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Auditor Report of Panacea Biotec Ltd.

Mar 31, 2023

Panacea Biotec Limited

Report on the Audit of the Standalone Financial Statements

Opinion

1. We have audited the accompanying standalone financial statements of Panacea Biotec Limited (''the Company''), which comprise the Balance Sheet as at 31 March 2023, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Cash Flow and the Statement of Changes in Equity for the year then ended, and notes to the standalone financial statements, including a summary of the significant accounting policies and other explanatory information.

2. In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Companies Act, 2013 (''the Act'') in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards (''Ind AS'') specified under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015 and other accounting principles generally accepted in India, of the state of affairs of the Company as at 31 March 2023, and its loss (including other comprehensive income), its cash flows and the changes in equity for the year ended on that date.

Basis for Opinion

3. We conducted our audit in accordance with the Standards on Auditing specified under section 143(10) of the Act. Our responsibilities under those standards are further described in the Auditor''s Responsibilities for the Audit of the Standalone Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India (''ICAI'') together with the ethical requirements that are relevant to our audit of the financial statements under the provisions of the Act and the rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

4. Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

5. We have determined the matters described below to be the key audit matters to be communicated in our report.

Key audit matter

How our audit addressed the key audit matter

A. Revenue recognition

Refer note 1.3(l) and note 27 of notes to the standalone financial statements and other explanatory information of the Company for the year ended 31 March 2023. The Company recognises revenue from the sales of products when control over goods is transferred to a customer. The actual point in time when revenue is recognised varies depending on the specific terms and conditions of the sales contracts entered with customers. The Company has a large number of customers operating in various geographies and the sales contracts/ arrangements with various customers have distinct commercial terms, including Incoterms that determine the timing of transfer of control and require judgment in determining timing of revenue recognition as per Ind AS 115, Revenue from Contracts with Customers. We have identified the recognition of revenue from sale of products as a key audit matter because revenue is a key performance indicator for the Company and there is risk of revenue being overstated due to the pressure to achieve targets or earning expectations.

Our audit procedures to address this key audit matter included, but were

not limited to the following:

a) Obtained an understanding of the Company''s process of revenue recognition and read customer contracts on sample basis;

b) Evaluated the design, tested the operating effectiveness of the Company''s internal controls over recognition and measurement of revenue in accordance with underlying customer contracts and accounting policies;

c) Performed substantive testing (including year-end cutoff testing) by selecting samples of revenue transactions recorded during and after the year and verified the underlying documents, which included sales invoices/ contracts and dispatch/shipping documents;

d) Performed substantive analytical procedures during the audit period to identify any unusual trends warranting additional audit procedures;

e) Obtained direct balance confirmations from customers on a sample basis as at the year-end or performed alternate audit procedures where such confirmations could not be obtained; and

f) Assessed the appropriateness and adequacy of the related disclosures in the standalone financial statements of the Company in accordance with the applicable accounting standards.

Key audit matter

How our audit addressed the key audit matter

B. Assessment of impairment of Property, plant and equipment

The Company considers its property, plant and equipment (PPE) as a single cash generating unit (CGU). As at 31 March 2023, the carrying value of Company''s PPE aggregates to ''4,412.98 million. These balances have been subject to a test of impairment by the management in accordance with Ind AS 36 "Impairment of Assets" (Ind AS 36) in the current year as the management have identified impairment indicators as explained in note 2.1 (vi) to the accompanying financial statements.

Refer note 1.3(g) and 2.1(vi) to the accompanying standalone financial statements. The Company has engaged independent third-party valuer to arrive at the value in use of the CGU as per discounted cash flow method and to arrive at the fair value based on market approach method.

Based on the report issued by such valuer, the recoverable value of the CGU being higher than its carrying value, the Company has concluded that no impairment provision needs to be recorded in the financial statements as at 31 March 2023.

In addition to significance of the amounts, management''s assessment process is complex as it involves significant judgement in determining the assumptions to be used to estimate the recoverable amounts involved in forecasting cash flows for the CGU, principally relating to budgeted revenue, operating margins, short-term and longterm growth rates and the discount rates used.

Considering the materiality of the amounts involved, significant judgment and high estimation uncertainty in determining the recoverable value of such PPE and such estimates and judgements being inherently subjective, this matter is determined as a key audit matter for the current year audit.

Our audit procedures to address this key audit matter included, but were

not limited to the following:

a) Obtained an understanding of the management''s process for identification of impairment indicators for Property, plant and equipment and process for identification of CGU and impairment testing of such assets;

b) Evaluated the Company''s accounting policy in respect of impairment assessment, and the methods and models used to determine the recoverable amounts of property, plant and equipment in accordance with the requirements of Ind AS 36;

c) Tested the design and operating effectiveness of internal controls over such identification and impairment measurement of identified assets;

d) Evaluated management''s identification of CGU and obtained the impairment assessment workings prepared by the management and its experts for such CGU;

e) Involved auditor''s experts to assess the appropriateness of the valuation methodologies used by the management and its expert to determine the recoverable values;

f) Reconciled the cash flows to the business plans approved by the Board of Directors of the Company/companies which constitute identified CGU;

g) Evaluated and challenged the reasonableness of key inputs and assumptions such as implied budgeted revenue, operating margins, growth rates and discount rates for their appropriateness based on our understanding of the business of the respective CGU, past results and external factors such as industry trends and forecasts;

h) Obtained and evaluated sensitivity analysis performed by the management on the key assumptions and performed independent sensitivity analysis of the key assumptions to assess the effect of reasonably possible variations on the estimated recoverable amounts for the CGU to evaluate sufficiency of headroom between recoverable values and carrying amounts;

i) Compared the carrying value of the net assets with the estimated recoverable value to calculate the impairment loss to be recognised, if any; and

j) Evaluated the adequacy of disclosures given in the standalone financial statements with respect to Property, plant, and equipment, including disclosure of significant assumptions, judgements and sensitivity analysis performed, in accordance with applicable accounting standards.

Information other than the Financial Statements and Auditor''s Report thereon

6. The Company''s Board of Directors are responsible for the other information. The other information comprises the information included in the Annual Report but does not include the standalone financial statements and our auditor''s report thereon.

Our opinion on the standalone financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the standalone financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements, or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Standalone Financial Statements

7. The accompanying standalone financial statements have been approved by the Company''s Board of Directors. The Company''s Board of Directors are responsible for the matters stated in section 134(5) of the Act with respect to the preparation and presentation of these standalone financial statements that give a true and fair view of the financial position, financial performance including

other comprehensive income, changes in equity and cash flows of the Company in accordance with the Ind AS specified under section 133 of the Act and other accounting principles generally accepted in India. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

8. In preparing the financial statements, the Board of Directors are responsible for assessing the Company''s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intend to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

9. Those Board of Directors are also responsible for overseeing the Company''s financial reporting process.

Auditor''s Responsibilities for the Audit of the Standalone Financial Statements

10. Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor''s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

11. As part of an audit in accordance with Standards on Auditing, specified under section 143(10) of the Act we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

â¢ Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control;

â¢ Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls with reference to financial statements in place and the operating effectiveness of such controls;

â¢ Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management;

â¢ Conclude on the appropriateness of Board of Directors'' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company''s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor''s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor''s report. However, future events or conditions may cause the Company to cease to continue as a going concern;

â¢ Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation;

12. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

13. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

14. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor''s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements

15. As required by section 197(16) of the Act based on our audit, we report that the Company has paid remuneration to its directors during the year in accordance with the provisions of and limits laid down under section 197 read with Schedule V to the Act.

16. As required by the Companies (Auditor''s Report) Order, 2020 (''the Order'') issued by the Central Government of India in terms of

section 143(11) 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.

17. Further to our comments in Annexure A, as required by section 143(3) of the Act based on our audit, 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 purpose of our audit of the accompanying standalone financial statements;

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

c) The standalone financial statements dealt with by this report are in agreement with the books of account;

d) In our opinion, the aforesaid standalone financial statements comply with Ind AS specified under section 133 of the Act;

e) On the basis of the written representations received from the directors and taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 2023 from being appointed as a director in terms of section 164(2) of the Act;

f) With respect to the adequacy of the internal financial controls with reference to financial statements of the Company as on 31 March 2023 and the operating effectiveness of such controls, refer to our separate Report in Annexure B wherein we have expressed an unmodified opinion; and

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

i. the Company, as detailed in note 38 to the standalone financial statements, has disclosed the impact of pending litigations on its financial position as at 31 March 2023;

ii. the Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses as at 31 March 2023;

iii. There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company during the year ended 31 March 2023;

iv. a. The management has represented that, to the best of its knowledge and belief, as disclosed in note 53(v) to the

standalone financial statements, no funds have been advanced or loaned or invested (either from borrowed funds or securities premium or any other sources or kind of funds) by the Company to or in any person(s) or entity(ies), including foreign entities (''the intermediaries''), with the understanding, whether recorded in writing or otherwise, that the intermediary shall, whether, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company (''the Ultimate Beneficiaries'') or provide any guarantee, security or the like on behalf the Ultimate Beneficiaries;

b. The management has represented that, to the best of its knowledge and belief, as disclosed in note 53(vi) to the standalone financial statements, no funds have been received by the Company from any person(s) or entity(ies), including foreign entities (''the Funding Parties''), with the understanding, whether recorded in writing or otherwise, that the Company shall, whether directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (''Ultimate Beneficiaries'') or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries; and

c. Based on such audit procedures performed as considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the management representations under sub-clauses (a) and (b) above contain any material misstatement.

v. The Company has not declared or paid any dividend during the year ended 31 March 2023.

vi. Proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 requires all companies which use accounting software for maintaining their books of account, to use such an accounting software which has a feature of audit trail, with effect from the financial year beginning on 1 April 2023 and accordingly, reporting under Rule 11(g) of Companies (Audit and Auditors) Rules, 2014 (as amended) is not applicable for the current financial year.

For Walker Chandiok & Co LLP

Chartered Accountants Firm''s Registration No.: 001076N/N500013

ArunTandon

Partner

Membership No.: 517273 UDIN: 23517273BGTXLN8001

Place: New Delhi

Date : 30 May 2023

Mar 31, 2018

Independent Auditors'' Report

To the Members of Panacea Biotec Limited

Report on the Standalone Financial Statements

1. We have audited the accompanying standalone financial statements of Panacea Biotec Limited (''the Company''), which comprise the Balance Sheet as at 31 March 2018, the Statement of Profit and Loss (including Other Comprehensive Income), the Cash Flow Statement and the Statement of Changes in Equity for the year then ended, and a summary of the significant accounting policies and other explanatory information.

Management''s Responsibility for the Standalone Financial

Statements

2. 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 state of affairs (financial position), profit or loss (financial performance including other comprehensive income), cash flows and changes in equity of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (''Ind AS'') specified 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.

Auditors'' Responsibility

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

4. 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.

5. 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 these standalone financial statements are free from material misstatement.

6. An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial controls relevant to the Company''s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company''s Directors, as well as evaluating the overall presentation of the financial statements.

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

Basis for Qualified Opinion

8. As explained in Note 53 to the statement, the Company''s total borrowings as at 31 March 2018 includes balances payable to various lenders amounting to Rs. 7,315.4 million which are currently recorded based on revised terms agreed with the said lenders as part of Corporate Debt Restructuring ("CDR") scheme, and are reconciled with all lenders except in case of one lender as explained in the said Note. Subsequent to the year end, the lenders have informed the Company that they are considering CDR package as failed CDR and exit from CDR, consequent to which we are unable to comment upon the impact, if any, on the carrying values of borrowings and its related classification as at 31 March 2018 and the interest expense (including penal interest, if any) for the year then ended.

Qualified Opinion

9. 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(s) described in the Basis for Qualified Opinion paragraph, 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 including Ind AS specified under Section 133 of the Act, of the state of affairs (financial position) of the Company as at 31 March 2018, and its loss (financial performance including other comprehensive income), its cash flows and the changes in equity for the year ended on that date.

Material Uncertainty Related to Going Concern

10. We draw attention to Note 52 to the standalone financial statements which indicates that the Company has incurred a net loss (before exceptional items) of Rs. 718.76 million during the year ended 31 March 2018 and as of that date, the Company''s current liabilities exceeded its current assets by Rs. 3,316.16 million. The Company has defaulted in repayment of borrowings from banks/ financial institutions and is in the process of complying with the conditions of Corporate Debt Restructuring. These factors along with other matters as set forth in aforesaid note and paragraph 8 above indicate the existence of a material uncertainty that may cast significant doubt about the Company''s ability to continue as a going concern. However, management has explained that the Company is in the process of discussions with potential investors for providing funds to the Company. Basis this and other factors mentioned in the aforesaid note 52 to the financial statements, management is of the view that going concern basis of accounting is appropriate. Our opinion is not modified in respect of this matter.

Emphasis of Matters

11. We draw attention to the following notes to the standalone financial statements:

a. Note 56 to the standalone financial statements regarding capital advances amounting to Rs.176.80 million given to a real estate developer for acquiring certain immovable properties in Dubai where the Company has initiated legal recourse; and

b. Note 51 to the standalone financial statements regarding payment of managerial remuneration for the financial years ended March 31, 2018, 2017, 2016, 2014 and 2013, which is in excess of the limits specified by the relevant provisions of the Companies Act, 2013 / the Companies Act, 1956 by Rs. 116.38 million for the said years. The Company''s applications to the Central Government seeking approval for payment of such excess remuneration have not been approved and consequently the Company is required to recover the excess amount thus paid for the said years. The Company has recorded an amount of Rs. 116.38 million as recoverable from the directors towards such excess remuneration paid. The Company has submitted new applications to the Central Government for waiver of recovery of excess remuneration paid and is also in the process of completing the related procedural formalities.

Pending the ultimate outcome of the aforesaid matters which is presently unascertainable, no adjustments have been made in the books of accounts. Our opinion is not qualified in respect of these matters.

Other Matter

12. The Company had prepared separate sets of statutory financial statements for the year ended 31 March 2017 and 31 March 2016 in accordance with Accounting Standards prescribed under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 (as amended) on which we issued auditor''s reports to the shareholders of the Company dated 30 May 2017 and 27 May 2016 respectively. These financial statements have been adjusted for the differences in the accounting principles adopted by the Company on transition to Ind AS, which have also been audited by us. Our opinion is not modified in respect of this matter.

Report on Other Legal and Regulatory Requirements

13. As required by the Companies (Auditor''s Report) Order, 2016 (''the Order'') issued by the Central Government of India in terms of Section 143(11) of the Act, we give in the Annexure A a statement on the matters specified in paragraphs 3 and 4 of the Order.

14. Further to our comments in Annexure A, as required by Section 143(3) of the Act, we report that:

a) we have sought and obtained all the information and

explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;

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

c) the standalone financial statements dealt with by this report are in agreement with the books of account;

d) except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph, in our opinion, the aforesaid standalone financial statements comply with Ind AS specified under Section 133 of the Act;

e) the matters described in paragraph 8 and 10 above under the Basis for Qualified Opinion/Material Uncertainty relating to Going Concern paragraph, in our opinion, may have an adverse effect on the functioning of the Company;

f) on the basis of the written representations received from the directors and taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 2018 from being appointed as a director in terms of Section 164(2) of the Act;

g) we have also audited the internal financial controls over financial reporting (IFCoFR) of the Company as on 31 March 2018 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date and our report dated 30 May 2018 as per Annexure B expressed an unqualified opinion; and

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, as detailed in Note 38 to the standalone financial statements, has disclosed the impact of pending litigations on its financial position;

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; and

iv. the disclosure requirements relating to holdings as well as dealings in specified bank notes were applicable for the period from 8 November 2016 to 30 December 2016 which are not relevant to these standalone financial statements. Hence, reporting under this clause is not applicable.

Based on the audit procedures performed for the purpose of reporting a true and fair view on the financial statements of the Company and taking into consideration the information and explanations given to us and the books of account and other records examined by us in the normal course of audit, and to the best of our knowledge and belief, we report that:

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

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

c) The title deeds of all the immovable properties (which are included under the head ''Property, plant and equipment'') are held in the name of the Company.

ii) In our opinion, the management has conducted physical verification of inventory at reasonable intervals during the year, except for goods-in-transit and stocks lying with third parties. For stocks lying with third parties at the year-end, written confirmations have been obtained by the management. No material discrepancies were noticed on the aforesaid verification.

iii) The Company has not granted any loan, secured or unsecured to companies, firms, Limited Liability

Partnerships (LLPs) or other parties covered in the register maintained under Section 189 of the Act. Accordingly, the provisions of clauses 3(iii)(a), 3(iii)(b) and 3(iii)(c) of the Order are not applicable.

iv) In our opinion, the Company has complied with the provisions of Sections 185 and 186 of the Act in respect of loans, investments, guarantees and security.

v) In our opinion, the Company has not accepted any deposits within the meaning of Sections 73 to 76 of the Act and the Companies (Acceptance of Deposits) Rules, 2014 (as amended). Accordingly, the provisions of clause 3(v) of the Order are not applicable.

vi) We have broadly reviewed the books of account maintained by the Company pursuant to the Rules made by the Central Government for the maintenance of cost records under sub-section (1) of Section 148 of the Act in respect of Company''s products and are of the opinion that, prima facie, the prescribed accounts and records have been made and maintained. However, we have not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

vii) a) Undisputed statutory dues including provident fund, employees'' state insurance, income-tax, sales-tax, service tax, duty of customs, duty of excise, value added tax, cess and other material statutory dues, as applicable, have generally been regularly deposited to the appropriate authorities, though there has been a slight delay in a few cases. Undisputed amounts payable in respect thereof, which were outstanding at the year-end for a period of more than six months from the date they became payable are as follows:

Statement of arrears of statutory dues outstanding for more than six months:

Name of the statute	Nature of the dues	Amount (Rs. in million)	Period to which the amount relates	Due Date	Date of Payment	Remarks, if any
Income Tax Act, 1961	Demand u/s 154/250/153A/ 143(3) of Income Tax Act, 1961	14.5	Assessment Year 2011-12	April, 21 2016	Not yet paid	The Company intends to settle the demand with refund of other years.

b) The dues outstanding in respect of income-tax, sales-tax, service-tax, duty of customs, duty of excise and value added tax on account of any dispute, are as follows:

Name of the statute	Nature of dues	Amount (Rs. in million)	Amount paid under Protest (Rs. in million)	Period to which the amount relates	Forum where dispute is pending
Income Tax Act, 1961	Disallowance in respect of certain purchases and expense items	162.2	-	Assessment Year 2005-06	Income Tax Appellate Tribunal (ITAT)
Income Tax Act, 1961	Disallowance in respect of certain purchases and expense items	3,300.7	-	Assessment Year 2006-07 to 2009-10	Income Tax Appellate Tribunal (ITAT)
The Finance Act, 1994	Demand raised for service tax by Assessing Officer	72.6	9.8	Financial Year 2003-04 to 2011-12	Custom Excise & Service Tax Appellate Tribunal
Customs Act, 1962	Duty levied on exempted goods	4.0	4.0	Financial Year 2001-02	Custom Excise & Service Tax Appellate Tribunal

viii) There are no loans or borrowings payable to financial institutions or government and no dues payable to debenture-holders. The Company has defaulted in repayment of loans/borrowings to the following banks:

Name of the bank	Amount of default as on 31 March 2018 (Rs. in million)	Period of default
Bank of India- Foreign Currency Loan	543.17	Not yet paid

ix) The Company did not raise moneys by way of initial public offer or further public offer (including debt instruments). In our opinion, the term loans were applied for the purposes for which the loans were obtained.

x) No fraud by the Company or on the Company by its officers or employees has been noticed or reported during the period covered by our audit.

xi) The Company has provided and paid managerial remuneration which is not in accordance with the requisite

The details are as follows: approval mandated by the provisions of Section 197 of the Act read with Schedule V to the Act.

Further, as mentioned in Note 51 to the standalone financial statements, the Company has paid managerial remuneration, which is not in accordance with the requisite threshold mandated by the provisions of Companies Act 2013/erstwhile 1956 for the relevant years ended March 31, 2018, 2017, 2016, 2014 and 2013:

S. No	Payment made to	Amount Paid/ provided in excess of limits prescribed (Rs. in million)	Amount due for recovery as at 31 March 2018 (Rs. in million)	Steps taken to secure the recovery of the amount	Remarks (if any)#
1.	Managing/Joint Managing and Whole Time Director	14.3	14.3	Company has filed applications for waiver of recovery of excess remuneration paid	Remuneration pertains to year ended March 31, 2013
2.	Managing/Joint Managing and Whole Time Director	14.8	14.8	Company has filed applications for waiver of recovery of excess remuneration paid	Remuneration pertains to year ended March 31, 2014
3.	Whole Time Director	2.6	2.6	Company has filed representation for approval of remuneration	Remuneration pertains to year ended March 31, 2016
4.	Managing/Joint Managing and Whole Time Director	43.0	43.0	Company has filed representation for approval of remuneration	Remuneration pertains to year ended March 31, 2017
5.	Managing/Joint Managing and Whole Time Director	41.6	41.6	Company has filed representation for approval of remuneration	Remuneration pertains to year ended March 31, 2018

# The Company has recorded a receivable amounting to Rs. 116.3 million as recoverable from the relevant directors.

xii) In our opinion, the Company is not a Nidhi Company. Accordingly, provisions of clause 3(xii) of the Order are not applicable.

xiii) In our opinion all transactions with the related parties are in compliance with Sections 177 and 188 of Act, where applicable, and the requisite details have been disclosed in the financial statements etc., as required by the applicable Ind AS.

xiv) During the year, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures.

xv) In our opinion, the Company has not entered into any noncash transactions with the directors or persons connected with them covered under Section 192 of the Act.

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

Independent Auditor''s Report on the Internal Financial

Controls under Clause (i) of Sub-section 3 of Section 143 of the

Companies Act, 2013 (''the Act'')

1. In conjunction with our audit of the standalone financial statements of Panacea Biotec Limited (''the Company'') as at and for the year ended 31 March 2018, we have audited the internal financial controls over financial reporting (''IFCoFR'') of the Company as at that date.

Management''s Responsibility for Internal Financial Controls

2. The Company''s Board of Directors 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 (the "Guidance Note") issued by the Institute of Chartered Accountants of India ("ICAI"). 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 the Company''s business, including adherence to the 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 Act.

Auditors'' Responsibility

3. Our responsibility is to express an opinion on the Company''s IFCoFR based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India (''ICAI'') and deemed to be prescribed under Section 143(10) of the Act, to the extent applicable to an audit of IFCoFR, and the Guidance Note issued by the ICAI. 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 IFCoFR were established and maintained and if such controls operated effectively in all material respects.

4. Our audit involves performing procedures to obtain audit evidence about the adequacy of the IFCoFR and their operating effectiveness. Our audit of IFCoFR includes obtaining an understanding of IFCoFR, 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 judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

5. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company''s IFCoFR.

Meaning of Internal Financial Controls over Financial Reporting

6. A company''s IFCoFR 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 IFCoFR include those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised 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

7. Because of the inherent limitations of IFCoFR, 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 IFCoFR to future periods are subject to the risk that the IFCoFR may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

8. In our opinion, the Company has, in all material respects, adequate internal financial controls over financial reporting and such controls were operating effectively as at 31 March 2018, based on internal control over financial reporting criteria established by the company considering the essential components of internal control stated in the Guidance Note issued by ICAI.

For Walker Chandiok & Co LLP

Chartered Accountants

Firm''s Registration No.: 001076N/N500013

Rajesh Jain

Place : New Delhi Partner

Date : May 30, 2018 Membership No.: 081203

Mar 31, 2017

To the Members of Panacea Biotec Limited

Report on the Standalone Financial Statements

1. We have audited the accompanying standalone financial statements of Panacea Biotec Limited(''the Company''), which comprise the Balance Sheet as at March 31, 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.

Management''s Responsibility for the Standalone Financial

Statements

2. 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, read with Rule 7 of the Companies(Accounts) Rules, 2014 (as amended). 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

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

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

Opinion

8. In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2017, and its loss and its cash flows for the year ended on that date.

Emphasis of Matter

9. We draw attention to the following notes to the standalone financial statements:

a) Note 50 to the standalone financial statements regarding capital advances amounting to Rs.176.8 million given to a real estate developer for acquiring certain immovable properties in Dubai where the Company has initiated legal recourse.

b) Note 47 to the standalone financial statements regarding the revocation of loan restructuring facility by one of the lender of the Company, which may result in reinstatement of the outstanding loan liability as per the original term of the loan agreement after adjusting the payments made till date.

c) Note 44 to the standalone financial statements regarding payment of managerial remuneration for the financial years ended March 31, 2017, 2016, 2014 and 2013, which is in excess of the limits specified by the relevant provisions of the Companies Act, 2013 / the Companies Act, 1956 by Rs.74.7 million for the said years. The Company''s applications to the Central Government seeking approval for payment of such excess remuneration have not been approved and consequently the Company is required to recover the excess amount thus paid for the said years. The Company has recorded an amount of Rs.74.7 million as recoverable from the directors towards such excess remuneration paid. The Company is also in the process of filing applications with Central Government for waiver of recovery of such excess remuneration paid.

d) Note 45 to the standalone financial statements which indicates that the Company has incurred a net loss (before exceptional items) of Rs.487.1 million during the year ended March 31, 2017 and as of that date, the Company''s current liabilities exceeded its current assets by Rs.1,793.7 million. These conditions along with other matters as set forth in aforesaid note and (b) above indicate the existence of a material uncertainty that may cast significant doubt about the Company''s ability to continue as a going concern:

Report on Other Legal and Regulatory Requirements

10. As required by the Companies (Auditor''s Report) Order, 2016 (''the Order'') issued by the Central Government of India in terms of Section 143(11) of the Act, we give in the Annexure A a statement on the matters specified in paragraphs 3 and 4 of the Order.

11. Further to our comments in Annexure A, as required by Section 143(3) of the Act, we report that:

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

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

c. the standalone financial statements dealt with by this report are in agreement with the books of account;

d. in our opinion, the aforesaid standalone financial statements comply with the Accounting Standards prescribed under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 (as amended);

e. the matters described in paragraph 9 above, in our opinion, may have an adverse effect on the functioning of the Company;

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

g. we have also audited the internal financial controls over financial reporting (IFCOFR) of the Company as on March 31, 2017 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date and our report dated May 30, 2017 as per Annexure B expressed an unqualified opinion; and

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, as detailed in Note 28 to the standalone financial statements, has disclosed the impact of pending litigations on its financial position;

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; and

iv. the company, as detailed in Note 53 to the standalone financial statements, has made requisite disclosures in these standalone financial statements as to holdings as well as dealings in Specified Bank Notes during the period from November 8, 2016 to December 30, 2016. Based on the audit procedures performed and taking into consideration the information and explanations given to us, in our opinion, these are in accordance with the books of account maintained by the company.

Annexure A

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

c) The title deeds of all the immovable properties (which are included under the head ''fixed assets'') are held in the name of the Company.

iii) The Company has not granted any loan, secured or unsecured to companies, firms, Limited Liability

Statement of arrears of statutory dues outstanding for more than six months:

Name of the statute	Nature of the dues	Amount (Rs. in millions)	Period to which the amount relates	Due Date	Date of Payment	Remarks, if any
Income Tax Act, 1961	Demand u/s 154/250/153A/ 143(3) of Income Tax Act, 1961	14.5	Assessment Year 2011-12	April, 21 2016	Not yet paid	The Company intends to settle the demand with refund of other years.

b) The dues outstanding in respect of income-tax, sales-tax, service tax, duty of customs, duty of excise and value added tax on account of any dispute, are as follows:

Name of the statute	Nature of dues	Amount (Rs. in millions)	Amount paid under Protest (Rs. in millions)	Period to which the amount relates	Forum where dispute is pending
Income Tax Act, 1961	Disallowance in respect of certain purchases and expense items	162.2	-	Assessment Year 2005-06	Income Tax Appellate Tribunal (ITAT)
Income Tax Act, 1961	Disallowance in respect of certain purchases and expense items	3,294.9	-	Assessment Year 2006-07 to 2012-13	Income Tax Appellate Tribunal (ITAT)
The Finance Act, 1994	Demand raised for service tax by Assessing Officer	72.6	9.8	Financial Year 2003-04 to 2011-12	Custom Excise & Service Tax Appellate Tribunal
Customs Act, 1962	Duty levied on exempted goods	4.0	4.0	Financial Year 2001-02	Custom Excise & Service Tax Appellate Tribunal

iv) In our opinion, the Company has complied with the provisions of Sections 185 and 186 of the Act in respect of loans, investments, guarantees and security.

viii) There are no dues payable to debenture-holders. The Company has defaulted in repayment of loans/borrowings to the following banks, financial institutions and governments including interest thereon:

Loan Particulars	Amount of default (Rs. in million)	Period of default (Days)
Indian Overseas Bank - Term Loan	16.5	27
State Bank of India - Term Loan - I	12.0	24
State Bank of India - Term Loan - I	13.2	18
State Bank of India - Term Loan - II	6.1	24
State Bank of India - Term Loan - II	6.5	19
Edelweiss Asset Reconstruction Company Limited - Term Loan I	37.5	27
Edelweiss Asset Reconstruction Company Limited - Term Loan II	4.7	21
Canara Bank - Working Capital Term Loan ("WCTLâ)	0.3	21
State Bank of India -WCTL	9.1	21
Bank of India - WCTL	1.0	21
Union Bank of India - WCTL	0.7	28
Indian Overseas Bank - WCTL	0.7	24
Canara Bank - Funded Interest Term Loan ("FITLâ)	0.2	21
State Bank of India - FITL	11.4	21
Bank of India - FITL	2.9	21
Union Bank of India - FITL	0.5	28
Indian Overseas Bank - FITL	4.1	27
Department of Science & Technology	2.5	9
Biotechnology Industrial Research Assistance Council	8.4	24

x) No fraud by the Company or on the company by its officers or employees has been noticed or reported during the period covered by our audit.

xi) The Company has provided and paid managerial remuneration which is not in accordance with the requisite

S. No	Payment made to	Amount Paid/ provided in excess of limits prescribed (Rs. in millions)	Amount due for Recovery as at 31 March 2017 (Rs. in millions)	Steps taken to secure the recovery of the amount	Remarks (if any)*
1.	Managing/Joint Managing and Whole Time Director	14.3	14.3	Company is in process of filing applications for waiver of recovery of excess remuneration paid	Remuneration pertains to year ended March 31, 2013
2.	Managing/Joint Managing and Whole Time Director	14.8	14.8	Company is in process of filing applications for waiver of recovery of excess remuneration paid	Remuneration pertains to year ended March 31, 2014
3.	Whole Time Director	2.6	2.6	Company is in the process of filing representation for approval of remuneration	Remuneration pertains to year ended March 31, 2016
4.	Managing/Joint Managing and Whole Time Director	43.0	43.0	Company is in the process of filing representations for approval of remuneration	Remuneration pertains to year ended March 31, 2017

*The Company has recorded a receivable amounting to Rs.74.7 million as recoverable from the relevant directors.

approval mandated by the provisions of Section 197 of the Act read with Schedule V to the Act.

Further as mentioned in Note 44 to the standalone financial statements, the Company has paid managerial remuneration, which is not in accordance with the requisite threshold mandated by the provisions of Companies Act for the years ended March 31, 2017, 2016, 2014 and 2013. The details are as follows:

xii) In our opinion, the Company is not a Nidhi Company. Accordingly, provisions of clause 3(xii) of the Order are not applicable.

xiv) During the year, the company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures.

xv) In our opinion, the company has not entered into any noncash transactions with the directors or persons connected with them covered under Section 192 of the Act.

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

Annexure B

Independent Auditor''s report on the Internal Financial

Controls under Clause (i) of Sub-section 3 of Section 143 of the

Companies Act, 2013 ("the Actâ)

1. In conjunction with our audit of the standalone financial statements of Panacea Biotec Limited("the Companyâ) as of and for the year ended March 31, 2017, we have audited the internal financial controls over financial reporting ("IFCOFRâ) of the Company as of that date.

Management''s Responsibility for Internal Financial Controls

2. The Company''s Board of Directors 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 (the "Guidance Noteâ) issued by the Institute of Chartered Accountants of India ("ICAIâ). 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 the Company''s business, including adherence to the 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 Act.

Auditors'' Responsibility

3. Our responsibility is to express an opinion on the Company''s IFCOFR based on our audit. We conducted our audit in accordance with the Standards on Auditing, issued by the ICAI and deemed to be prescribed under section 143(10) of the Act, to the extent applicable to an audit of IFCOFR, and the Guidance Note issued by the ICAI. 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 IFCOFR were established and maintained and if such controls operated effectively in all material respects.

4. Our audit involves performing procedures to obtain audit evidence about the adequacy of the IFCOFR and their operating effectiveness. Our audit of IFCOFR included obtaining an understanding of IFCOFR, 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.

5. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company''s IFCOFR.

Meaning of Internal Financial Controls over Financial Reporting

6. A Company''s IFCOFR 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 IFCOFR 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

7. Because of the inherent limitations of IFCOFR, 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 IFCOFR to future periods are subject to the risk that IFCOFR may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

8. In our opinion, the Company has, in all material respects, adequate internal financial controls over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31, 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 issued by ICAI.

For Walker Chandiok & Co LLP

Chartered Accountants

Firm''s Registration No.: 001076N/N500013

per Anupam Kumar

Place : New Delhi Partner

Date : May 30, 2017 Membership No.: 501531

Mar 31, 2016

To the Members of Panacea Biotec Limited

Report on the Standalone Financial Statements

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

Management''s Responsibility for the Standalone Financial

Statements

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

Auditor''s Responsibility

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

5. 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 standalone financial statements are free from material misstatement.

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

Opinion

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

Emphasis of Matters

9. We draw attention to Note 44 to the standalone financial statements regarding payment of managerial remuneration of Rs.37.5 million and Rs.37.2 million for the financial year ended March 31, 2014 and 2013, respectively, which is in excess of the limits specified by the relevant provisions of the Companies Act, 1956, by Rs.13.5 million and Rs.13.2 million respectively. The Company has filed necessary application to the Central Government which is pending approval as on date. Pending the ultimate outcome of the aforesaid matter which is presently unascertainable, no adjustments have been recorded in the statement. Our report is not qualified in respect of this matter.

10. We draw attention to Note 45 to the accompanying statement which indicates that the Company incurred a net loss (before exceptional items) of Rs.487.8 million during the year ended March 31, 2016 and as of that date, the Company''s current liabilities exceeded its current assets by Rs.1,351.9 million. These conditions along with other matters as set forth in aforesaid note indicate the existence of a material uncertainty that may cast significant doubt about the Company''s ability to continue as a going concern. Our report is not qualified in respect of this matter.

Report on Other Legal and Regulatory Requirements

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

12. Further to our comments in Annexure A, as required by Section 143(3) of the Act, we report that:

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

Annexure To the Auditors'' Report

Annexure A

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

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

(c) The title deeds of all the immovable properties (which are included under the head ''fixed assets'') are held in the name of the Company.

(ii) In our opinion, the management has conducted physical verification of inventory at reasonable intervals during the year, except for stocks lying with third parties. For stocks lying with third parties at the year end, written confirmations have been obtained by the management. No material discrepancies were noticed on the aforesaid verification.

(iii) The Company has not granted any loan, secured or unsecured to companies, firms, Limited Liability Partnerships (LLPs) or other parties covered in the register maintained under Section 189 of the Act. Accordingly, the provisions of clauses 3(iii)(a), 3(iii)(b) and 3(iii)(c) of the Order are not applicable.

Name of the statute	Nature of dues	Amount (Rs. in millions)	Amount Paid Under Protest (Rs. in millions)	Period to which the amount relates	Forum where dispute is pending
Income Tax Act, 1961	Disallowance in respect of certain purchases and expense items	162.2	-	Assessment Year 2005-06	Income Tax Appellate Tribunal (ITAT)
Income Tax Act, 1961	Disallowance in respect of certain purchases and expense items	3,294.9	-	Assessment Year 2006-07 to 2012-13	Income Tax Appellate Tribunal (ITAT)
The Finance Act, 1994	Demand raised for service tax by Assessing Officer	72.6	9.8	Financial Year 2003-04 to 2011-12	Custom Excise & Service Tax Appellate Tribunal
Customs Act, 1962	Duty levied on exempted goods	4.0	4.0	Financial Year 2001-02	Custom Excise & Service Tax Appellate Tribunal

(viii) There are no loans or borrowings payable to financial institutions and no dues payable to debenture holders. The Company has defaulted in repayment of loans/borrowings to the following banks and governments:

Loan particulars	Amount (Rs. in millions)	Period of Default (Days)
State Bank of India - Working Capital Term Loan ("WCTL")	4.3	30
State Bank of India - Funded Interest Term Loan ("FITL")	5.7	30
State Bank of India - Term Loan - I	12.0	30
State Bank of India - Term Loan - II	6.1	30
State Bank of India - Term Loan - III	117.6	3
Canara Bank - WCTL	0.3	1

(iv) In our opinion, the Company has complied with the provisions of sections 185 and 186 of the Act in respect of loans, investments, guarantees and security.

(v) In our opinion, the Company has not accepted any deposits within the meaning of Sections 73 to 76 of the Act and the Companies (Acceptance of Deposits) Rules, 2014 (as amended). Accordingly, the provisions of clause 3(v) of the Order are not applicable.

(vi) We have broadly reviewed the books of account maintained by the Company pursuant to the Rules made by the Central Government for the maintenance of cost records under sub-section (1) of Section 148 of the Act in respect of Company''s products and are of the opinion that, prima facie, the prescribed accounts and records have been made and maintained. However, we have not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

(vii) (a) Undisputed statutory dues including provident fund,

employees'' state insurance, income tax, sales tax, service tax, duty of customs, duty of excise, value added tax, cess and other material statutory dues, as applicable, have generally been regularly deposited to the appropriate authorities, though there has been a slight delay in a few cases. Further, no undisputed amounts payable in respect thereof were outstanding at the yearend for a period of more than six months from the date they became payable.

(b) The dues outstanding in respect of income tax, sales tax, service tax, duty of customs, duty of excise and value added tax on account of any dispute, are as follows:

(ix) The Company did not raise moneys by way of initial public offer or further public offer (including debt instruments).

Loan particulars	Amount (Rs. in millions)	Period of Default (Days)
Canara Bank - FITL	0.2	1
Union Bank - WCTL	0.3	121
Union Bank - FITL	0.2	120
Indian Overseas Bank - WCTL	0.3	36
Indian Overseas Bank - FITL	1.9	36
Indian Overseas Bank - Term Loan	7.5	5
Axis Bank Limited - WCTL	0.0*	1
Axis Bank Limited - FITL	0.0*	1
Loan from Technology Development Board	1.4	228
Loan from Technology Development Board	1.4	47
Loan from Department of Science & Technology	2.0	907
Loan from Department of Science & Technology	2.0	542
Loan from Department of Science & Technology	2.0	177

*0.0 under "Amount (Rs. in million)" represents amount less than Rs.50,00( In our opinion, the Company has applied the term loans for the purpose for which the loans were obtained.

(x) No fraud by the Company or on the Company by its officers or employees has been noticed or reported during the period covered by our audit.

(xi) Managerial remuneration has been paid and provided by the Company in accordance with the requisite approval mandated by the provisions of Section 197 of the Act read with Schedule V to the Act for the year ended March 31, 2016.

However, as mentioned in Note 44 to the standalone financial statements, the Company has paid managerial remuneration, which is not in accordance with the requisite threshold mandated by the provisions of the Companies Act 1956, for the years ended March 31, 2014 and 2013. The details are as follows:

No.

Payment made to

Amount Paid/ provided in excess of limits prescribed (Rs in millions)

Amount due for Recovery as at March 31, 2016 (Rs in millions)

Steps taken to secure the recovery of the amount

Remarks (if any)

Managing/Joint Managing and Whole - time Director

13.5

Application has been made to Central Government for requisite approvals

Two directors (remuneration pertains to year ended March 31, 2014)

Managing/Joint Managing and Whole - time Director

13.2

Application has been made to Central Government for requisite approvals

Two directors (remuneration pertains to year ended March 31, 2013)

(xii) In our opinion, the Company is not a Nidhi Company. Accordingly, clause 3(xii) of the Order is not applicable.

(xiii) In our opinion all transactions with the related parties are in compliance with sections 177 and 188 of the Act, where applicable, and the requisite details 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.

(xv) In our opinion, the Company has not entered into any noncash transactions with the directors or persons connected with them covered under Section 192 of the Act.

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

Annexure B

Independent Auditor''s report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 ("the Act")

1. In conjunction with our audit of the standalone financial statements of Panacea Biotec Limited ("the Company") as of and for the year ended March 31, 2016, we have audited the internal financial controls over financial reporting ("IFCoFR") of the Company as on that date.

Management''s Responsibility for Internal Financial Controls

2. The Company''s Board of Directors 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 (the "Guidance Note") issued by the Institute of Chartered Accountants of India ("ICAI"). 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 the Company''s business, including adherence to the 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 Act.

Auditors'' Responsibility

3. Our responsibility is to express an opinion on the Company''s IFCoFR based on our audit. We conducted our audit in accordance with the Standards on Auditing, issued by the ICAI and deemed to be prescribed under section 143(10) of the Act, to the extent applicable to an audit of IFCoFR, and the Guidance Note issued by the ICAI. 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 IFCoFR were established and maintained and if such controls operated effectively in all material respects.

4. Our audit involves performing procedures to obtain audit evidence about the adequacy of the IFCoFR and their operating effectiveness. Our audit of IFCoFR included obtaining an understanding of IFCoFR, 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.

5. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company''s IFCoFR.

Meaning of Internal Financial Controls over Financial Reporting

6. A Company''s IFCoFR 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 IFCoFR 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

7. Because of the inherent limitations of IFCoFR, 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 IFCoFR to future periods are subject to the risk that IFCoFR may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

8. In our opinion, the Company has, in all material respects, adequate internal financial controls over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31, 2016, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note issued by ICAI.

For Walker Chandiok & Co LLP

Chartered Accountants

Firm''s Registration No.: 001076N/N500013

per Anupam Kumar

Place : New Delhi Partner

Date : May 27, 2016 Membership No.: 501531

Mar 31, 2015

Report on the Standalone Financial Statements

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

Management''s Responsibility for the Standalone Financial Statements

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

Auditor''s Responsibility

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

4. 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.

5. 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 standalone financial statements are free from material misstatement.

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

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

Basis for Qualified Opinion

8. As stated in note 53 to the standalone financial statements, during the year ended March 31, 2015, the Company had received advance research fees from a customer amounting to Rs.197.2 million which has been accounted for as income from research and development. In our opinion, the recognition of such advances as income is not consistent with the revenue recognition principles prescribed under the Accounting Standard Â 9 (AS-9) ''Revenue Recognition''. Had the Company followed the principles of AS-9 with respect to these amounts, the revenue for the year ended March 31, 2015 would have been lower by Rs.197.2 million and the loss for the year ended March 31, 2015 would have been higher by Rs.197.2 million. Further, the reserves and surplus as at that date would have been lower by Rs.197.2 million and current liabilities as at that date would have been higher by Rs.197.2 million.

Qualified Opinion

9. 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, 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 March 31, 2015, its loss and its cash flows for the year ended on that date.

Emphasis of Matters

10. We draw attention to Note 44 to the standalone financial statements regarding payment of managerial remuneration of Rs.37.5 million and Rs.37.2 million for the financial years ended March 31, 2014 and 2013 respectively, which is in excess of the limits specified by the relevant provisions of the Companies Act, 1956, by Rs.13.5 million and Rs.13.2 million respectively. The Company has fled necessary application to the Central Government which is pending approval as on date. Pending the ultimate outcome of the aforesaid matter which is presently unascertainable, no adjustments have been recorded in the statement. Our report is not qualified in respect of this matter.

11. We draw attention to note 45 to the standalone financial statements which indicates that the Company has incurred a net loss of Rs.652.3 million for the year ended March 31, 2015. Further as of that date, the Company''s current liabilities exceeded its current assets by Rs.3,835.3 million. These conditions along with other matters as set forth in aforesaid note indicate the existence of a material uncertainty that may cast significant doubt about the Company''s ability to continue as a going concern. Our report is not qualified in respect of this matter.

Other matter

12. The audit of the standalone financial statements for the previous year ended March 31, 2014, included in the standalone financial statements was carried out and reported by S.R. Batliboi & Co. LLP vide their unqualified audit report dated May 30, 2014, whose audit report has been furnished to us and which have been relied upon by us for the purpose of our audit of the standalone financial statements. Our audit report is not qualified in respect of this matter.

Report on Other Legal and Regulatory Requirements

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

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

a. we have sought and, except for the effects of the matter described in the Basis for Qualified Opinion paragraph, obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;

b. except for the effects of the matter described in 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;

c. the standalone financial statements dealt with by this report are in agreement with the books of account;

d. except for the effects of the matter described in the Basis for Qualified Opinion paragraph, in our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 (as amended);

e. the matter described in paragraph 11 under the Emphasis of Matters above, in our opinion, may have an adverse effect on the functioning of the Company;

f. on the basis of the written representations received from the directors 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; and

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

i. as detailed in Note 28 to the standalone financial statements, the Company has disclosed the impact of pending litigations on its standalone financial position;

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

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

Annexure To the Auditors'' Report

Based on the audit procedures performed for the purpose of reporting a true and fair view on the financial statements of the Company and taking into consideration the information and explanations given to us and the books of account and other records examined by us in the normal course of audit, we report that:

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

(b) The Company has a regular program of physical verification of its fixed assets under which fixed assets are verified in a phased manner over a period of three years, which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification.

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

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

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

(iii) The Company has not granted any loan, secured or unsecured to companies, firms or other parties covered in the register maintained under Section 189 of the Act. Accordingly, the provisions of clauses 3(iii)(a) and 3(iii)(b) of the Order are not applicable.

(iv) In our opinion, there is an adequate internal control system commensurate with the size of the Company and the nature of its business for the purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit, no major weakness has been noticed in the internal control system in respect of these areas.

(v) In our opinion, the Company has complied with the directives issued by the Reserve Bank of India, the provisions of Sections 73 to 76 and other relevant provisions of the Act and the Companies (Acceptance of Deposits) Rules, 2014 (as amended) as applicable, with regard to the deposits accepted. According to the information and explanations given to us, no order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal, in this regard.

(vi) We have broadly reviewed the books of account maintained by the Company pursuant to the Rules made by the Central Government for the maintenance of cost records under sub-section (1) of Section 148 of the Act in respect of Company''s products and are of the opinion that, prima facie, the prescribed accounts and records have been made and maintained. However, we have not made a detailed examination of the cost records.

(vii) (a) Undisputed statutory dues including provident fund, employees'' state insurance, income-tax, sales-tax, wealth tax, service tax, duty of customs, duty of excise, value added tax, cess and other material statutory dues, as applicable, have generally been regularly deposited with the appropriate authorities, though there has been a slight delay in a one case. Further, no undisputed amounts payable in respect thereof were outstanding at the year-end for a period of more than six months from the date they became payable.

(b) The dues outstanding in respect of income-tax, sales- tax, wealth tax, service tax, customs duty, excise duty, value added tax and cess on account of any dispute, are as follows:

Amount Paid Amount Name of the statute Nature of dues Under Protest (Rs. in million) (Rs. in million)

Income Tax Act, 1961 Disallowance in respect of certain 162.2 96.6 purchases and expense items

Income Tax Act, 1961 Disallowance in respect of certain 3,294.9 - purchases and expense items

The Finance Act, 1994 Demand raised for service tax by 72.6 Nil Assessing Offer

Customs Act, 1962 Duty levied on exempted goods 4.0 4.0

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

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

Income Tax Act, 1961 Assessment Year CIT(Appeals) 2006-07 to 2012-13

The Finance Act, 1994 Financial Year 2003-04 Custom Excise & Service to 2011-12 Tax Appellate Tribunal

Customs Act, 1962 Financial Year 2001-02 Hon''ble Supreme Court

(c) The Company has transferred the amount 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 made thereunder within the specified time.

(viii) In our opinion, the Company''s accumulated losses at the end of the financial year are more than fifty percent of its net worth. The Company has incurred cash losses in the current and the immediately preceding financial year.

(ix) As explained in Note 47 to the financial statements, after receiving the approvals for rescheduling its loans from the banks, the Company has not defaulted in repayment of its dues to any bank during the year. The Company has no dues payable to any financial institution or debenture- holders during the year.

(x) The Company has not given any guarantees for loans taken by others from banks or financial institutions. Accordingly, the provisions of clause 3(x) of the Order are not applicable.

(xi) In our opinion, the Company has applied the term loans for the purpose for which these loans were obtained.

(xii) No fraud on or by the Company has been noticed or reported during the period covered by our audit.

For Walker Chandiok & Co LLP

(Formerly Walker, Chandiok & Co) Chartered Accountants

Firm''s Registration No.: 001076N/N500013

per Anupam Kumar

Place : New Delhi Partner

Date : May 30, 2015 Membership No.: 501531

Mar 31, 2014

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

Management''s Responsibility for the Financial Statements

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with accounting principles generally accepted in India, including the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956, read with General Circular 8/2014 dated 4 April 2014 issued by the Ministry of Corporate Afairs. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor''s Responsibility

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

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

Opinion

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

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

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

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

Emphasis of Matter We draw attention to:

a) Without qualifying our opinion, we draw attention to Note 45 to the financial statements regarding the managerial remuneration of Rs.37.5 million and Rs.37.2 million for the financial year ending March 31, 2014 and March 31, 2013, which is in excess of the limits specified by the relevant provisions of the Companies Act, 1956, by Rs.13.5 million and by Rs.13.2 million on account of losses incurred during the current year and previous year respectively.

b) Without qualifying our opinion, we draw attention to Note 47 in the financial statements which indicates that the Company during the year has incurred losses of Rs.4.2 million (Previous year Rs.2,301.3 million) (including exceptional income of Rs.2,970.2 million (Previous year Rs.173.1 million)) and as of that date, the Company has net current liabilities of Rs.5,410.1 million (Previous year Rs.1,810.9 million). These conditions, along with other matters as set forth in Note 47 indicate the existence of a material uncertainty that may cast significant doubt about the Company''s ability to continue as a going concern.

Report on other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2003 ("the Order") issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

2. As required by section 227(3) of the Act, we report that:

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

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

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

d) In our opinion, the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement comply with the Accounting Standards notifed under the Companies Act, 1956, read with General Circular 8/2014 dated 4 April 2014 issued by the Ministry of Corporate Afairs;

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

Annexure referred to in paragraph 1 under the heading "Report on other legal and regulatory requirements" of our report of even date

Re: Panacea Biotec Limited (the Company)

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

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

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

ii. a) The management has conducted physical verifcation of inventory at reasonable intervals during the year.

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

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

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

e) The Company has taken loans from 10 parties covered in the register maintained under Section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs.864.6 million and the year-end balance of loans taken from such parties was Rs.760.8 million.

f) In our opinion and according to the information and explanations given to us, the rate of interest and other terms and conditions for such loans are not prima facie prejudicial to the interest of the Company.

g) In respect of loans taken, repayment of the principal amount is as stipulated, however payment of interest has been delayed in certain cases which are as follows:

i. Cases where interests have been paid with delays during the year

Loan Amount of Interest Period for which interest was due Period in which interest was paid (Rs. in million)

Loans from directors 10.9 June 2013 - September 2013 July 2013 - December 2013

Fixed Deposits from directors'' relative 4.1 June 2013 - September 2013 July 2013 - December 2013

Loans from Trinidhi Finance Pvt. Ltd. 0.1 June 2013 - September 2013 December 2013

Loans from Radhika Heights Ltd. 9.3 June 2013 - September 2013 July 2013 Â March 2014

II. Cases where interests remains in arrears as on March 31, 2014

Loan Amount of Interest Period for which interest was due Subsequent status (Rs. in million)

Loan from Directors 10.4 December 2013 Â March 2014 Paid subsequently during April, 2014

Fixed Deposit from Directors'' Relatives 4.3 December 2013 Â March 2014 Paid subsequ -ently during April, 2014

Loan from Radhika Heights Ltd. 11.6 September 2013 Â March 2014 Rs.4.5 million Paid subsequently during May'' 2014

Loan from Trinidhi Finance Pvt. Ltd. 0.1 September 2013 Â March 2014 Not yet paid

iv. In our opinion and according to the information and explanations given to us, and having regard to the explanation that some of the fixed assets & raw materials purchased are unique and specialized nature and alternate sources do not exist for obtaining comparative quotations thereof, there is an adequate internal control system commensurate with the size of the Company and the nature of its business, for the purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit, we have not observed any major weakness or continuing failure to correct any major weakness in the internal control system of the company in respect of these areas.

v. a) According to the information and explanations provided by the management, we are of the opinion that the particulars of contracts or arrangements referred to in section 301 of the Companies Act, 1956 that need to be entered into the register maintained under section 301 have been so entered.

b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangements and exceeding the value of Rupees five lakhs have been entered into during the financial year at prices which are reasonable having regard to the prevailing market prices at the relevant time.

vi. In respect of deposits accepted, in our opinion and according to the information and explanations given to us, directives issued by the Reserve Bank of India and the provisions of sections 58A, 58AA or any other relevant provisions of the Companies Act, 1956, and the rules framed there under, to the extent applicable, have been complied with. We are informed by the management that no order has been passed by the Company Law Board, National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal.

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

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

ix. a) Undisputed statutory dues including provident fund, investor education and protection fund, employees'' state insurance, income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty, cess and other material statutory dues have generally been regularly deposited with the appropriate authorities though there has been a slight delay in a few cases of TDS, service tax and wealth tax. In respect of custom duty, dues have not been deposited with the appropriate authorities. Refer para (ix) (b) below for the details.

b) According to the information and explanations given to us, undisputed amounts payable in respect of provident fund, investor education and protection fund, employees'' state insurance, income-tax, wealth-tax, service tax, sales-tax, customs duty, excise duty, cess and other material statutory dues were outstanding, at the year end, for a period of more than six months from the date they became payable are as follows:

Name of the Nature of dues Amount Period to which the Due date Date of statute (Rs. in million) amount relates Payment

Customs Act, Custom Duty including interest (relating to expired 20.7 Financial Year July 25, 2013 and Not yet paid 1962 advance licenses) 2013-14 October 10, 2013

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

Name of the Nature of dues Amount Period to which statute (Rs. in million) the amount relates

Income Tax Demand raised by Assessing Officer 0.9 Assessment Year Act, 1961 2007-08 & 2008-09

Income Tax Demand raised by Assessing Officer 3.9 Assessment Year Act, 1961 2009-10

The Finance Service Tax Demand raised by Assessing Officer 9.9 Financial Year Act, 1994 2003-04 to 2011-12

The Finance Service Tax Demand raised by Assessing Officer 62.7 Financial Year Act, 1994 2009-10 & 2010-11

Name o the statute Forum where dispute is pending

Income Tax Act, 1961 Appeal pending with AO

Income Tax Act, 1961 Appeal pending with CIT(Appeals)

The Finance Act, 1994 Pending with CESTAT and Assessing Officer

The Finance Act, 1994 Pending with Commissioner, Service Tax

x. The Company''s accumulated losses at the end of the financial year are more than fifty per cent of its net worth. The Company has incurred cash losses in the current and immediately preceding financial year.

xi) Based on our audit procedures and as per the information and explanations given by the management, the Company has defaulted in repayment of loan installments, interests on borrowings and has also overdrawn cash credit facilities availed from various banks during the year. The details of amount and period of defaults are as follows:

I. Cases where repayments of loan installments have been delayed or defaulted during the year

Loan Installment amount Due date of Installment Status (Rs. in million)

Indian Overseas Bank - Term loan 125.0 March 31, 2014 Not yet paid

II. Cases where interests on long term and short term borrowings have been paid with delays during the year

Loan Amount of Interest Period for which interest was due Period in which interest was paid (Rs. in million)

State Bank of India - Term Loan I 63.4 June''2013 - August''2013 July''2013 - November''2013

State Bank of India - Term Loan II 30.8 June''2013 - August''2013 July''2013 - October''2013

State Bank of India - Term Loan III 12.4 June''2013 - September''2013 July''2013 - January''2014

State Bank of Travancore - Term Loan 65.8 June''2013 - September''2013 July''2013 - January''2014

Indian Overseas Bank - Term loan 39.7 June''2013 - September''2013 July''2013 - March''2014

Bank Of India - Term Loan 41.6 April''2013 - September''2013 December''2013 - March''2014

Axis Bank - Cash Credit 0.3 November''2013 December ''2013

State Bank of Travancore - Cash Credit 3.5 November''2013 - December''2013 January''2014

III. Cases where interests on long term and short term borrowings have not been deposited during the year and remains in arrears as on March 31, 2014

Loan Amount of interest Period for which interest was due Subsequent Status (Rs. in million)

State Bank of India - Term Loan I 154.7 September''2013 - March''2014 Rs. 13.0 million has been

State Bank of India - Term Loan II 73.6 September''2013 - March''2014 subsequently paid during April''2014

State Bank of India - Term Loan III 19.4 September''2013 - March''2014 to May''2014

State Bank of Travancore - Term Loan 101.9 October''2013 - March''2014 Not yet paid

Indian Overseas Bank - Term loan 61.1 October''2013 - March''2014 Rs. 41.0 million has been subsequently paid during April'' 2014

Bank Of India - Term Loan 39.6 October''2013 - March''2014 Not yet paid

State Bank of Travancore - Cash Credit 4.2 February''2014 - March''2014 Not yet paid

State Bank of Mysore - Cash Credit 11.7 November''2013 - March''2014 Not yet paid

State Bank of India - Cash Credit 51.2 December''2013 - March''2014 Not yet paid

IV. Cases where cash credit facilities availed from banks have been overdrawn during the year

Name of the bank Sanctioned limit of Maximum amount No. of days for Status as on March 31, 2014* Drawing Power overdrawn which the account (Rs. in million) (Rs. in million) was overdrawn

State Bank of India 627.6 - 797.1 283.0 263 Overdrawn by Rs.270.5 million

Indian Overseas Bank 196.1 Â 250.0 51.9 331 Overdrawn by Rs.19.6 million

IDBI Bank 78.5 Â 100.0 34.3 130 Account within the sanctioned limits

Union Bank of India 196.1 Â 250.0 53.4 335 Account within the sanctioned limits

State Bank of Travancore 117.7 Â 150.0 48.1 328 Overdrawn by Rs.31.9 million

Bank Of India 258.9 Â 330.0 71.7 334 Overdrawn by Rs.33.8 million

State Bank of Mysore 145.1 Â 185.0 39.4 315 Overdrawn by Rs.0.9 million

Canara Bank 156.9 Â 200.0 42.7 283 Account within the sanctioned limits * Status as on March 31, 2014 has been arrived on the basis of the drawing power for the month of November, 2013.

The Company did not have any outstanding dues in respect of a financial institution or debentures during the year.

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

xiii) In our opinion, the Company is not a chit fund or a nidhi / mutual benefit fund / society. Therefore, the provisions of clause 4(xiii) of the Companies (Auditor''s Report) Order, 2003 (as amended) are not applicable to the Company.

xiv) In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Companies (Auditor''s Report) Order, 2003 (as amended) are not applicable to the Company.

xv) According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from bank or financial institutions.

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

xvii) According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we report that funds amounting to Rs.3,851 million raised on short term basis in the form of short term borrowings and increase in the current liabilities have been used for long-term investment representing acquisition of fixed assets, funding of losses and investment in subsidiary companies.

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

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

xx) During the year under review, the Company has not raised any money through public issue, hence clause 4(xx) of the Companies (Auditor''s Report) Order, 2003 (as amended) is not applicable to the Company.

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

For S.R. Batliboi & Co. LLP Firm registration number: 301003E Chartered Accountants

per Rajiv Goyal Place : New Delhi Partner Dated: May 30, 2014 Membership No. 94549

Mar 31, 2013

Report on the Financial Statements

We have audited the accompanying fnancial statements of Panacea Biotec Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2013, and the Statement of Proft and Loss and Cash Flow Statement for the year then ended, and a summary of signifcant accounting policies and other explanatory information.

Management''s Responsibility for the Financial Statements

Management is responsible for the preparation of these fnancial statements that give a true and fair view of the fnancial position, fnancial performance and cash fows of the Company in accordance with accounting principles generally accepted in India, including the Accounting Standards referred to in sub- section (3C) of section 211 of the Companies Act, 1956 ("the Act"). This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the fnancial 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 fnancial 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 fnancial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fnancial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the fnancial 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 fnancial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the fnancial statements. We believe that the audit evidence we have obtained is sufcient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the fnancial 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 afairs of the Company as at March 31,2013;

b) in the case of the Statement of Proft and Loss, of the loss for the year ended on that date; and

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

Emphasis of Matter

We draw attention to:

a) Note 46 to the fnancial statements regarding the managerial remuneration of Rs.37.2 million for the fnancial year ending March 31, 2013, which is in excess of the limits specifed by the relevant provisions of the Companies Act, 1956, by Rs.13.2 million on account of losses incurred during the current year. The Company has initiated steps to obtain approval from Central Government in respect to excess remuneration paid. Pending outcome of the steps taken, no adjustments have been made to the accompanying fnancial statements. Our opinion is not qualifed in respect of this matter.

b) Note 47 to the fnancial statements regarding delisting of Company''s DTP-based combination and monovalent hepatitis B vaccines by World Health Organization (WHO) from its list of pre-qualifed vaccines. Company has stock of raw & packing material and fnished goods of Rs.324.6 million and Rs.394.2 million respectively as at March 31, 2013 of these vaccines which is considered saleable by the management. Further impact if any, of the delisting above products on fxed assets cannot be separately quantifed. As mentioned in the said note, the Company has been taking steps in order to get these products re-listed in the list of prequalifed vaccines of WHO. Pending outcome of the above measures, no adjustments have been made to the accompanying fnancial statements. Our opinion is not qualifed in respect of this matter.

Report on other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2003 ("the OrderÂ) issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Act, we give in the Annexure a statement on the matters specifed in paragraphs 4 and 5 of the Order.

2. As required by section 227(3) of the Act, we report that:

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

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

c) the Balance Sheet, statement of proft and loss and cash fow statement dealt with by this report are in agreement with the books of account;

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

e) on the basis of the written representations received from the directors, as on March 31, 2013, and taken on record by the Board of Directors, we report that none of the directors is disqualifed as on March 31, 2013 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

Annexure referred to in paragraph 1 under the heading "Report on other legal and regulatory requirementsÂ of our report of even date

Re: Panacea Biotec Limited (the Company)

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

b) All fxed assets have not been physically verifed by the management during the year but there is a regular programme of verifcation which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verifcation.

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

ii. a) The management has conducted physical verifcation of inventory at reasonable intervals during the year.

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

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

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

e) The Company has taken loan from one partnership frm covered in the register maintained under Section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs.337.6 million and the year-end balance of loans taken from such parties was Rs.337.6 million.

f) In our opinion and according to the information and explanations given to us, the rate of interest and other terms and conditions for such loans are not prima facie prejudicial to the interest of the Company.

g) In respect of loans taken, repayment of the principal amount is as stipulated and payment of interest has been regular.

iv. In our opinion and according to the information and explanations given to us, and having regard to the explanation that most of the fxed assets purchased are unique and specialized nature and alternate sources do not exist for obtaining comparative quotations thereof, there is an adequate internal control system commensurate with the size of the Company and the nature of its business, for the purchase of inventory and fxed assets and for the sale of goods and services. During the course of our audit, we have not observed any major weakness or continuing failure to correct any major weakness in the internal control system of the company in respect of these areas.

v. a) According to the information and explanations provided by the management, we are of the opinion that the particulars of contracts or arrangements referred to in section 301 of the Companies Act, 1956 that need to be entered into the register maintained under section 301 have been so entered.

b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangements and exceeding the value of Rupees fve lakhs have been entered into during the fnancial year at prices which are reasonable having regard to the prevailing market prices at the relevant time.

vi. In respect of deposits accepted, in our opinion and according to the information and explanations given to us, directives issued by the Reserve Bank of India and the provisions of sections 58A, 58AA or any other relevant provisions of the Companies Act, 1956, and the rules framed there under, to the extent applicable, have been complied with. We are informed by the management that no order has been passed by the Company Law Board, National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal.

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

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

ix. a) Undisputed statutory dues including provident fund, investor education and protection fund, employees'' state insurance, income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty, cess and other material statutory dues have generally been regularly deposited with the appropriate authorities though there has been a slight delay in a few cases.

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

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

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

Income Tax Act, Demand raised by 0.9 1961 Assessing Ofcer

Income Tax Act, Demand raised by 166.1 1961 Assessing Ofcer

The Finance Act, Service Tax Demand 9.9 1994 raised by Assessing Ofcer

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

Income Tax Act, Assessment Year Appeal pending 2007-08 & 2008-09 with AO

Income Tax Act, Assessment Year Appeal pending 2005 - 06 & 2009-10 with CIT(Appeals)

Income Tax Act, Financial Year Pending with 2003-04 to CESTAT and 2011-12 Assessing ofcer

x. The Company''s accumulated losses at the end of the fnancial year are less than ffty per cent of its net worth. The Company has incurred cash losses in the current and immediately preceding fnancial year.

xi. Based on our audit procedures and as per the information and explanations given by the management, the Company, while in the process of getting loans rescheduled, has defaulted in repayment of dues to banks amounting to Rs. 994 million during the year. However, subsequently these loans have been rescheduled by the banks and the moratorium period of 1 year and 9 months has been granted by banks. The Company did not have any outstanding dues in respect of a fnancial institution or debentures during the year.

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

xiii. In our opinion, the Company is not a chit fund or a nidhi / mutual beneft fund / society. Therefore, the provisions

of clause 4(xiii) of the Companies (Auditor''s Report) Order, 2003 (as amended) are not applicable to the Company.

xiv. In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Companies (Auditor''s Report) Order, 2003 (as amended) are not applicable to the Company.

xv. According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from bank or fnancial institutions.

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

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

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

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

xx. During the year under review, the Company has not raised any money through public issue, hence clause 4(xx) of the Companies (Auditor''s Report) Order, 2003 (as amended) is not applicable to the Company.

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

For S.R. Batliboi & Co. LLP

Firm registration number: 301003E

Chartered Accountants

per Rajiv Goyal

Place : Gurgaon Partner

Dated: May 30, 2013 Membership No. 94549

Mar 31, 2012

1. We have audited the attached Balance Sheet of Panacea Biotec Limited ('the Company') as at March 31, 2012 and also the Statement of profit and loss and the cash flow statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

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

4. Without qualifying our opinion, we draw attention to:

a) Note 44 to the financial statements regarding expenditure on Pre-clinical development studies which are under progress amounting to Rs. 68.9 million for year ended March 31, 2012 and Rs. 186.5 million as at March 31, 2012. The ultimate approval of such products, which has been considered as highly likely by the management, is not within direct control of the Company. Pending such final approval, no adjustments have been made to the accompanying financial statements.

b) Note 45 to the financial statements regarding the managerial remuneration of Rs. 66.0 million for the financial year ending March 31, 2012, which is in excess of the limits specified by the relevant provisions of the Companies Act, 1956, by Rs. 42.0 million on account of losses incurred during the current year. The Company has initiated steps to obtain approval from Central Government in respect to excess remuneration paid. Pending outcome of the steps taken, no adjustments have been made to the accompanying financial statements.

c) Note 46 to the financial statements regarding delisting of Company's DTP-based combination vaccines and oral polio vaccines by World Health Organization (WHO) from its list of pre-qualified vaccines. Company has stock of raw material and finished goods inventory of Rs.1,526.7 million and Rs.363.0 million respectively as at March 31, 2012 of the above said vaccines. Impact, if any, on fixed assets relating to the delisting of above products cannot be separately quantified. The Company has initiated steps in order to get these products re-listed in the list of prequalified vaccines of WHO. Pending outcome of the above measures, no adjustments have been made to the accompanying financial statements.

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

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

iv. in our opinion, the balance sheet, statement of profit and loss and cash flow statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956;

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

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

a) in the case of the balance sheet, of the state of affairs of the Company as at March 31, 2012;

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

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

Annexure referred to in paragraph (3) of our report of even date, Re: Panacea Biotec Limited (the Company')

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

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

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

ii. a) The management has conducted physical verification of inventory at reasonable intervals during the year.

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

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

iii. a) The Company has granted loan to one company covered in the register maintained under section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs. 654.3 million and the year- end balance of loans (including interest accrued) granted to the party was Rs. 654.3 million.

b) In our opinion and according to the information and explanations given to us, the rate of interest and other terms and conditions for such loans are not prima facie prejudicial to the interest of the Company.

c) In respect of loans granted, repayment of the principal amount is as stipulated and payment of interest has been regular.

d) There is no overdue amount of loans granted to companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956.

e) The Company has taken loan from one partnership firm covered in the register maintained under Section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs. 472.0 million and the year-end balance of loans taken from such parties was Rs. 277.0 million.

f) In our opinion and according to the information and explanations given to us, the rate of interest and other terms and conditions for such loans are not prima facie prejudicial to the interest of the Company.

g) In respect of loans taken, repayment of the principal amount is as stipulated and payment of interest has been regular.

iv. In our opinion and according to the information and explanations given to us, and having regard to the explanation that most of the fixed assets purchased are unique and specialized nature and alternate sources do not exist for obtaining comparative quotations thereof, there is an adequate internal control system commensurate with the size of the Company and the nature of its business, for the purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit, we have not observed any major weakness or continuing failure to correct any major weakness in the internal control system of the company in respect of these areas.

v. a) According to the information and explanations provided by the management, we are of the opinion that the particulars of contracts or arrangements referred to in section 301 of the Companies Act, 1956 that need to be entered into the register maintained under section 301 have been so entered.

b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangements and exceeding the value of Rupees five lakhs have been entered into during the financial year at prices which are reasonable having regard to the prevailing market prices at the relevant time.

vi. In respect of deposits accepted, in our opinion and according to the information and explanations given to us, directives issued by the Reserve Bank of India and the provisions of sections 58A, 58AA or any other relevant provisions of the Companies Act, 1956, and the rules framed there under, to the extent applicable, have been complied with. We are informed by the management that no order has been passed by the Company Law Board, National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal.

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

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

ix. a) Undisputed statutory dues including provident fund, employees' state insurance, investor education and protection fund, income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty, cess and other material statutory dues have generally been regularly deposited with the appropriate authorities.

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

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

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

Income Tax Act, Income tax Demand 38.4 Assessment Year Appeal pending 1961 raised by Assessing from 2003-04 to with High Court Officer 2008-09

Income Tax Act, Demand raised by 0.8 Assessment Year Appeal pending 1961 Assessing Officer 2007-08 with AO

Income Tax Act, Demand raised by 11.8 Assessment Year Appeal pending 1961 Assessing Officer 2009-10 with CIT (Appeals)

The Finance Act, Service Tax Demand 50.0 Financial Year Pending with 1994 raised by Assessing 2003-04 to CESTAT Officer 2007-09

The Finance Act, Service tax Demand 2.1 Financial Year Pending with 1994 raised by Assessing 2009-10 Assessing Officer Officer

x. The Company has no accumulated losses at the end of the financial year. The Company has incurred cash losses during the year. In the immediately preceding financial year, the Company had not incurred cash loss.

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

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

xiii. In our opinion, the Company is not a chit fund or a nidhi / mutual benefit fund / society. Therefore, the provisions of clause 4(xiii) of the Companies (Auditor's Report) Order, 2003 (as amended) are not applicable to the Company.

xiv. In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Companies (Auditor's Report) Order, 2003 (as amended) are not applicable to the Company.

xv. According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from bank or financial institutions.

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

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

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

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

xx. During the year under review, the Company has not raised any money through public issue, hence clause 4(xx) of the Companies (Auditor's Report) Order, 2003 (as amended) is not applicable to the Company.

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

For S.R.Batliboi & Co.

Firm registration number: 301003E

Chartered Accountants

per Rajiv Goyal

Place: New Delhi Partner

Date: May 18, 2012 Membership No. 94549

Mar 31, 2011

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

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

4. Without qualifying our opinion, we draw attention to:

a) Note 17 of Schedule XX-C to the financial statements regarding capitalization of expenditure on clinical trials amounting to Rs. 67.2 million for year ended March 31, 2011 and Rs. 596.4 million as of March 31, 2011. The ultimate approval of such products, which has been considered as highly likely by the management, is not within direct control of the Company. Pending such final approval, no adjustments have been made to the accompanying financial statements.

b) Note 5 (b) of Schedule XX-C to the financial statements regarding the managerial remuneration of Rs.63 million for the financial year ending 31 st March 2009, which is in excess of the limits specified by the relevant provisions of the Companies Act, 1956, by Rs. 38.2 million. The Company had already obtained approval from Central Government vide its letters dated December 23, 2009, February 15, 2011 and February 18, 2011 in respect to excess remuneration paid amounting to Rs. 29.1 million and for the balance excess remuneration of Rs. 9.1 million, requisite approval is awaited. Pending such final approval, no adjustments have been made to the accompanying financial statements.

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

iii. the Balance Sheet,Profit and Loss Account and cash flow statement dealt with by this report are in agreement with the books of account;

iv. in our opinion, the balance sheet, profit and loss account and cash flow statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956.

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

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

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

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

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

Annexure referred to in paragraph [3] of our report of even date. Re: Panacea Biotec Limited

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

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

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

ii. a) The management has conducted physical verification of inventory at reasonable intervals during the year.

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

c) The Company is maintaining proper records of inventory and no material discrepancies were noticed on physical verification carried out at the end of the year.

iii. a) The Company has granted loan to one company covered in the register maintained under section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs. 771.1 million and the year- end balance of loans (including interest accrued) granted to the party was Rs. 490.4 million.

c) The loans granted are re-payable on demand. As informed, the company has not demanded repayment of any such loan during the year,thus, there has been no default on the part of the party to whom the money has been lent. The payment of interest for loans has been regular.

d) There is no overdue amount of loans granted to company, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956.

e) The Company has taken loan from one partnership firm covered in the register maintained under Section 301 of the Companies Act, 1956.The maximum amount involved during the year was Rs. 362 million and the year-end balance of loans taken from such parties was Rs. 360 million.

g) In respect of loans taken, repayment of the principal amount is as stipulated and payment of interest has been regular.

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

v. a) Accordingtotheinformationandexplanationsprovided by the management, we are of the opinion that the particulars of contracts or arrangements referred to in section 301 of the Act that need to be entered into the register maintained under section 301 have been so entered.

b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangements exceeding value of Rupees five lakhs have been entered into during the financial year at prices which are reasonable having regard to the prevailing market prices at the relevant time.

vi. In respect of deposits accepted, in our opinion and according to the information and explanations given to us, directives issued by the Reserve Bank of India and the provisions of sections 58A, 58AA or any other relevant provisions of the Companies Act, 1956 and the rules framed there under,to the extent applicable, have been complied with.We are informed by the management that no order has been passed by the Company Law Board, National Company Law Tribunal or Reserve Bank of India or any Court or any otherTribunal.

vii. In our opinion, the Company has an internal audit system 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, and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained.

ix. a) Undisputed statutory dues including provident fund, employees' state insurance, investor education and protection fund, income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty, cess and other material statutory dues applicable to it have generally been regularly deposited with the appropriate authorities except for slight delay in few cases in Income tax where amount involved is not significant.

Further, since the Central Government has till date not prescribed the amount of cess payable under section 441 A of the Companies Act, 1956, we are not in a position to comment upon the regularity or otherwise of the company in depositing the same.

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

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

Nameofthe Nature of dues Amount Period to which the Forumwhere statute (Rs in million) amount relates dispute is pending

Income Tax Act, Income tax Demand 27.5 Assessment Year Appeal pending 1961 raised by Assessing 2003-04 with High Court Officer

Income Tax Act, Demand raised by 0.9 Assessment Year Appeal pending 1961 Assessing Officer 2005-06 with ITAT

Income Tax Act, Demand raised by 2.2 Assessment Year Appeal pending 1961 Assessing Officer 2006-07 with ITAT

Income Tax Act, Demand raised by 4.8 Assessment Year Appeal pending 1961 Assessing Officer 2007-08 with ITAT

Income Tax Act, Demand raised by 4.9 Assessment Year Appeal pending 1961 Assessing Officer 2008-09 with CIT(Appeals)

The Finance Act, Service Tax Demand 50.0 Financial Year Pending with 1994 raised by Assessing 2003-04to CESTAT Officer 2007-09

The Finance Act, Service tax Demand 2.1 Financial Year Pending with 1994 raised by Assessing 2009-10 Assessing Officer Officer

Central Excise Act, Excise Duty Demand 1.7 Financial Year Pending with 1944 raised by Assessing 2000-01 to Assessing Officer Officer 2001-02

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

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

xiii. In our opinion, the Company is not a chit fund or a nidhi / mutual benefit fund / society. Therefore, the provisions of clause 4(xiii) of the Companies (Auditor's Report) Order,2003 (as amended) are not applicable to the Company.

xiv. In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly,the provisions of clause 4(xiv) of the Companies (Auditor's Report) Order, 2003 (as amended) are not applicable to the Company.

xv. According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from bank or financial institutions.

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

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

xix. The Company had unsecured 'Zero Coupon Convertible Bonds due 2011'outstanding which have been redeemed during the year.

For S.R.Batliboi& Co.

Firm registration number: 301003E

Chartered Accountants

per Rajiv Goyal

New Delhi Partner

May 13,2011 Membership No.: 94549

Mar 31, 2010

1. We have audited the attached balance sheet of Panacea Biotec Limited ("the Company") as at March 31, 2010 and also the profit and loss account and the cash flow statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

4. Without qualifying our opinion, we draw attention to:

a) Note 3(ii) of Schedule XX C to the financial statements regarding non-provision of proportionate premium on redemption of`US$ 50 Million Zero Coupon Convertible Bonds due 2011amounting to Rs. 564,995,867.The same has been disclosed as a contingent liability. Management has represented, that the redemption premium will be offset against the securities premium account and, hence, no adjustments have been considered in the accounts.

b) Note 17 of Schedule XX C to the financial statements regarding capitalization of expenditure on clinical trials amounting to Rs. 32,125,547 for year ended March 31, 2010 and Rs. 479,497,285 as of March 31,2010.The ultimate approval of such products, which has been considered as highly likely by the management, is not within direct control of the Company. Pending such final approval, no adjustments have been made to the accompanying financial statements.

c) Note 5 (b) of Schedule XX C to the financial statements, The Company had incurred managerial remuneration of Rs. 63,035,463 for the financial year ending 31st March 2009, which was in excess of the limits specified by the relevant provisions of the Companies Act, 1956, by Rs. 38,169,706. The Company has obtained approval from Central Government vide its letter dated December 23, 2009 in respect to remuneration paid amounting to Rs.25,296,096 and the requisite approval for balance remuneration is awaited. Pending the final outcome of the Companys application for balance remuneration, no adjustments have been made to the accompanying financial statements in this regard.

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

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

iv) In our opinion, the balance sheet, profit and loss account and cash flow statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956;

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

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 the affairs of the Company as at March 31,2010;

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

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

Annexure referred to in paragraph [3] of our report of even date Re: Panacea Biotec Limited (the Company)

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

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

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

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

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

(iii) a) The Company has granted loan to two companies covered in the register maintained under section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs. 739,605,679 and the year- end balance of loans granted to such parties was Rs. 733,461,803.

c) The loans granted are re-payable on demand. As informed, the company has not demanded repayment of any such loan during the year, thus, there has been no default on the part of the parties to whom the money has been lent. The payment of interest (whenever due) for loans has been regular.

d) There is no overdue amount of loans granted to companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956.

e) The Company has taken loan from one partnership firm covered in the register maintained under Section 301 of the Companies Act, 1956.The maximum amount involved during the year was Rs. 335,147,700 and the year-end balance of loans taken from such parties was Rs. 315,000,000.

g) In respect of loans taken, repayment of the principal amount is as stipulated and payment of interest has been regular.

(iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business, for the purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit, no major weakness has been noticed in the internal control system in respect of these areas.

(vi) In respect of deposits accepted, in our opinion and according to the information and explanations given to us, directives issued by the Reserve Bank of India and the provisions of sections 58A, 58AA or any other relevant provisions of the Companies Act, 1956 and the rules framed there under, to the extent applicable, have been complied with. We are informed by the management that no order has been passed by the Company Law Board, National Company Law Tribunal or Re- serve Bank of India or any Court or any other Tribunal.

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

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

(ix) a) Undisputed statutory dues including provident fund, investor education and protection fund, employeesstate insurance, income-tax, sales-tax, wealth-tax, service tax, custom duty, excise duty and other statutory dues have generally been regularly deposited with the appropriate authorities except for slight delay in fewcasesin Value added tax (VAT) deposition, where amount involved is not significant.

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

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

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

The Income Tax Act, 1961 Demand raised by Assessing Officer 39,255,799 Financial Year 2003-04 Pending with Delhi High Court

The Income Tax Act, 1961 Demand raised by Assessing Officer 30,084 Financial Year 2005-06 Pending with ITAT The

Income Tax Act, 1961 Demand raised by Assessing Officer 5,488,062 Financial Year 2007-08 Pending with CIT(Appeals) The Fina nce Act, 1994 Demand raised by Assessing Officer 27,883,707 Financial Year 2003-04 Pending with Assessing Officer (Service tax) to 2007-08

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

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

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

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

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

(xv) According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions.

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

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

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

(xix) The Company has unsecured`Zero Coupon Convertible Bonds due 2011 outstanding during the year on which no security or charge is required to be created.

(xx) We have verified that the end use of money raised by public issues is as disclosed in the notes to the financial statements (Refer Note 3(iii) of Schedule XX C to Financial Statements).

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

S.R. Batliboi&Co.

Firm registration number: 301003E

Chartered Accountants

per Rajiv Goyal

Place : New Delhi Partner

Date : May 07, 2010 Membership No.: 94549

Mar 31, 2009

1. We have audited the attached balance sheet of Panacea Biotec Limited ("the Company") as at March 31, 2009 and also the profit and loss account and the cash flow statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the 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 auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the fnancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the fnancial statements. An audit also includes assessing the accounting principles used and signifcant estimates made by management, as well as evaluating the overall fnancial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

4. Without qualifying our opinion, we draw attention to:

a) Note 3(ii) of Schedule XXC to the fnancial statements regarding non-provision of proportionate premium on redemption of `US$ 50 Million Zero Coupon Convertible Bonds due 2011 amounting to Rs.470,992,269. The same has been disclosed as a contingent liability. Management has represented, that the redemption premium will be offset against the securities premium account and, hence, no adjustments have been considered in the accounts.

b) Note 17 of Schedule XXC to the fnancial statements regarding capitalization of expenditure on clinical trials amounting to Rs.123,978,449. The ultimate approval of such products, which has been considered as highly likely by the management, is not within direct control of the Company. Pending such fnal approval, no adjustments have been made to the accompanying fnancial statements.

c) Note 5(b) of Schedule XXC to the fnancial statements, The Company has incurred managerial remuneration of Rs.63,035,463 during the year, which is in excess of the limits specifed by the relevant provisions of the Companies Act, 1956, by Rs.38,169,706. The Company has made an application to the appropriate regulatory authorities in this regard, for payment of such excess remuneration to managerial personnel. Pending the fnal outcome of the Companys application, no adjustments have been made to the accompanying fnancial statements in this regard.

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

iii) The balance sheet, proft and loss account and cash fow statement dealt with by this report are in agreement with the books of account;

iv) in our opinion, the balance sheet, proft and loss account and cash fow statement dealt with by this report, comply with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956;

v) on the basis of written representations received from the directors, as on March 31, 2009, and taken on record by the Board of Directors, we report that none of the directors is disqualified as on March 31, 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 the affairs of the Company as at March 31, 2009;

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

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

Annexure referred to in paragraph [3] of our report of even date, Re: Panacea Biotec Limited

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

b) All fxed assets have not been physically verifed by the management during the year but there is a regular program of verifcation, which in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. As informed, no material discrepancies were noticed in respect of the fxed assets physically verifed during the year.

c) There was no substantial disposal of fxed assets during the year.

ii) a) The management has conducted physical verifcation of inventory at reasonable intervals during the year.

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

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

iii) a) The Company has granted loan to three companies covered in the register maintained under section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs.819,644,921 and the year-end balance of loans granted to such parties was Rs.819,644,921.

c) The loans granted are re-payable on demand. As informed, the company has not demanded repayment of any such loan during the year, thus, there has been no default on the part of the parties to whom the money has been lent. The payment of interest (whenever due) for loans has been regular.

d) There is no overdue amount of loans granted to companies, frms or other parties listed in the register maintained under section 301 of the Companies Act, 1956.

e) The Company has taken loan from one partnership firm covered in the register maintained under Section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs.533,428,059 and the year-end balance of loans taken from such parties was Rs.300,000,000.

g) In respect of loans taken, repayment of the principal amount is as stipulated and payment of interest has been regular.

iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business, for the purchase of inventory and fxed assets and for the sale of goods and services. During the course of our audit, no major weakness has been noticed in the internal control system in respect of these areas.

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

b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangements exceeding value of Rupees fve lakhs have been entered into during the fnancial year at prices which are reasonable having regard to the prevailing market prices at the relevant time.

vi) In respect of deposits accepted, in our opinion and according to the information and explanations given to us, directives issued by the Reserve Bank of India and the provisions of sections 58A, 58AA or any other relevant provisions of the Companies Act, 1956 and the rules framed there under, to the extent applicable, have been complied with. We are informed by the management that no order has been passed by the Company Law Board, National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal.

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

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

ix) a) Undisputed statutory dues including provident fund, investor education and protection fund, employees state insurance, income-tax, sales-tax, wealth-tax, service tax, custom duty, excise duty, cess have generally been regularly deposited with the appropriate authorities except for slight delay in few cases, where amount involved is not signifcant, in the depositing of Value added tax (VAT), employees state insurance and service tax.

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

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

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

Income Tax Demand raised by 50,000 Act, 1961 Assessing Offcer

Income Tax Demand raised by 60,557 Act, 1961 Assessing Offcer

The Finance Demand raised by 29,789,842 Act, 1994 Assessing Officer

Period to Forum where which the dispute amount relates is pending

Assessment Appeal pending Year 2005-06 with CIT (Appeals)

Assessment Appeal pending Year 2006-07 with CIT (Appeals)

Financial Year Pending with 2003-04 to 2007-08 Assessing Offcer

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

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

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

xiii) In our opinion, the Company is not a chit fund or a nidhi/ mutual beneft fund / society. Therefore, the provisions of clause 4(xiii) of the Order are not applicable to the Company.

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

xv) According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or fnancial institutions.

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

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

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

xix) The Company has unsecured `Zero Coupon Convertible Bonds due 2011 outstanding during the year on which no security or charge is required to be created.

xx) We have verifed that the end use of money raised by public issues is as disclosed in the notes to the fnancial statements (Refer Note 3(iii) of Schedule XXC to Financial Statements).

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

For S.R. Batliboi & Co. Chartered Accountants

per Manoj Gupta New Delhi Partner May 27, 2009 Membership No. 83906

Mar 31, 2008

1. We have audited the attached Balance Sheet of Panacea Biotec Limited as at March 31, 2008 and also the Profit and Loss Account and the Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the 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 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 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.

4. Without qualifying our opinion, we draw attention to:

a) Note 3(iii) of Schedule XX C to the financial statements regarding non-provision of proportionate premium on redemption of US$ SO Million Zero Coupon Convertible Bonds due 2011 amounting to Rs.243,706,599.The same has been disclosed as a contingent liability.

b) Note 17 of Schedule XX C to the financial statements regarding capitalization of expenditure on clinical trials amounting to Rs.185,575,387. The ultimate approval of such products, which has been considered as highly likely by the management, is not within direct control of the entity.

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

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

iv in our opinion, the balance sheet, profit and loss account and cash flow statement dealt with by this report, comply with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956;

v on the basis of written representations received from the directors, as on March 31,2008, and taken on record by the Board of Directors, we report that none of the directors is disqualified as on March 31,2008 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 the affairs of the Company as at March 31,2008;

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 referred to in paragraph [3] of our report of even date, Re: Panacea Biotec Limited

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

b) All fixed assets have not been physically verified by the management during the year but there is a regular program of verification, the frequency of which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed in respect of the fixed assets physically verified during the year.

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

ii) a) The management has conducted physical verification of inventory at reasonable intervals during the year.

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

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

iii) a) The Company has granted loan to five companies covered in the register maintained under section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs.2,612,784,182 and the year- end balance of loans granted to such parties was Rs.39,778,050.

c) The loans granted are re-payable on demand. As informed, the company has not demanded repayment of any such loan during the year, thus, there has been no default on the part of the parties to whom the money has been lent. The payment of interest for loans other than loans to subsidiary has been regular. Loans given to subsidiaries are interest free.

d) There is no overdue amount of loans granted to companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956.

e) The Company has taken loan from 4 parties covered in the register maintained under Section 301 of the Companies Act, 1956.The maximum amount involved during the year was Rs.456,283,860 and the year-end balance of loans taken from such parties was Rs.432,500,000.

g) In respect of loans taken, repayment of the principal amount is as stipulated and payment of interest has been regular.

iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business, for the purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit, no major weakness has been noticed in the internal control system in respect of these areas.

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

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

ix) a) Undisputed statutory dues including provident fund, investor education and protection fund, employees state insurance, income-tax, sales-tax, wealth-tax, service tax, custom duty, excise duty, cess have generally been regularly deposited with the appropriate authorities except for slight delay in few cases, where amount involved is not significant, in the deposition of tax deducted at source.

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

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

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

Income Tax Demand raised 1,244,155 Act, 1961 by CIT

Income Tax Demand raised by 1,619,096 Act, 1961 Assessing Officer

Period to Forum where which the dispute amount relates is pending

Assessment Appeal pending Year 2003-04 at lTAT

Assessment Appeal filed Year 2005-06 with CIT

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

xiii) In our opinion the Company is not a chit fund or a nidhi / mutual benefit fund / society.Therefore, the provisions of clause 4(xiii) of the Order are not applicable to the Company.

xiv) In our opinion and according to the information and explanation given to us, the Company is not dealing in or trading in shares, securities, debentures and other investments.

xv) According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions.

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

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

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

xix) The Company has unsecured Zero Coupon Convertible Bonds due 2011 outstanding during the year on which no security or charge is required to be created.

xx) We have verified that the end use of money raised by issue of Zero Coupon Convertible Bonds due 2011 is as disclosed in the notes to the financial statements. (Refer Note 3(iv) of Schedule XXC to Financial Statements.

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

For S.R. Batliboi & Co. Chartered Accountants

per Manoj Gupta New Delhi Partner June 26,2008 Membership No. 83906

Mar 31, 2007

1. We have audited the attached Balance Sheet of Panacea Biotec Limited as at March 31, 2007 and also the Profit and Loss Account and the Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company's management.Our responsibility is to express an opinion on these financial statements based on our audit.

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

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

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

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

v. on the basis of written representations received from the directors,as on March 31,2007, and taken on record by the Board of Directors, we report that none of the directors is disqualified as on March 31, 2007 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956;

vi. Without qualifying our opinion, we draw attention to Note 3(iv) of Schedule XIX C of the financial statements regarding non-provision of proportionate premium on redemption of US$ 50 million Zero Coupon Convertible Bonds due 2011'amounting to Rs.l59,623,752. The same has been disclosed as a contingent liability.

vii. Without qualifying our opinion, we draw attention to Note 5(a) of Schedule XIX C of the financial statements regarding provision of commission payable to Directors amounting to Rs.l 85,049,736. The same is pending approval of shareholders and shall be placed for their approval in the forthcoming shareholders'meeting of the Company.

viii. Without qualifying our opinion, we draw attention to Note 18 of Schedule XIX C of the financial statements regarding capitalization of expenditure on clinical trials amounting to Rs.91,557,518. The ultimate approval of such products, which has been considered as highly likely by the management, is not within the direct control of the entity.

ix. Attention is invited to note no. 16 of Schedule XIX C of the financial statements relating to liability for interest and required disclosures under "The Micro, Small and Medium Enterprises Development Act, 2006". The Company is in the process of compiling information regarding measurement and disclosures prescribed by the Act. In view of the above, we are unable to comment on the impact of the same on financial statements.

x. Subject to the comments in paragraph 4(ix) above where consequential effects on the financial statements are not ascertainable, in our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India;

a) in the case of the Balance Sheet, of the state of the affairs of the Company as at March 31,2007;

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.

For S.R. Batliboi & Co. Chartered Accountants per Manoj Gupta Partner Membership No.83906

New Delhi June 14,2007

Annexure referred to in paragraph [3] of our report of even date, Re: Panacea Biotec Limited

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

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

ii) a) The management has conducted physical verification of inventory at reasonable intervals during the year.

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

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

iii) a) The Company has granted loan to one company covered in the register maintained under section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs.21,186,411 and the year-end balance of loans granted to such parties was Rs.21,186,411.

c) The loans granted are re-payable on demand. As informed, the company has neither demanded repayment of any such loan nor any interest was payable during the year, thus, there has been no default on the part of the party to whom the money has been lent.

d) There is no overdue amount more than rupees one lakh of loans granted to companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956.

e) The Company has taken loan from 4 parties covered in the register maintained under section 301 of the Companies Act, 1956.The maximum amount involved during the year was Rs.173,796,370 and the year-end balance of loans taken from such parties was Rs.173,490,000.

g) In respect of loans taken, repayment of the principal amount is as stipulated and payment of interest has been regular.

iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business, for the purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit, no major weakness has been noticed in the internal control system in respect of these areas.

vi) In respect of deposits accepted, in our opinion and according to the information and explanations given to us, directives issued by the Reserve Bank of India and the provisions of sections 58A, 58AA or any other relevant provisions of the Companies Act, 1956 and the rules framed there under, to the extent applicable, have been complied with.We are informed by the management that no order has been passed by the Company Law Board, National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal,

vii) In our opinion, the Company has an internal audit system commensurate with the size and nature of its business, viii) We have broadly reviewed the books of account maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under section 209(1)(d) of the Companies Act, 1956, and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained.

ix) a) Undisputed statutory dues including provident fund, investor education and protection fund, employees' state insurance, income-tax, sales-tax, wealth-tax, service tax, custom duty, excise duty, cess have generally been regularly deposited with the appropriate authorities except for slight delay in few cases, where amount involved is not significant, in deposit of tax deducted at source.

b) According to the information and explanations given to us, undisputed dues in respect of Central Sales Tax of Rs.121,721,909 (including accrued interest of Rs.28,089,671) was outstanding, at the year end for a period of more than six months from the date they became payable. There are no other undisputed amounts payable in respect of provident fund, investor education and protection fund, employees' state insurance, income-tax, wealth-tax, service tax, sales-tax, customs duty, excise duty, cess and other undisputed statutory dues were outstanding, at the year end, for a period of more than six months from the date they became payable.

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

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

Income Tax Demand raised 1,244,155 Assessment Appeal pending Act, 1961 by CIT Year 2003-04 at ITAT

Income Tax Demand raised 1,108,868 Assessment Appeal filed Act, 1961 by Assessing Year 2004-05 with CIT Officer

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

xiii) In our opinion,the Company is not a chit fund or a nidhi/mutual benefit fund/society.Therefore, the provisions of clause 4(xiii) of the Order are not applicable to the Company.

xiv) In respect of dealing in shares, securities and other investments, in our opinion and according to the information and explanations given to us, proper records have been made of the transactions and contracts and timely entries have been made therein.The shares and securities have been held by the Company in its own name.

xv) According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions.

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

xvii) According to the information and explanations given to us and on overall examination of the Balance Sheet and Cash Flow Statement of the Company, we report that no funds raised on short-term basis have been used for long-term investments.

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

xix) The Company has unsecured `Zero Coupon Convertible Bonds due 2011' outstanding during the year on which no security or charge is required to be created.

xx) We have verified that the end use of money raised by issue of `Zero Coupon Convertible Bonds due 2011' is as disclosed in the notes to the financial statements. (Refer Note 3(vi) of Schedule XlXC to Financial Statements).

For S.R.Batliboi & Co. Chartered Accountants per Manoj Gupta Partner Membership No. 83906

New Delhi June 14, 2007

Mar 31, 2006

1. We have audited the attached Balance Sheet of Panacea Biotec Limited as at March 31, 2006 and also the Profit and Loss Account and the Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

3. As required by the Companies (Auditor's Report) Order, 2003 (as amended) issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1 956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4. Further to our comments in the annexure referred to in 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, proper books of account as required by law, have been kept by the Company, so far as appears from our examination of the 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;

v. on the basis of written representations received from the directors, as on March 31, 2006, and taken on record by the Board of Directors, we report that none of the directors is disqualified as on March 31, 2006 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956;

vi. without qualifying our opinion, we draw attention to Note 3(v) of Schedule XIX B to the financial statements regarding non- provision of proportionate premium on redemption of `US$ 50 Million Zero Coupon Convertible Bonds due 2011'. The same has been disclosed as a contingent liability.

vii. 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 the affairs of the Company as at March 31, 2006;

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.

For S. R. Batliboi & Co. Chartered Accountants

Per Manoj Gupta Place : New Delhi Partner Dated : 22nd May, 2006 Membership No. 83906

Annexure referred to in paragraph [3] of our report of even date

Re: Panacea Biotec Limited

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

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

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

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

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

(iii) a) As informed, the Company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly, paragraphs (iii) (b), (c) and (d) of the Companies (Auditor's Report) Order, 2003 (as amended) (herein referred to as the Order), are not applicable.

e) The Company has taken loan from 3 parties covered in the register maintained under section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs. 315,540,000 and the year-end balance of loans taken from such parties was Rs. 135,000,000.

g) In respect of loans taken, repayment of the principal amount is as stipulated and payment of interest has been regular.

(v) a) According to the information and explanations provided by the management, we are of the opinion that the particulars of contracts or arrangements referred to in section 301 of the Act that need to be entered into the register maintained under section 301 have been so entered, b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangements exceeding value of Rupees five lakhs have been entered into during the financial year at prices which are reasonable having regard to the prevailing market prices at the relevant time.

(vi) In respect of deposits accepted, in our opinion and according to the information and explanations given to us, directives issued by the Reserve Bank of India and the provisions of sections 58A, 58AA or any other relevant provisions of the Companies Act, 1956 and the rules framed thereunder, to the extent applicable, have been complied with. We are informed by the management that no order has been passed by the Company Law Board, National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal,

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

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

(ix) a) Undisputed statutory dues including provident fund, investor education and protection fund, employees' state insurance, income-tax, sales-tax, wealth-tax, service tax, custom duty, excise duty, cess have generally been regularly deposited with the appropriate authorities except for slight delay in few cases, where amount involved is not significant, in the deposition of tax deducted at source.

b) According to the information and explanations given to us, undisputed dues in respect of Central Sales Tax of Rs.93,632,238 was outstanding, at the year end for a period of more than six months from the date they became payable. There are no other undisputed amounts payable in respect of provident fund, investor education and protection fund, employees' state insurance, income-tax, wealth-tax, service tax, sales-tax, customs duty, excise duty, cess and other undisputed statutory dues were outstanding, at the year end, for a period of more than six months from the date they became payable.

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

Name of the statute - Income Tax Act, 1961 Nature of dues - Demand raised by ACIT for certain additions Amount (Rs) - 39,689,887 Period to which the amount relates - Assessment year 2001-02 and 2003-04 Forum where dispute is pending - CIT (Appeals)

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

(xiii) In our opinion, the Company is not a chit fund or a nidhi/mutual benefit fund/society. Therefore, the provisions of clause 4(xiii) of the Order are not applicable to the Company.

(xiv) In respect of dealing in shares, securities and other investments, in our opinion and according to the information and explanations given to us, proper records have been made of the transactions and contracts and timely entries have been made therein. The shares and securities have been held by the Company in its own name.

(xv) According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions.

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

(xvii) According to the information and explanations given to us and on an overall examination of the Balance Sheet and Cash Flow Statement of the Company, we report that no funds raised on short-term basis have been used for long-term investments.

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

(xix) The Company has unsecured `Zero Coupon Convertible Bonds due 2011' outstanding during the year on which no security or charge is required to be created.

(xx) We have verified that the end use of money raised by issue of `Zero Coupon Convertible Bonds due 2011' is as disclosed in the notes to the financial statements. (Refer Note 3(iv) of Schedule XIXB to Financial Statements).

(xxi) We have been informed that an employee of the Company had committed breach of trust and mis-appropriated funds of Rs. 14 lacs during the year under review. The fraud was detected in time by the management. Legal action was taken and the amount has been recovered in full from the employee. Based upon the audit procedures performed for the purpose of reporting true and fair view of the financial statements and as per the information and explanations given by the management, we report that no other fraud on or by the Company has been noticed or reported during the course of our audit.

For S. R. Batliboi & Co. Chartered Accountants Per Manoj Gupta Partner Membership No. 83906

Place : New Delhi Dated : 22nd May, 2006

Mar 31, 2005

1. We have audited the attached Balance Sheet of Panacea Biotec Limited as at March 31,2005 and also the Profit and Loss Account and the Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

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

v. on the basis of written representations received from the directors, as on March 31, 2005, and taken on record by the Board of Directors, we report that none of the directors is disqualified as on March 31, 2005 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956;

a) in the case of the Balance Sheet, of the state of the affairs of the Company as at March 31, 2005;

b) in the case of the Profit and Loss Account, of the prof it 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.

For S. R. Batliboi & Co. Chartered Accountants

Per Manoj Gupta Membership No. 83906

Place: New Delhi Partner Dated: 31st May, 2005

Annexure referred to in paragraph (3) of our report of even date, Re: Panacea Biotec Limited

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

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

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

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

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

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

b) The Company has taken loan from 25 parties covered in the register maintained under section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs.27,11,60,349 and the year-end balance of loans taken from such parties was Rs.26,73,55,349.

c) In our opinion and according to the information and explanations given to us, the rate of interest and other terms and conditions for such loans are not prima facie prejudicial to the interest of the Company.

d) In respect of loans taken, repayment of the principal amount is as stipulated and payment of interest has been regular.

(vi) In respect of deposits accepted, in our opinion and according to the information and explanations given to us, directives issued by the Reserve Bank of India and the provisions of sections 58A, 58AA or any other relevant provisions of the Companies Act, 1956andthe rules framed there under, to the extent applicable, have been complied with. We are informed by the management that no order has been passed by the Company Law Board, National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal.

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

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

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

c) According to the information and explanations given to us, there are no dues of income-tax, sales tax, wealth-tax, service tax, custom duty, excise duty and cess which have not been deposited on account of any dispute, (x) The Company has no accumulated losses at the end of the financial year and it has not incurred cash losses in the current and immediately preceding financial year.

(xiii) In our opinion, the Company is not a chit fund or a nidhi/mutual benefit fund/society. Therefore, the provisions of clause 4(xiii) of the Order are not applicable to the Company.

(xv) According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions.

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

(xviii) The Company has not made any preferential allotment of shares to parties or companies covered in the register maintained underSection301 of the Companies Act, 1956.

(xix) According to the information and explanations given to us, security was created in respect of the debentures issued by the Company in earlier years. The debentures have been redeemed during the current year.

(xx) The Company has not raised any money through a public issue during the year.

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

For S. R. Batliboi & Co. Chartered Accountants

Per Manoj Gupta Partner Membership No. 83906

Place: New Delhi Dated: 31st May, 2005

Mar 31, 2004

1. We have audited the attached Balance Sheet of Panacea Biotec Limited as at March 31, 2004 and also the Profit and Loss Account and the Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

3. As required by the Companies (Auditor's 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. Further to our comments in the Annexure referred to above, we report that:

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

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

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

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

v) On the basis of written representations received from the directors, as on March 31, 2004, and taken on record by the Board of Directors, we report that none of the directors is disqualified as on March 31, 2004 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956;

a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2004;

b) in the case of the Profit & 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.

For S. R. Batliboi & Co. Chartered Accountants Per MANOJ GUPTA Place: New Delhi Partner Dated: 30th June, 2004 Membership No, 83906

Annexure referred to in paragraph 3 of our report of even date, Re: Panacea Biotec Limited

i) a) The Company is maintaining fixed assets records in quantitative terms. However, for other details/particulars, the Company is in the process of updating the records.

b) Fixed assets have been physically verified by the management during the year and no material discrepancies were identified on such verification.

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

ii) a) The management has conducted physical verification of inventory at reasonable intervals during the year.

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

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

iii) a) The Company had taken loan from 28 parties covered in the register maintained under section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs.11,96,00,000 and the year-end balance of loans taken from such parties was Rs.11,83,50,000. The Company has not granted any loans to parties covered under Section 301 of the Companies Act, 1956.

b) In our opinion and according to the information and explanations given to us, the rate of interest and other terms and conditions for such loans taken, are not prima facie prejudicial to the interest of the Company.

c) In respect of loans taken, repayment of the principal amount is as stipulated and payment of interest have been regular.

d) There is no overdue amount of loans taken from companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956.

iv) In our opinion and according to the information and explanations given to us, and having regard to the explanations that some of the items are of a specialized nature for which alternative quotations are not available, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business, for the purchase of inventory and fixed assets and for the sale of goods. During the course of our audit, no major weakness has been noticed in the internal controls in respect of these areas.

v) a) According to the information and explanations provided by the management, we are of the opinion that the transactions that need to be entered into the register maintained under section 301 have been so entered.

b) In our opinion and according to the information and explanations given to us, the transactions with parties with whom transactions exceeding value of Rupees five lakhs have been entered into during the financial year are at prices which are reasonable having regard to the prevailing market prices at the relevant time.

vi) In our opinion and according to the information and explanations given to us, directives issued by the Reserve Bank of India and the provisions of Sections 58A and 58AA of the Companies Act, 1956 and the rules framed there under, to the extent applicable, have been complied with. We are informed by the management that no order has been passed by the National Company Law Tribunal under Sections 58A and 58AA.

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

ix) a) The Company is regular in depositing with appropriate authorities undisputed statutory dues including provident fund, investor education and protection fund, employees' state insurance, income tax, sales tax, wealth tax, custom duty, excise duty, cess and other material statutory dues applicable to it.

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

c) According to the information and explanations given to us, there are no dues of provident fund, investor education and protection fund, employees' state insurance, sales tax, income tax, custom duty, wealth tax, excise duty and cess which have not been deposited on account of any dispute.

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

xiii) As informed, the Company is not a chit fund or a nidhi/mutual benefit fund/society. Therefore, the provisions of clause 4(xiii) of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company.

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

xv) According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from bank or financial institutions.

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

xvii) According to the information and explanations given to us and on an overall examination of the balance sheet and cash flow statement of the Company, we report that no funds raised on short-term basis have been used for long-term investment and no long-term funds have been used to finance short-term assets except in respect of Preference Share Capital of Rs.90,43,49,140 raised during the year, which has been used to meet the working capital requirements of the Company.

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

xix) Security was created in respect of the debentures issued by the Company in earlier years and outstanding at the end of year.

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

For S. R. Batliboi & Co. Chartered Accountants Per MANOJ GUPTA Place: New Delhi Partner Dated: 30th June, 2004 Membership No. 83906

Mar 31, 2003

We have audited the attached Balance Sheet of Panacea Biotec Limited, as at 31st March 2003 and also the Profit and Loss Account and the Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

1. 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.

2. As required by the Manufacturing and Other Companies (Auditors' Report) Order, 1988 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.

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

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

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

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

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

(v) On the basis of written representations received from the directors as on 31st March, 2003, and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March, 2003 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, read together with the Notes and Schedules annexed thereto, give the information required by the Companies Act, 1956 in the manner so required and give atrue and fair view in confirmity 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, 2003;

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

Annexure to the Auditors' Report

(Referred to in paragraph 2 of our report of even date on the Statement of Accounts of Panacea Biotec Limited as at and for the year ended 31st March, 2003)

1. The Company is maintaining fixed assets records in quantitative terms. However, for other details/particulars, the Company is in the process of updating the records. The management has physically verified the Fixed Assets at reasonable intervals and discrepancies observed on such verification as compared to book records, which were not material have been properly dealt with in the books of accounts.

2. None of the fixed assets have been revalued during the year.

3. Physical verification has been conducted by the management, of stocks of finished goods, trading goods, stores and spare parts, raw materials and packing materials at reasonable intervals during the year.

4. In our opinion and according to the information and explanations given to us, 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.

5. The discrepancies between the physical stocks and the book records, which were not material, have been properly dealt with in the books of accounts.

7. The Company has taken unsecured loans from a company, directors, relatives and other parties listed in the register maintained under Section 301 of the Companies Act, 1956 and the rates of interest and other terms and conditions of such loans are prima facie not prejudicial to the interests of the Company. Further, the Company has not taken any loans, secured or unsecured, from the companies under the same management as defined under sub-section (1B) of Section 370 of the Companies Act, 1956.

8. The Company has not granted any loans, secured or unsecured, to companies, firms or other parties listed in the register maintained under Sections 301 of the Companies Act, 1956 or to the companies under the same management as defined under sub-section (1B) of Section 370 of the Companies Act, 1956.

9. The parties (including staff) to whom loans or advances in the nature of loans have been given by the Company, are repaying the principal amounts as stipulated and are also regular in the payment of interest, wherever applicable.

10. In our opinion and according to the information and explanations given to us, and having regard to the explanations that some of the items are of a specialised nature for which alternative quotations are not available, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business for the purchase of stores, raw & packing materials, trading goods, plant and machinery, equipment and other assets, and for the sale of goods.

11. According to the information and explanations given to us, there are no transactions of purchase of goods and materials and sale of goods, materials and services made in pursuance of contracts or arrangements required to be entered in the Register maintained under Section 301 of the Companies Act, 1956 and aggregating during the year to Rs.50,000 (Rupees fifty thousand) or more in respect of each party.

12. According to the information and explanations given to us, the Company has reasonable system of determination of unservicable, expired or damaged stores, raw materials, packing materials and finished goods and adequate provision has been made in the accounts for the loss arising on the items so determined.

13. The Company has accepted deposits from the public and has complied with the directives issued by the Reserve Bank of India and the provisions of Section 58A of the Companies Act, 1956, and the rules framed there under.

14. In our opinion, the Company is maintaining reasonable records for the sale and disposal of realisable scrap. The Company's manufacturing process does not produce any by-product.

15. In our opinion, the Company has an Internal Audit system, which is adequate in relation to the size of the Company and the nature of its business.

16. We have broadly reviewed the books of accounts maintained by the Company pursuant to the Order made by the Central Government for the maintenance of Cost Records under Section 209 (1) (d) of the Companies Act, 1956 and are of opinion that prima facie the prescribed Accounts and Records are being maintained. However, we have not carried out any detailed examination of such accounts and records.

17. The Company has been regular in depositing of Provident Fund and Employees' State Insurance dues with the appropriate authorities.

18. According to the information and explanations given to us, there were no undisputed amounts payable in respect of Income Tax, Wealth Tax, Custom Duty, Excise Duty and Sales Tax which have remained outstanding as at 31st March, 2003 for a period of more than six months from the date they became payable.

19. According to the information and explanations given to us and on the basis of the records examined by us, no personal expenses have been charged to the Profit and Loss Account, other than those payable under any contractual obligations or in accordance with generally accepted business practices.

20. The Company is not a Sick Industrial Company within the meaning of clause (o) of sub-section (1) of Section-3 of the Sick Industrial Companies (Special Provisions) Act, 1985.

21. As informed to us, the Company does not have any damaged goods in respect of its trading activity.

S. R. BATLIBOI & CO. CHARTERED ACCOUNTANTS

Per Place: New Delhi Manoj Gupta Date: 28th June, 2003 Partner

Mar 31, 2002

We have audited the attached Balance Sheet of Panacea Biotec Limited, as at 31st March 2002 and also the Profit and Loss Account for the year ended on that date annexed thereto. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit;

2. As required by the Manufacturing and Other Companies (Auditors Report) Order, 1988 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.

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

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

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

(iii) The Balance Sheet and Profit and Loss Account dealt with by this report are in agreement with the books of account;

(iv) In our opinion, the Balance Sheet and Prof it and Loss Account dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956;

(v) On the basis of written representations received from the directors as on 31st March, 2002, and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March, 2002 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956.

4. In our opinion, and to the best of our information and according to the explanations given to us, the said Balance Sheet and Profit and Loss Account, read together with the Notes and Schedules annexed thereto, give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view:

(a) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2002; and

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

Annexure to the Auditors Report

(Referred to in paragraph 2 of our report of even date on the Statement of Accounts of Panacea Biotec Limited as at and for the year ended 31st March, 2002)

1. The Company is maintaining fixed assets records in quantitative terms however, for other details/particulars, the Company is in the process of updating records. The management has physically verified the Fixed Assets at reasonable intervals and no material discrepancy was reported to have been observed on such verification as compared to book records.

2. None of the fixed assets have been revalued during the year.

4. In our opinion and according to the information and explanations given to us, the procedure of physical verification of stocks followed by the management is reasonable and adequate in relation to the size of the Company and the nature of its business.

5. The discrepancies between the physical stocks and the book records, which were not material, have been properly dealt with in the books of accounts.

7. The Company has taken unsecured loans from directors, relatives and other parties listed in the Register maintained under Section 301 of the Companies Act, 1956 and the rate of interest and other terms and conditions of such loans are prima facie not prejudicial to the interests of the company. Further, the Company has not taken any loans, secured or unsecured, from the companies under the same management as defined under sub-section (1B) of Section 370 of the Companies Act, 1956.

8. The Company has not granted any loan, secured or unsecured, to companies, firms or other parties listed in the Register maintained under Sections 301 and 370 (1 B) of the Companies Act, 1956.

10. In our opinion and according to the information and explanations given to us, and having regard to the explanations that some of the items are of a specialised nature for which alternative quotations are not required, there is an adequate internal control procedure commensurate to the size of the Company and the nature of its business for the purchase of stores, raw materials, trading goods, plant and machinery, equipment and other assets, and for the sale of goods.

11. There were no transactions for purchase of goods and material and sale of goods, materials and services made in pursuance of contracts or arrangements required to be entered in the Register maintained under section 301 of the Companies Act, 1956 and aggregating during the year to Rs. 50,000 (Rupees fifty thousand) or more in respect of each party.

12. According to the information and explanations given to us, the Company has reasonable system for determination of unservicable, expired or damaged stores, raw materials, packing material and finished goods. Adequate provision has been made in the accounts for the loss arising on the items so determined.

14. In our opinion, the Company is maintaining reasonable records for sale and disposal of realisable scrap. The Companys manufacturing process does not produce any by-product.

15. In our opinion, the Company has an Internal Audit System, which is adequate in relation to the size of the Company and the nature of its business.

16. We have broadly reviewed the books of accounts maintained by the Company pursuant to the Order made by the Central Government for the maintenance of Cost Records under section 209 (1) (d) of the Companies Act, 1956 and are of opinion that prima facie the prescribed Accounts and Records are being maintained. However, we have not carried out any detailed examination of such Accounts and Records.

17. The Company has been regular in deposit of Provident Fund and Employees State Insurance dues with the appropriate authorities.

18. According to the information and explanations given to us, there were no undisputed amounts payable in respect of Income Tax, Wealth Tax, Custom Duty, Excise Duty and Sales Tax which have remained outstanding as at 31st March, 2002 for a period of more than six months from the date they became payable.

19. According to the information and explanations given to us and on the basis of the records examined by us, no personal expenses have been charged to the Profit and Loss Account, other than those payable under any contractual obligation or in accordance with generally accepted business practice.

20. The Company is not a sick industrial company within the meaning of clause (o) of sub-section (1) of Section 3 of the Sick Industrial Companies (Special Provisions) Act, 1985.

21. As informed to us, the Company does not have any damaged goods in respect of its trading activity.

S. R. BATLIBOI & ASSOCIATES CHARTERED ACCOUNTANTS Per

Place: New Delhi Anil Gupta Date: 27th June, 2002 Partner

Mar 31, 2001

We have audited the attached Balance Sheet of Panacea Biotec Limited as at 31st March, 2001 and also the Profit and Loss Account of the Company for the year ended on that date, annexed thereto. and report that:

1. As required by the Manufacturing and Other Companies (Auditors' Report) Order,1988, issued by the Company Law Board in terms of Section 227(4A) of the Companies Act, 1956, we have annexed hereto a statement on the matters specified in paragraph 4 and 5 of the said Order.

2. Further to our comments in the Annexure referred to in paragraph 1 above, we also report that:

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

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

c) The Balance Sheet and Profit and Loss Account referred to in this Report are in agreement with the books of account:

d) In our opinion and to the best of our information and according to explanations given to us, the accounts, read together with the notes thereon and the significant accounting policies, comply with the Accounting Standards referred to in sub-section (3C) of Section 211 Of the Companies Act, 1956.

e) On the basis of written representations received from the Directors and taken on record by the Board of Directors, we report that none of the Directors is disqualified as at 31st March, 2001 from being appointed as a Director in terms of clause (g) of Sub-Section (1) of Section 274 of the Companies Act, 1956;

f) In our opinion, and to the best of our information and according to the explanations given to us, the said Balance Sheet and Profit and Loss Account, read together with Notes and Schedules annexed thereto, give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view:

i) in so far as it relates to the Balance Sheet, of the state of affairs of the Company as at 31st March,2001,

and

ii) in so far as it relates to Profit and Loss Account, of the profit of the Company for the year ended on that date.

S.R. BATLIBOI & ASSOCIATES Chartered Accountants

Place: New Delhi Manoj Gupta Date : 14th July, 2001 Partner

Annexure to the Auditors' Report

Referred to in paragraph 1 of our report of even date on the Statement of Accounts of Panacea Biotec Limited as at and for the year ended 31 st March, 2001.

1 The Company is in the process of updating records to include full particulars and details of the fixed assets. The fixed assets have been physically verified by the management during the year. No material discrepancy was noticed on comparison between book records and physical inventory.

2. None of the fixed assets have been revalued during the year

3. Physical verification has been conducted by the management, of stocks of finished goods, trading goods, stores and spare parts, raw materials and packing material at reasonable intervals during the year.

4. In our opinion and according to the information and explanations given to us, 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.

5. No material discrepancy was noted on physical verification of stocks.

6. 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 on the same basis as in earlier years except for general stores and spares which are valued at cost as at 31st March, 2001 at Rs. 2,921 thousand whereas these were charged off to Profit and Loss Account upto last year. In case the same policy was continued, the profits would have been lower by Rs. 2,921 thousand.

7. The Company has not taken any loan, secured or unsecured, from Companies, firms or other parties listed in the Register maintained under Section 301 of the Companies Act, 1956, or from the Companies under the same management as defined in sub-section (1 B) of Section 370 of the Companies Act, 1956.

8. The Company has not granted any loan, secured or unsecured, to Companies, firms or other parties listed in the Register maintained under Section 301 and 370 (1B) of the Companies Act, 1956.

10. In our opinion and according to the information and explanations given to us, and having regard to the explanations that some of the items are of a specialised nature for which alternative quotations are not required, there is an adequate internal control procedure commensurate to the size of the Company and the nature of its business for the purchase of stores, raw materials, trading goods, plant and machinery, equipment and other assets, and for the sale of goods.

11. As per the records of the Company, there were no transactions for purchase of goods and material and sale of goods, materials and services made in pursuance of contracts or arrangements required to be entered in the Register maintained under section 301 of the Companies Act, 1956, and aggregating during the year to Rs. 50,000/- ( Rupees fifty thousand) or more in respect of each party.

12. According to the information and explanations given to us, the Company has reasonable system for determination of unserviceable, expired or damaged stores, raw materials, finished goods and formulations. Adequate provision has been made in the accounts for the loss arising on the items so determined.

13. According to the information and explanations given to us, the Company has not accepted any deposits from the public within the meaning of section 58 A of the Companies Act, 1956 and rules framed thereunder.

14. In our opinion, the Company is maintaining reasonable records for sale and disposal of realisable scrap and by- product.

15. In our opinion, the Company has an Internal Audit System which is adequate in relation to the size of the Company and the nature of its business.

16. We have broadly reviewed the books of accounts maintained by the Company pursuant to the order made by the Central Government for the maintenance of Cost Records under section 209 (1) (d) of the Companies Act, 1956 and are of opinion that prima facie the prescribed accounts and record are being maintained. However, we have not carried out any detailed examination of such accounts and records.

17. The Company has been regular in deposit of Provident Fund and Employees' State Insurance dues with the appropriate authorities .

18. According to information and explanations given to us, there were no undisputed amounts payable in respect of Income Tax, Wealth Tax, Custom Duty, Excise Duty and Sales Tax which have remained outstanding as at 31st March, 2001, for a period of more than six months from the date they became payable.

19. According to the information and explanations given to us and on the basis of records examined by us, no personal expenses have been charged to Profit and Loss Account, other than those payable under any contractual obligation or in accordance with generally accepted business practice.

20. The Company is not a Sick Industrial Company within the meaning of clause (o) of sub-section (1) of section 3 of the Sick Industrial Companies (Special Provisions) Act,1985.

21. As informed to us, the Company does not have any damaged goods in respect of its trading activity.

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