1956.

9. (a) According to the records of the Company, the company is generally regular in depositing the Provident Fund dues and Employees State Insurance dues with the appropriate authorities.

(b) According to the information and explanations given to us following are the disputed dues relating to Income Tax, Wealth Tax, Customs Duty, Sales Tax and Excise Duty as on 30th June, 2009.

Name of the Statue Nature of Disputed Amount the Dispute Amount (Rs.) deposited(Rs)

Central Excise Act, 1944 Excise Duty 21,223,061 -- Customs Act, 1962 Customs Duty 1,801,111 -- The A.P.VAT Act, 2005 VAT 840,705 840,705 The A.P.VAT Act, 2005 VAT 545,677 545,677 The A.P.VAT Act, 2005 VAT 1,809,145 --

Name of the Period to which the Forum where the dispute is pending Statue amounts relate (F.Y)

Central Excise 2002-2003 Customs, Excise & Service Tax Act, 1944 Appelate tribunal, south zonal bench, Banglore

Customs Act, 2008-2009 O/o.The Commissioner of Customs, 1962 Central Excise and Service Tax, Hyderabad III Commissionerate

The A.P.VAT 2008-2009 Appelate Deputy Commissioner (CT), Act, 2005 Secunderabad Division

The A.P.VAT 2007-2008 Appelate Deputy Commissioner (CT), Act, 2005 Secunderabad Division

The A.P.VAT 2005-2006 WP No.14764/2009 filed with High Act, 2005 Court, AP

10. In our opinion, the company neither accumulated losses at the end of the year exceeding fifty percent of its net worth, nor incurred cash losses during the financial year covered by our audit and in the immediately preceding financial year.

11. As per the records of the Company and according to the information and explanations given to us, we are of the opinion that the company has not defaulted in repayment of dues to financial institutions, banks or debenture holders.

12. According to the information and explanations given to us, the company has not given any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

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

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

15. In our opinion, the terms and conditions on which the company has given guarantees for loans taken by the others from banks or financial institutions are not prejudicial to the interest of the company.

16. In our opinion, the term loans taken by the company were applied for the purpose for which they were taken.

17. In our opinion, according to the information and explanations given to us and on an overall examination of statements and records of the company, that the funds raised on short-term basis have, prima facie, not been used during the year for long-term investment. No long term funds have been used to finance short term assets except permanent working capital..

18. According to the information and explanations given to us, the company has made preferential allotment of share warrants during the year to parties covered in the register maintained under section 301 of the Companies Act, 1956. In our opinion the price at which shares have been issued is not prejudicial to the interest of the company.

19. In our opinion, according to the information and explanations given to us, the company has not issued debentures during the period covered by our report.

20. According to the information and explanation given to us, the company has not raised money byway of public issue during the year.

21. According to the information and explanations given to us and based on audit procedures performed, no fraud on or by the Company has been noticed during theyear.

for Pinnamaneni & Co. Chartered Accountants

Sd/- (P.V.V. Satyanarayana) Partner.

Place : Hyderabad Dated : 5th December 2009