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Auditor Report of Panyam Cements & Mineral Industries Ltd.

Mar 31, 2015

We have audited the accompanying financial statements of M/s. Panyam Cements & Minerals Industries Limited, Nandyal ("the Company"), which comprise the Balance Sheet as at 31st March, 2015, the Statement of Profit and Loss, the Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

(2) Management's Responsibility for the Stand alone Financial Statements

The management and Board of Directors of the company are responsible for the matters stated in section 134(5) of the Companies Act, 2013 (" the Act") with respect to the preparation and presentation of these stand alone 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 Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes the 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; design, implementation and maintenance of adequate internal financial controls, that are 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.

(3) Auditors' Responsibility

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

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

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

(4) Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid stand alone financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India; a) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2015

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

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

(5) Report on Other Legal and Regulatory Requirements

As required by the Companies (Auditor's Report) Order, 2015 ("the Order") issued by the Central Government of India in terms of sub section (11) of Section 143 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable. As required by Section 143(3) of the Act, we further report that:

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

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

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

d) in our opinion, the aforesaid stand alone financial statements comply with the applicable Accounting Standards specified under section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014;

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

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

(i) The company does not have any pending litigations which would impact its financial position.

(ii) The company did not have any long term contracts including derivative contracts; as such there were no material foreseeable losses thereon.

(iii) During the year under report, there are no amounts that require to transfer to the Investor Education and Protection Fund; therefore delay in transferring such sums does not arise.

ANNEXURE TO AUDITOR'S REPORT Re: M/s. Panyam Cements & Mineral Industries Limited.

Referred to in paragraph 5 of our report of even date; (i) In respect of fixed assets;

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

b. As explained to us, the company has a regular programme of physical verification of its fixed assets and have been physically verified by the management in a phased manner during the year, which in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. As informed to us, no material discrepancies were noticed on such physical verification.

(ii) In respect of inventory;

a. The physical verification of inventory has been conducted by the management at reasonable intervals during the year. In our opinion, the frequency of verification is reasonable.

b. In our opinion and according to the information and explanations given to us, 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 has maintained proper records of inventory and as explained to us, no material discrepancies were noticed on physical verification and the small discrepancies, if any, have been properly dealt with in the books of account.

(iii) The Company has granted loans to companies covered in the register maintained under Section 189 of the Companies Act, 2013 ('the Act').

a) In our opinion and according to the information and explanations given to us and as represented by the company, in respect of loans granted by the company, the interest and the principal amounts are receivable on demand and therefore the question of irregularity in receipt of principal and the interest amounts does not arise.

b) In our opinion and according to the information and explanations given to us and as represented by the company, these are receivable on demand and therefore the question of over due amount does not arise.

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

(v) In our opinion and according to the information and explanations given to us, the company has not accepted any deposits from the public specified under the provisions of section 73 to 76 or any other relevant provisions of the Companies Act, 2013 and the rules framed there under. 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.

(vi) In our opinion and according to the information and explanations given to us, the Central Government has prescribed for the maintenance of Cost records under sub section (1) of Section 148 of the Companies Act, 2013 in respect of the products manufactured by the company and prime facie, the prescribed cost records have been made and maintained by the company pursuant to the rules made there under.

(vii) In respect of statutory dues;

a. According to the information and explanations given to us and based on the records of the company examined by us, the Company is not regular in depositing with appropriate authorities undisputed statutory dues including Provident Fund, Employee's State Insurance, Income Tax, Wealth Tax, Service Tax, Sales Tax, Value Added Tax, Duty of Customs, Duty of Excise, Cess and other statutory dues applicable to it.

According to the information and explanations given to us, the following undisputed statutory dues were outstanding as at 31st March, 2015 for a period of more than six months from the date they became payable and the due dates for payment of sales tax dues for July and August, 2012 considered as per the installments granted by the Department.

Statement of arrears of statutory dues outstanding as at 31.03.2015 for more than six months:

Sl. Name of the Amount Period to which Nature of the Dues No. Statute Rs. Lakhs the amount relates

1 CST Act,1956 Central Sales Tax 7.22 2009-10

24.92 2010-11

0.07 2013-14

2 A.P.VAT Act, 2005 Value Added Tax and Interest 581.23 July 2012 to August 2013

3 T.N.G.S.T Act Tamilnadu Sales Tax 51.88 March 1999 to Feb 2000

4 Goa G.S.T Act, 1956 Goa Sales Tax 13.87 Feb.1999 to Feb 2000

5 A.P.G.S.T.Act, 1956 Consignment Sales Tax 16.82 1998-99 to 2003-04 (Consignment Agents in Different States)

6 CST Act, 1956 Central Sales Tax 11.51 2008-09

7 A.P. Profession Tax Act,1987 Profession Tax Collections 1.13 Octobe2000 to August 2005

8 Income Tax Act, 1961 I.T.D.S from Interest 14.30 2004-05 to, 2005-06 & 2013-14

9 Income Tax Act, 1961 I.T.D.S from Professionals 1.08 2004-05 & April 2013 to August, 2014

10 Income Tax Act, 1961 I.T.D.S from Contractors 1.97 2000-01 & 2001-02

11 Income Tax Act, 1961 I.T.D.S from Contractors 6.20 2004-05 & Apr 2013 to August 2014 12 Income Tax Act, 1961 T.C.S. on Royalty 20.87 July 2010 to August2014

13 Income Tax Act, 1961 Income Tax 11.22 2008-09

152.47 2011-12

306.26 2012-13

14 E.P.F Act, 1952 P.F. Recoveries and 90.00 April 2005 to March 2014 Contributions

P.F. Recoveries and 27.45 April 2014 to August 2014

Contributions

P.F. Penal Damages 230.70 Up to 2005

15 The Central Excise Act,1944 Excise Duty & Cess 26.88 July & August 2012

16 The Finance Act,1994 Service Tax & Cess 2.90 April 2012 to August 2013

17 A.P. Panchayat Raj Tax Act,1994 Property Tax 4.62 2004-05

18 Mines and Minerals Act,1957 Royality on Limestone 777.44 2005-06 to Aug - 2014

19 Mines and Minerals Act,1957 Cess on Royalty 41.86 2006-07 to Aug -2014

20 NALA Act,1963 Non Agriculture Land Tax 0.58 1999-2000

(b) According to the information and explanations given to us, the following are the statutory dues which have not been deposited on account of dispute:

Amount Period to Sl. Name of the Forum wher Nature of the Dues Rs.Lakhs Which the No. Statute dispute is pending (Net of Payments) amount relates

1 TNGST Act, Tamilnadu Sales Tax 5.56 1994-95 Remanded to Assessing 1956 Officer by the Appellate Tribunal

2 The Central CENVAT credits availed on 232.36 Feb.97 to Commissioner (Appeals) Excise Act, 1944 D.G.Sets dis allowed by the Dept. June 1999

3 .do. CENVAT credit availed 4.37 1994-95 A.P. High Court on refractory bricks

4 .do. CENVAT credit availed on service tax 24.52 Dec. 06 to Commissioner, Tirupati paid on outward freight Aug. 07

5 .do. CENVAT credit availed on service tax 28.54 Sep. 07 to Commissioner, Tirupati paid on outward freight Feb. 08

6 .do. CENVAT credit availed on service tax 12.88 Apr. 2009 to Commissioner, Tirupati. paid on outward freight Oct. 2009

7 .do. Differential Duty for Supplies 40.63 Mar. 2007 to Appeal in CESTAT, Bengaluru made to Direct parties Feb. 2008

8 The Central Duty on captive consumption 1.46 2007-08 Appeal in CESTAT, Bengaluru Excise Act, 1944

9 .do. Duty on captive consumption 0.87 2008-09 Appeal in CESTAT, Bengaluru

10 .do. Differential Duty on D.G.Set 42.37 2007-08 Appeal in CESTAT, Bengaluru

11 .do. Differential Duty on D.G.Set 10.24 2004-05 A.P.High Court

12 .do. Cenvat on Capital Goods 42.11 2008-09 & Appeal in CESTAT (TMT Bars) 2009-10 Bengaluru

13 .do. Differential Duty on high 34.32 August 2012 Addl. Commissioner, seas imported coal Guntur

14 do. CENVAT on Service 35.18 Nov. 2009 to Addl. Commissioner, Tax on outward GTA Dec. 2010 Tirupati

15 .do. Differential Duty for Supplies 383.80 Apr. 2008 to Appeal in CESTAT made to Direct Parties Oct. 2011 Bengaluru

16 .do. Differential Duty for Supplies 246.81 Nov. 2011 to Commissioner, Tirupati made to Direct Parties Dec. 2013

17 Income Tax Capital Gains Tax on Land 3309.50 2005-06 CIT Appeals, Hyderabad Act, 1961 Development Agreements

18 Income Tax MAT on Book Profit of 878.68 2007-08 CIT Appeals, Hyderabad Act, 1961 Sick Company

19 AP VAT Penalty for delay in 58.27 2011-12 Request for waiver Act,2005 Payment of Tax before 55.78 2012-13 before the Govt. of A.P. Due dates 10.80 June 2013 19.69 2004-15

20 Mines & Mineral Penal Interest on 1249.75 May. 2006 to Revision application for waiver Act,1957 Royalty dues Mar. 2015 before the Dept / Ministry of Mines

21 The Electricty Fuel Surcharge 30.08 2008-09 Supreme Court of India Act, 2003 Adjustement (FSA) Charges 23.48 Apr.2009 to High Court of A.P. Jun 2009 Hyderabad

c. According to the information and explanations given to us, during the year under report, there are no amounts which require to transfer to the Investor Education and Protection Fund.

(viii) In our opinion, the accumulated losses of the company have exceeded fifty percent of its net worth as at 31st March, 2015. The company has incurred cash loss of Rs.923.03 lakhs during the financial year covered by our audit and not incurred cash loss in the immediately preceding financial year.

(ix) In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to Banks except delays in payment of interest and term loan installments to banks and an amount of Rs.222.81 lakhs outstanding towards interest and installments of term loans at the year end on 31.03.2015

(x) In our opinion and according to the information and explanations given to us, the company has given guarantees for loans taken by Cheran Cement Limited from financial institution (SIPCOT) and by M/s S.P.Y. Agro Industries Limited from State Bank of India, State Bank of Hyderabad; Bank of India, Syndicate Bank, Indian Overseas Bank, Central Bank of India and Canara Bank and the terms and conditions of the guarantees given are not prima facie, prejudicial to the interest of the company.

(xi) In our opinion and according to the information and explanations given to us, the term loans received during the year were applied for the purpose for which the loans were obtained,

(xii) According to the information and explanations given to us, no material fraud on or by the Company has been noticed or reported during the year.

For Brahmayya & Co.,

Chartered Accountants

Firm's Registration No.000514S

B. DAIVADHEENAM REDDY

Partner

M.No.026450

Place: Nandyal (Camp)

Dt. 30th May, 2015


Mar 31, 2014

We have audited the accompanying financial statements of M/s.Panyam Cements & Mineral Industries Limited, Nandyal ("the Company"), which comprise the Balance Sheet as at 31 st March, 2014, the Statement of Profit and Loss and also the Cash Flow Statement for the year then ended and a summary of significant accounting policies and other explanatory information.

2) Management''s Responsibility for the Financial Statements

The Company''s Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards referred to in Section 211 (3C) of the Companies Act, 1956 ("the Act").(which continue to be applicable in respect of Section 133 of the Companies Act, 2013 in terms of General Circular 15/2013 dated 13th September, 2013 of the Ministry of Corporate Affairs) and in accordance with the accounting principles generally accepted in India. This responsibility includes the design, implementation and maintenance of internal controls relevant to the preparation and presentation of the financial statements that give a true and fair view and free from material misstatement, whether due to fraud or error.

3) Auditors'' Responsibility

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

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

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

4) Opinion

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

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

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

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

5) Report on Other Legal and Regulatory Requirements

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

As required by Section 227(3) of the Act, 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 purpose of our audit.

ii) 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;

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

iv) In our opinion, the Balance Sheet, the Statement of Profit and Loss, and the Cash Flow Statement comply with the Accounting Standards referred to in Section 211(3C) of the Act.(which continue to be applicable in respect of Section 133 of the Companies Act, 2013 in terms of General Circular 15/2013 dated 13th September, 2013 of the Ministry of Corporate Affairs)

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

ANNEXURE TO AUDITOR''S REPORT Re: M/s. Panyam Cements & Mineral Industries Limited. Referred to in paragraph 3 of our report of even date;

(i) In respect of fixed assets:

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

b) As explained to us, all the 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) In our opinion, the company has disposed off vehicles under fixed assets and land property of discontinued operations of Wire Division, Bangalore land given for development, which is under Current Assets as Investment in land property and the going concern status of the company is not affected.

(ii) In respect of inventories:

(a) The inventories have been physically verified by the management at regular intervals during the year. In our opinion, the frequency of verification is reasonable.

(b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the company and the nature of its business.

(c) The company has maintained proper records of inventories. As explained to us, no material discrepancies were noticed on physical verification.

(iii) (a) The company has taken interest free unsecured loans from the companies covered in the register maintained under section 301 of the Companies Act,1956. The maximum amount involved during the year was Rs. 4075.43 lakhs and the year end balance was Rs. 4075.43 lakhs. There are companies covered in the register maintained under section 301 of the Companies Act, 1956 to which the company has granted loans/advances. The maximum amount involved during the year was Rs..6550.45 lakhs and the year end balance of loans granted to such parties was Rs. 6550.45 lakhs.

(b) In our opinion and according to the information and explanations given to us and as represented by the Company, the rate of interest wherever applicable and other terms and conditions on which loans have been taken from or granted to companies or other parties listed in the register maintained under section 301 of the Companies Act, 1956 are not, prima facie, prejudicial to the interest of the company.

(c) In our opinion and according to the information and explanations given to us and as represented by the company, in respect of loans taken/ granted by the company, the interest and the principal amounts are repayable / receivable on demand, therefore, no irregularity in repayment or receipt of principal and interest amounts.

(d) In our opinion and according to the explanations given to us and as represented by the company, there is no overdue amount in respect of loans taken from or granted to companies or other parties listed in the register maintained under section 301 of the Companies Act,1956, since these are repayable / receivable on demand.

(iv) In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the company and the nature of its business with regard to purchase of inventory, fixed assets and with regard to the sale of goods. During the course of our audit, we have not observed any major weaknesses in internal controls.

(v) In respect of transactions covered under Section 301 of the Companies Act, 1956:

a) According to the information and explanations given to us, we are of the opinion that the transactions made in pursuance of contracts or arrangements, that need to be entered in the register maintained under section 301 of the Companies Act, 1956 have been so entered.

(b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and exceeding the value of rupees five lakhs in respect of any party during the year have been made 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, the company has not accepted any public deposits specified under the provisions of Section 58A and 58Aa of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975. No order has been passed by the Company Law Board.

(vii) In our opinion, the company has an internal audit conducted by outside professionals, which commensurate with the size and nature of its business.

(viii) The Central Government has prescribed for the maintenance of cost records under section 209(1)(d) of the Companies Act, 1956 in respect of the products of the company. We have broadly reviewed the cost records relating to materials, labour and other items of cost maintained by the company pursuant to the Companies (Cost Accounting Records) Rules, 2011 and we are of the opinion, that prima facie, the prescribed cost records have been made and maintained. We have not however, made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

(ix) In respect of statutory dues:

a) According to the records of the company, the company is not regular in depositing with appropriate authorities 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. There are outstanding dues as at 31.03.2014 of the above said statutory dues.

b) According to the information and explanations given to us, the following undisputed amounts payable in respect of income tax, wealth tax, sales tax, service tax, customs duty and excise duty were in arrears, as at 31st March, 2014 for a period of more than six months from the date they became payable and the due dates for payment of sales tax dues for July and August, 2012 considered as per the installments granted by the Department.

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

Sl. Name of the Amount Nature of the Dues No. Statute Rs. Lakhs

1 CST Act,1956 Central Sales Tax 7.22

1.35

1.30

0.08

2 A.P.VAT Act, 2005 Value Added Tax 492.33

3 T.N.G.S.T Act Tamilnadu Sales Tax 51.88

4 Goa G.S.T Act, 1956 Goa Sales Tax 13.87

5 A.P.G.S.T.Act, 1956 Consignment Sales Tax 16.82 (Consignment Agents in Different States)

6 CST Act, 1956 Central Sales Tax 11.51

7 Profession Tax Act Profession Tax Collections 1.13

8 Income Tax Act, 1961 I.T.D.S from Interest 15.23

9 Income Tax Act, 1961 I.T.D.S from Professionals 4.95

10 Income Tax Act, 1961 I.T.D.S from Contractors 1.97

11 Income Tax Act, 1961 I.T.D.S from Commission 2.95

12 Income Tax Act, 1961 I.T.D.S from Contractors 8.66

13 Income Tax Act, 1961 T.C.S. on Royalty 20.84

14 Income Tax Act, 1961 Income Tax 11.22

59.18

201.44

15 E.P.F Act, 1952 P.F. Recoveries and Contributions 54.02

19.81

16 The Central Excise Act 1944 Excise Duty & Cess 148.59

17 The Finance Act-1994 Service Tax & Cess 95.85



Name of the Statute Period to which the amount relates

CST Act,1956 2009- 10

2010-11

2011-12

2013-14

A.P.VAT Act, 2005 Upto August 2013

T.N.G.S.T Act March 1999 to Feb 2000

Goa G.S.T Act, 1956 Feb.1999 to Feb 2000

A.P.G.S.T.Act, 1956 1998-99 to 2003-04 (Consignment Agents in Different States)

CST Act, 1956 2008-09

CST Act, 1956 October 2000 to August 2005

Profession Tax Act 2004-05 to, 2005-06 and April 2013 To August, 2013

Income Tax Act, 1961 2004-05 & April 2013 to August, 2013

Income Tax Act, 1961 2000-01 & 2001-02

Income Tax Act, 1961 April 2013 to August 2013

Income Tax Act, 1961 2004-05 & April 2013 to August 2013

Income Tax Act, 1961 July 2010 to August 2013

Income Tax Act, 1961 2008-09

2011-12

2012-13

Income Tax Act, 1961 April 2005 to December 2005

E.P.F Act, 1952 April 2013 to August 2013

The Central Excise Act 1944 July & August 2012

The Finance Act-1994 April 2012 to August 2013

(c) According to the information and explanations given to us, the following are the statutory dues of sales tax, income tax, service tax, customs duty, wealth tax, excise duty and cess which have not been depos- ited on account of dispute.

x) In our opinion, the accumulated losses of the company are not more than fifty percent of its net worth. The company has not incurred cash losses during the financial year covered by our audit and in the immediately preceding financial year.

xi) In our opinion and according to the information and explanations given to us, we are of the opinion that the company has not defaulted in repayment of dues to Banks and debenture holders except interest dues to J.M.Capital Management Private Limited of Rs.11.51 lakhs and delays in payment of interest and term loan installments to Banks and an amount of Rs. 288.65 lakhs outstanding towards interest and installments of term loans at the year end on 31.03.2014.

xii) In our opinion and according to the information and explanations given to us, the company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

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 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) In our opinion and according to the information and explanations given to us, the terms and conditions on which the company has given guarantees for loans taken by Cheran Cement Limited from financial institution (SIPCOT) and by M/s S.P.Y.Agro Industries Limited from State Bank of India, State Bank of Hyderabad; Bank of India, Syndicate Bank, Indian Overseas Bank, Central Bank of India and Canara Bank are not prima facie, prejudicial to the interest of the company.

xvi) In our opinion, the term loans received during the year have been applied for the purpose for which they were raised.

xvii) According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company as at 31st March, 2014, we report that no funds raised on short- term basis have been used for long-term investment. No long-term funds have been used to finance short-term assets except permanent working capital.

xviii) According to the information and explanations given to us, during the year under report, the company has not made preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Companies Act, 1956.

xix) According to the information and explanations given to us, during the period covered by our audit report, the company has not issued any debentures and hence creation of securities does not arise.

xx) The company has not raised any money by way of public issue during the year.

xxi) In our opinion and according to the information and explanations given to us, no fraud on or by the company has been noticed or reported during the course of our audit.

For Brahmayya & Co.,

Chartered Accountants Firm''s Registration No.000514S

B. DAIVADHEENAM REDDY

Place: Nandyal (Camp) Partner

Dt. 30th May, 2014 M.No.026450


Mar 31, 2013

1) Report on Financial Statements

We have audited the accompanying financial statements of M/s. Panyam Cements & Mineral Industries Limited, Nandyal ("the Company"), which comprise the Balance Sheet as at 31st March, 2013, the Statement of Profit and Loss and also the Cash Flow Statement for the year then ended and a summary of significant accounting policies and other explanatory information.

2) Management''s Responsibility for the Financial Statements

The Company''s Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards referred to in Section 211 (3C) of the Companies Act, 1956 ("the Act"). This responsibility includes the design, implementation and maintenance of internal controls relevant to the preparation and presentation of the financial statements that give a true and fair view and free from material misstatement, whether due to fraud or error.

3) Auditors'' Responsibility

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

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

4) Opinion

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

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

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

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

5) Report on Other Legal and Regulatory Requirements

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

As required by Section 227(3) of the Act, 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 purpose of our audit.

ii) 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;

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

iv) In our opinion, the Balance Sheet, the Statement of Profit and Loss, and the Cash Flow Statement comply with the Accounting Standards referred to in Section 211(3C) of the Act.

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

ANNEXURE TO AUDITOR''S REPORT Re: M/s. Panyam Cements & Mineral Industries Limited.

Referred to in paragraph 3 of our report of even date;

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

(b) As explained to us, all the 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) During the year, the company has disposed off vehicles under fixed assets and land property of discontinued operations of Wire Division, Bangalore land given for development, which is under Current Assets as Investement in land property and the going concern status of the company is not affected.

(ii) (a) The inventories have been physically verified by the management at regular intervels during the year. In our opinion, the frequency of verification is reasonable.

(b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the company and the nature of its business.

(c) The company has maintained proper records of inventories. As explained to us, the discrepancies noticed on verification between the physical stocks and the book records were not material.

(iii) (a) The company had taken interest free unsecured loans from Associate Companies covered in the register maintained under section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs.524.77 lakhs and the year end balance was Rs.524.77 lakhs. There are companies covered in the register maintained under section 301 of the Companies Act, 1956 to which the company has granted loans/advances. The maximum amount involved during the year was Rs.8812.15 lakhs and the year end balance of loans granted to such parties was Rs. 6230.45 lakhs.

(b) In our opinion and according to the information and explanations given to us, the rate of interest wherever applicable and other terms and conditions on which loans have been taken from or granted to companies or other parties listed in the register maintained under section 301 of the Companies Act, 1956 are not, prima facie, prejudicial to the interest of the company.

(c) In respect of loans taken/ granted by the company, the interest and the principal amounts are repayable / receivable on demand, therefore, no irregularity in repayment or receipt of principal and interest amounts.

(d) There is no overdue amount in respect of loans taken from or granted to companies or other parties listed in the register maintained under section 301 of the Companies Act, 1956, since these are repayable / receivable on demand.

(iv) In our opinion and according to the information and explanations given to us, there are adequate

internal control procedures commensurate with the size of the company and the nature of its business with regard to purchase of inventory, fixed assets and with regard to the sale of goods. During the course of our audit, we have not observed any major weaknesses in internal controls.

(v) (a) According to the information and explanations given to us, we are of the opinion that the transactions that need to be entered in the register maintained under section 301 of the Companies Act, 1956 have been so entered.

(b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and exceeding the value of rupees five lakhs in respect of any party during the year have been made 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, the company has not accepted any public deposits specified under the provisions of Section 58A and 58AA of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975. No order has been passed by the Company Law Board.

(vii) In our opinion, the company has an internal audit conducted by outside professionals, which commensurate with the size and nature of its business.

(viii) We have broadly reviewed the books of account and cost records relating to materials, labour and other items of cost 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. We are of the opinion, that prima facie, the prescribed accounts and records have been made and maintained. We have not however, made a detailed examination of the cost records with a view to / determine whether they are accurate or complete.

(ix) (a) According to the records of the company, the company is not regular in depositing with appropriate authorities 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 .

(b) According to the information and explanations given to us, the following undisputed amounts payable in respect of income tax, wealth tax, sales tax, service tax, customs duty and excise duty were in arrears, as at 31st March, 2013 for a period of more than six months from the date they became payable and the due dates for payment of arrears of royalty have been considered as per the deferment sanctioned by the Government of Andhra Pradesh as per GO.Ms.No.307 dated 24th May, 2006 and installments granted for payment of sales tax dues for July and August, 2012.

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

Sl. Name of the Amount Period to which No. Statute Nature of the Dues Rs Lakh the amount relates (Net of Payments)

1 CST Act Central Sales Tax 3.08 2006-07

2 T.N.G.S.T Tamilnadu Sales Tax 51.88 March 1999 to Feb 2000

3 Goa G.S.T Act Goa Sales Tax 13.87 Feb. 1999 to Feb 2000

4 A.P.G.S.T Act Consignment Sales Tax 16.82 1998-99 to 2003-04 (Consignment Agents in Different States)

5 CST Act Central Sales Tax 11.50 2008-09

6 Profesion Tax Act Profession Tax Collections 1.13 October 2000 to August 2005

7 Income Tax Act, 1961 I.T.D.S from Interest 18.78 2004-05 to 2005-06 & Apr. to Aug. 2012

8 Income Tax Act, 1961 I.T.D.S from Professionals 1.22 2004-05 & Apr. to July 2012

9 Income Tax Act, 1961 I.T.D.S from Contractors 1.96 2000-01 & 2001-02

10. Income Tax Act, 1961 I.T.D.S from Commission 3.83 Apr. to Aug. 2012

11 Income Tax Act, 1961 I.T.D.S from Contractors 13.91 2004 - 05 & Apr. to August 2012

12 Income Tax Act, 1961 T.C.S. on Royalty 16.75 July 2010 to August 2012

13 E.PF Act P.F. Recoveries and 53.49 April 2005 to December 2005 contributions

14 The Centeral Excise Act-1944 Excise Duty & Cess 264.59 July & Aug 2012

15 The Finance Act-1994 Service Tax & Cess 46.12 Apr. to Aug 2012

(c) According to the information and explanations given to us, the following are the statutory dues of sales tax, income tax, serive tax, customs duty & excise duty which have not been deposited on account of dispute.

Amount Sl. Name of the Nature of the Dues Rs. Lakhs No. Statute (Net of Payments)

1 TNGST Act Tamilnadu Sales Tax 5.56

2 Central CENVAT credits availed on 232.36 Excise Act D.G.Sets disallowed by the Dept.

3 .do. CENVAT credit availed 4.37 on refractory bricks

4 .do. CENVAT credit availed on service tax 24.52 paid on outward freigh

5 .do. -do- 28.54

6 .do. -do- 12.88

7 .do. Differential Duty for Supplies 40.63 made to Direct parties

8 .do. Duty on captive consumption 1.46

9 .do. -do- 0.87

10 .do. Differential Duty on D.G.Set 42.37

11 .do. -do- 10.24

12 .do. Cenvat on Capital Goods 42.11 (TMT Bars)

13 .do. Irregular availment 413.38 of CENVAT Credit

14 .do. CENVAT on Service 35.18 Tax on outward GTA

15 .do. Differential Duty for Supplies 383.80 made to Direct Parties

16 .do. Differential Duty for Supplies 151.31 made to Direct Parties

17 E.PF Act PF. Penal damages for 255.39 Delay Payments

18 Income Tax Capital Gains Tax on Land 2278.48 Act, 1961 Development Agreements

19 Income Tax MAT on Book Profit of 111.22 Act, 1961 Sick Company

20 Income Tax TDS not dedected and 34.42 Act, 1961 Interest on delayed payments

21 AP VAT Act Penalty for delay in Payment 58.27 of Tax before Due dates

22 AP VAT Act Penalty for delay in Payment 55.78 of Tax before Due dates

23 Mines & Penal Interest on 650.26 Mineral Act Royalty dues

24 The Electricty Fuel Surcharge 30.08 Act, 2003 Adjustement (FSA) Charges 23.48



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

TNGST Act 1994-95 Remanded to Assessing Officer by the Appellate Tribunal

Central Excise Act Feb.97 to Commissioner (Appeals) June 1999

.do. 1994-95 A.P. High Court

.do. Dec. 06 to Commissioner, Tirupati Aug. 07

.do. Sep. 07 to Commissioner, Tirupati Feb. 08

.do. Apr. 2009 to Commissioner, Tirupati. Oct. 2009

.do. Mar. 2007 to Appeal in CESTAT, Bengaluru Feb. 2008

.do. 2007-08 Appeal in CESTAT, Bengaluru

.do. 2008-09 Appeal in CESTAT, Bengaluru

.do. 2007-08 Appeal in CESTAT, Bengaluru

.do. 2004-05 A.P.High Court

.do. 2008-09 & Appeal in CESTAT 2009-10 Bengaluru

.do. Jul. 2006 to Appeal in CESTAT Nov. 2007 Bengaluru

.do. Dec. 2009 to Addl. Commissioner, Dec. 2010 Tirupati

.do. Apr. 2008 to Appeal in CESTAT Oct. 2011 Bengaluru

.do. Nov. 2011 to Commissioner, Tirupati Mar. 2012

E.P.F Act May. 1999 to Commissioner of Sep. 2001 Provident Fund,Kadapa

Income Tax Act,1961 2007-08 Income Tax Appellate Tribunan, Hyderabad.

Income Tax Act,1961 2008-09 Income Tax Appellate Tribunan, Hyderabad.

Income Tax Act,1961 2010-11 Commissioner of Incometax (Appeals) Hyderabad.

AP VAT Act 2011-12 Request for waiver before the Govt. of A. P.

AP VAT Act 2012-13 Request for waiver before the Govt. of A. P.

Mines Mineral Act May. 2006 to Revision application for waiver Mar. 2013 before the Dept / Ministry of Mines

The Electricity Act,2003 2008-09 Supreme Court of India

Apr. 2009 to High Court of A. P. Jun 2009 Hyderabad

x) In our opinion, the accumulated losses of the company are not more than fifty percent of its net worth. The company has not incurred cash losses during the financial year covered by our audit and the immediately preceding financial year.

xi) In our opinion and according to the information and explanations given to us, the company has not defaulted in repayment of dues to Banks and debenture holders except interest dues to J.M.Capital Management Private Limited of Rs.11.51 lakhs and delays in payment of interest and term loan installments to Banks and an amount of Rs. 432.46 lakhs outstanding towards March 2013 interest and installments of term loans at the year end on 31.03.2013 was paid in the subsequent year i.e 2013-14.

xii) In our opinion and according to the information and explanations given to us, the company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

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 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) In our opinion and according to the information and explanations given to us, the terms and conditions on which the company has given guarantees for loans taken by Cheran Cement Limited from financial institution (SIPCOT) and by M/s S.P.Y.Agro Industries Limited from State Bank of India, State Bank of Hyderabad; Bank of India, Syndicate Bank and Indian Overseas Bank, are not prima facie, prejudicial to the interest of the company.

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

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. No long-term funds have been used to finance short-term assets except permanent working capital.

xviii) According to the information and explanations given to us, during the year under report, the company has not made preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Companies Act, 1956.

xix) According to the information and explanations given to us, during the period covered by our audit report, the company has not issued any debentures and hence creation of securities does not arise.

xx) According to the information and explanations given to us, during the year covered by our report, the company has not raised any money by public issue.

xxi) In our opinion and according to the information and explanations given to us, no fraud on or by the company has been noticed or reported during the course of our audit.



For Brahmayya & Co.,

Chartered Accountants

Firm''s Registration No.000514S

Place: Nandyal (Camp) B.DAIVADHEENAM REDDY

Dt. 27 May, 2013 Partner

M.No.026450


Mar 31, 2012

1. We have audited the attached Balance Sheet of M/s.Panyam Cements & Mineral Industries Limited, as at 31st March, 2012 and the Statement of Profit and Loss and also 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 the auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whetherthe 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 the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor's Report) Order, 2003 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 purpose 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, except Accounting Standard-15, Accounting for Retirement Benefits, regarding gratuity superannuation and Leave encashment on actuarial valuation.

v) On the basis of written representations received from the directors, as on 31st March, 2012 and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March, 2012 from being appointed as a director in terms of 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, "subject to non provision of gratuity / Superannuation / leave encashment liability on actuarial valuation in respect of employees and the amount of liability is not ascertained by the company," the said accounts give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

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

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

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

ANNEXURE Re: M/s. Panyam Cements & Mineral Industries Limited.

Referred to in paragraph 3 of our report of even date;

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

(b) All the assets have not been physically verified by the management during the 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) During the year, the company has not disposed off substantial part of fixed assets and the going concern status of the company is not affected.

(ii) (a) The inventory has been physically verified during the year by the management. In our opinion, the frequency of verification is reasonable.

(b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the company and the nature of its business.

(c) The company has maintained proper records of inventory. As explained to us, the discrepancies noticed on verification between the physical stocks and the book records were not material.

(iii) (a) The company had taken unsecured loans from Associate Companies covered in the register maintained under section 301 of the Companies Act, 1956 and the maximum amount involved during the year was Rs.524.77 lakhs and the year end balance was Rs.524.77 lakhs. There are companies covered in the register maintained under section 301 of the Companies Act, 1956 to which the company has granted loans/advances. The maximum amount involved during the year was Rs.8812.15 lakhs and the year end balance of loans granted to such parties was Rs. 8812.15 lakhs.

(b) In our opinion and according to the information and explanations given to us, the rate of interest wherever applicable and other terms and conditions on which loans have been taken from/ granted to companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956 are not, prima facie, prejudicial to the interest of the company.

(c) In respect of loans taken/granted by the company, the interest and the principal amount is repayable/receivable on demand.

(d) There is no overdue amount in respect of loans taken from or granted to companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956, since these are repayable/receivable on demand.

(iv) In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the company and the nature of its business with regard to purchase of inventory, fixed assets and with regard to the sale of goods. During the course of our audit, we have not observed any continuing failure to correct major weakness in internal controls.

(v) (a) According to the information and explanations given to us, we are of the opinion that the transactions that need to be entered into the register maintained under section 301 of the Companies Act, 1956 have been so entered.

(b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and exceeding the value of rupees five lakhs in respect of any party during the year have been made 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, the company has not accepted any public deposits under the provisions of Section 58A and 58AA of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975. No order has been passed by the Company Law Board.

(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 relating to materials, labour and other items of cost 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 we are of the opinion, that prima facie, the prescribed accounts and records have been made and maintained. We have not however, made a detailed examination of the same.

(ix) (a) According to the records of the company, the company is generally regular in depositing with appropriate authorities undisputed statutory dues including provident fund, employees state insurance, income-tax, sales tax, wealth tax, customs duty, excise duty, cess and other material statutory dues applicable to it except royalty and Income-Tax deducted/collected at source.

(b) According to the information and explanations given to us, the following undisputed amounts payable in respect of income tax, wealth tax, sales tax, customs duty, excise duty and cess were in arrears, as at 31st March, 2012 for a period of more than six months from the date they became payable and the due dates for payment of arrears of royalty and sales tax dues have been considered taking into consideration the deferment for payment of the said dues sanctioned by the Government of Andhra Pradesh as per GO.Ms.No.307 dated 24th May, 2006 and installments granted for payment of sales tax dues for July and August, 2011.

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

Amount SI. Name of the Nature of the Period to which Rs. Lakhs No. Statute Dues (Net of Payments) the amount relates

1 CSTAct Central Sales Tax 0.33 2006-07

2 T.N.G.S.T Tamilnadu Sales Tax 51.88 March 1999 to Feb 2000

3 GoaG.S.TAct Goa Sales Tax 11.55 Feb.1999 to Feb2000

4 A.P.GS.TAct Consignment Sales Tax 45.78 1998-99 to 2003-04 (Consignment Agents in Different States)

5 CSTAct Central Sales Tax 0.88 2009-10

6 Profesion Tax Act Profession Tax Collections 1.13 October 2000 to August 2005

7 Income Tax Act, 1961 I.T.D.S from Salaries 4.90 2003-04

8 Income Tax Act, 1961 I.T.D.S from Interest 25.56 2001-02,2003-04 to 2005-06

9 Income Tax Act, 1961 I.T.D.S from Professionals 1.24 2002-03, 2003-04 to 2005-06

10 Income Tax Act, 1961 I.T.D.S from Contractors 1.96 2000-01 & 2001-02

11 Income Tax Act, 1961 I.T.D.S from Contractors 14.14 December 1999 to August 2005

12 Income Tax Act, 1961 T.C.S. on Royalty 8.70 July 2010 to August 2011

13 Non-Agricultural Land NALA on factory land 10.19 1993-94 and from 1999-2000 Assessment Tax to June 2011

14 Mines and Minerals Act Dead Rent/cess on limestone 2.33 1984-85 to 1986-87

15 Mines and Minerals Act Royalty on limestone 262.44 Dec 2010 to August 2011

16 Mines and Minerals Act State Cess on Limestone 14.41 Sept 2010 to August 2011

17 Panchayat Tax Act Property Tax 4.62 1998-99 to 2006-07

18 E.P.FAct PF. Recoveries and contributions 51.79 April 2005 to December 2005

(c) According to the information and explanations given to us, the following are the statutory dues of sales tax, income tax, customs duty, wealth tax, excise duty and cess which have not been deposited on account of dispute.

SI. Name of the Nature of the Amount No. Statute Dues Rs. Lakhs (Net of Payments)

1 TNGST Act Tamilnadu Sales Tax 5.56

2 Central CENVAT credits 232.36 Excise Act availed on D.G.Sets disallowed by the Dept.

3 .do. CENVAT credit availed 4.80 on Proclain Shovel

4 .do. CENVAT credit availed 4.37 on refractory bricks

5 .do. CENVAT credit 24.52 availed on service tax paid on outward freight

6 .do. -do- 28.54

7 .do. -do- 12.88

8 .do. Differential Duty for 40.63 Supplies made to Direct parties

9 .do. Duty on captive consumption 1.46

10 .do. -do- 0.87

11 .do. Differential Duty 42.37 on D.G.Set

12 .do. -do- 10.24

13 .do. Cenvat on Capital Goods 41.77 (TMT Bars)

14 .do. -do- 0.34

15 .do. Irregular availment 413.38 of CENVAT Credit

16 .do. CENVAT on Service 35.18 Tax on outward GTA

17 .do. H.R. Coils/Plates/Sheets/ 56.80 Channels and angles

18 E.P.FAct P.F. Penal damages for 277.59 Delay Payments

19 Income Tax Capital Gains Tax on Land 2278.48 Act, 1961 Development Agreements

20 Income Tax MAT on Book Profit of 177.82 Act, 1961 Sick Company

21 AP VAT Act Penalty for delay in 58.27 Payment of Tax before Due dates

22 Mines & Penal Interest on 343.72 Mineral Act Royalty dues

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

TNGST Act 1994-95 Remanded to Assessing Otficerby the Appellate Tribunal

Central Excise Act Feb.97 to Commissioner June 1999 (Appeals)

.do. 1994-95 A.P.High Court

.do. 1994-95 A.P.High Court

.do. December 06 Commissioner to August 07 Tirupathi

.do. September 07 Commissioner, to February 08 Tirupati.

.do. April 2009 Commissioner to August 2009 Tirupati.

.do. March 2007 to Appeal in CESTAT, Bengaluru February 2008

.do. 2007-08 Appeal in CESTAT Bangalore

.do. 2008-09 Appeal in CESTAT Bengaluru

.do. 2007-08 Appeal in CESTAT, Bengaluru

.do. 2004-05 A.P.High Court

.do. 2008-09 Commissioner, Tirupathi.

.do. 2009-10 Asst. Commissioner, Kurnool July 2006 to Commissioner, Tirupathi. November 2007

.do. December 2009 Addl. Commissioner, Tirupathi to Dec. 2010

.do. Jan 2007 to Addl. Commissioner, Tirupathi July 2009

E P F Act May 1999 to Commissioner of Sep 2001 Provident Fund.Kadapa

Income Tax Act,1961 2007-08 Commissioner of Income Tax (Appeals) Hyderabad.

Income Tax Act,1961 2008-09 Commissioner of Income Tax (Appeals) Hyderabad.

AP VAT Act 2011-12 Request for waiver before the Govt, of A. P.

Mines & Mineral Act May 2006 to Revision application for March 2011 waiver before the Dept / Ministry of Mines

x) In our opinion, the accumulated losses of the company are more than fifty percent of its net worth. The company has not incurred cash losses during the financial year covered by our audit and the immediately preceding financial year.

xi) In our opinion and according to the information and explanations given to us, the company has not defaulted in repayment of dues to Banks, Financial Institutions and debenture holders except interest dues to J.M.Capital Management Private Limited of Rs.11.51 lakhs and delays in payment of interest and term loan installments to Banks and an amount of Rs.186.48 lakhs outstanding towards March 2012 interest and one installment of two term loans at the year end on 31.03.2012 was paid in the subsequent year 2012-13.

xii) In our opinion and according to the information and explanations given to us, the company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

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 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) In our opinion and according to the information and explanations given to us, the terms and conditions on which the company has given guarantees for loans taken by Cheran Cement Limited from financial institution (SIPCOT) and by M/s S.P.Y.Agro Industries Limited from State Bank of India, State Bank of Hyderabad; Bank of India, Syndicate Bank and Indian Overseas Bank, are not prima facie, prejudicial to the interest of the company.

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

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. No long-term funds have been used to finance short-term assets except permanent working capital.

xviii) According to the information and explanations given to us, during the year under report, the company has not made preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Companies Act, 1956.

xix) According to the information and explanations given to us, during the period covered by our audit report, the company has not issued any debentures and hence creation of securities does not arise.

xx) According to the information and explanations given to us, during the year covered by our report, the company has not raised any money by public issue.

xxi) In our opinion and according to the information and explanations given to us, no fraud on or by the company has been noticed or reported during the course of our audit.

For Brahmayya & Co.,

Chartered Accountants

Firm's Registration No.000514S

B.DAIVADHEENAM REDDY

Place: Nandyal (Camp) Partner

Dt.30th May, 2012 M.No.026450


Mar 31, 2011

1. We have audited the attached Balance Sheet of M/s.Panyam Cements & Mineral Industries Limited, as at 31st March, 2011 and the Profit and Loss Account and also 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 the auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor's Report) Order, 2003 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 purpose 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, except Accounting Standard-15, Accounting for Retirement Benefits, regarding gratuity on actuarial valuation.

v) On the basis of written representations received from the directors, as on 31st March, 2011 and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March, 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, "subject to non provision of gratuity liability on actuarial valuation in respect of employees and the a mount of gratuity liability is not ascertained by the company," the said accounts give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

a) In the case of the Balance Sheet, of the state of affairs of the company as at 31st March, 2011;

b) In the case of the Profit and Loss Account, 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.

ANNEXURE Re: M/s. Panyam Cements & Mineral Industries Limited. Referred to in paragraph 3 of our report of even date;

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

(b) All the assets have not been physically verified by the management during the 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) During the year, the company has not disposed off substantial part of fixed assets and the going concern status of the company is not affected.

ii) (a) The inventory has been physically verified during the year by the management. In our opinion, the frequency of verification is reasonable.

(b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the company and the nature of its business.

(c) The company has maintained proper records of inventory. As explained to us, the discrepancies noticed on verification between the physical stocks and the book records were not material.

iii) (a) The company had taken unsecured loans in the earlier years from one Ex-Director (Director as on the date of loan taken) and from Associates/parties covered in the register maintained under section 301 of the Companies Act, 1956 and the maximum amount involved during the year was Rs.452.06 lakhs and the year end balance was Rs.435.85 lakhs. There are companies covered in the register maintained under section 301 of the Companies Act, 1956 to which the company has granted loans/advances. The maximum amount involved during the year was Rs. 8370.61 lakhs and the year end balance of loans granted to such parties was Rs. 8370.61 lakhs.

(b) In our opinion and according to the information and explanations given to us, the rate of interest wherever applicable and other terms and conditions on which loans have been taken from/granted to companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956 are not, prima facie, prejudicial to the interest of the company.

(c) In respect of loans taken/granted by the company, the interest and the principal amount is repayable/receivable on demand.

(d) There is no overdue amount in respect of loans taken from or granted to companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956, since these are repayable/receivable on demand.

iv) In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the company and the nature of its business with regard to purchase of inventory, fixed assets and with regard to the sale of goods. During the course of our audit, we have not observed any continuing failure to correct major weakness in internal controls.

v) (a) According to the information and explanations given to us, we are of the opinion that the transactions that need to be entered into the register maintained under section 301 of the Companies Act, 1956 have been so entered.

(b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and exceeding the value of rupees five lakhs in respect of any party during the year have been made 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, the company has not accepted any public deposits under the provisions of Section 58A and 58AA of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975. No order has been passed by the Company Law Board.

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 relating to materials, labour and other items of cost 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 we are of the opinion, that prima facie, the prescribed accounts and records have been made and maintained. We have not however, made a detailed examination of the same

ix) (a) According to the records of the company, the company is generally regular in depositing with appropriate authorities undisputed statutory dues including provident fund, employees state insurance, income-tax, sales tax, wealth tax, customs duty, excise duty, cess and other material statutory dues applicable to it except royalty and Income-Tax deducted/collected at source.

According to the information and explanations given to us, the following undisputed amounts payable in respect of income tax, wealth tax, sales tax, customs duty, excise duty and cess were in arrears, as at 31st March, 2011 for a period of more than six months from the date they became payable and the due dates for payment of arrears of royalty and sales tax dues have been considered taking into consideration the deferment for payment of the said dues sanctioned by the Government of Andhra Pradesh as per G.O.Ms.No.307 dated 24th May, 2006.

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

Name of the Nature of Amount period to which Statute the Dues Rs. Lakhs the amount (Net of relates Payment

APGST Act Andhra Pradesh 36.11 Arrears upto Sales Tax 2005-06

CST Act Central Sales 0.33 2006-07 Tax

T.N.G.S.T.Act Tamilnadu Sales 51.88 March 1999 to Tax Feb.2000

Goa G.S.T.Act Goa Sales Tax 11.55 Feb.1999 to Feb.2000

A.P.G.S.T.Act Consignment 45.78 1998-99 to (Consignment Sales Tax 2003-04 Agents in diff -erent States)

CST Act Central Sales 0.88 2009-10 Tax

Professional Tax Profession Tax 1.13 Oct. 2000 to Act collections Aug. 2005

Professional Tax Profession Tax 2.41 Sept. 1999 to Act collections April 2005

Income Tax Act, I.T.D.S. from 4.90 2003-04 1961 Salaries

Income Tax Act, I.T.D.S. from 25.56 2001-02, 2003-04 1961 Interest to 2005-06

Income Tax Act, I.T.D.S. from 1.24 2002-03, 2003-04 1961 Professional to 2005-06

Income Tax Act, I.T.D.S. from 1.96 2000-01 and 1961 contractors 2001-02

Income Tax Act, I.T.D.S. from 14.14 December 1999 1961 contractors to Aug.05

Income Tax Act, T.C.S.on Royalty 5.60 2009-10 and upto 1961 Aug.2010

Non-Agricultural NALA on factory 9.29 1993-94 and from Land 1999-2000 Assessment Tax to June 2010. Mines and Minerals Dead Rent/cess 2.33 1984-85 to on limestone 1986-87

Mines and Minerals Royalty on 125.69 April 2010 to limestone August 2010

Mines and Minerals State Cess on 9.35 2006-07 to Limestone August 2010

Panchayat Tax Act Property Tax 4.62 1998-99 to 2006-07

E.P.F.Act PF. Recoveries 51.79 April 2005 to and contribu December 2005 -tions Period to which

(c) According to the information and explanations given to us, the following are the statutory dues of sales tax, income tax, customs duty, wealth tax, excise duty and cess which have not been deposited on account of dispute.

Name of the Nature of Amount Statute the Dues Rs. Lakhs (Net of Payments

TNGST Act Tamilnadu Sales Tax 5.56

Central CENVAT credits 232.36 Excise Act availed on D.G.Sets disallowed by the Dept.

-do- CENVAT credit availed 4.80 on Proclain Shovel

-do- CENVAT credit availed 4.37 on refractory bricks

-do- CENVAT credit 24.52 availed on service tax paid on outward freight

-do- -do- 28.54

-do- -do- 12.88

-do- Differential Duty for 40.63 Supplies made to Direct parties

-do- Duty on captive consumption 1.46

-do- -do- 0.87

-do- Differential Duty 42.37 on D.G.Set

-do- -do- 10.24

-do- Cenvat on Capital Goods 41.77 (TMT Bars)

-do- -do- 0.34

-do- Irregular availment 413.38 0f CENVAT Credit - CENVAT on Serive Tax on outward GTA 20.10

P.F.Act Penal damages for 399.69 delay payments.

VAT.Act Differential tax on 92.59 Consignment Sales

Income Tax Capital Gains Tax on 2378.48 Act, 1961 land development Agreements

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

TNGST Act 1994-95 Remanded to Assessing Officer by the Appellate Tribunal

Central Feb.97 to Commissioner Excise Act June 1999 (Appeals)

-do- 1994-95 A.P.High Court

-do- 1994-95 A.P.High Court

-do- December 06 Commissioner to August 07 Tirupathi

-do- September 07- Commissioner, February 08 Tirupati.

-do- April 2009 Commissioner August 2009 Tirupati.

-do- March 2007 to Appeal in CESTAT, February 2008 Bangalore

-do- 2007-08 Appeal in CESTAT Bangalore

-do- 2008-09 Appeal in CESTAT Bangalore

-do- 2007-08 Appeal in CESTAT, Bangalore

-do- 2004-05 A.P.High Court

-do- 2008-09 Commissioner, Tirupathi.

-do- 2009-10 Asst. Commissioner, Kurnool

-do- July 2006 to Commissioner, Tirupathi. November 2007

-do- December 2009 Addl.Commissioner, to April 2010 Tirupathi

P.F.Act May 1999 to Commissioner of Pro- Sept.2001 vident Fund,Kadapa

VAT.Act 2007-08 & Appellate Deputy 2008-09 Commissioner, Kurnool

Income Tax 2007-08 Commissioner of Act, 1961 Income Tax (Appeals) Hyderabad.

x) In our opinion, the accumulated losses of the company are more than fifty percent of its net worth. The company has not incurred cash losses during the financial year covered by our audit and the immediately preceding financial year.

xi) In our opinion and according to the information and explanations given to us, the company has not defaulted in repayment of dues to Banks, Financial Institutions and debenture holders except interest dues to J.M.Capital Management Private Limited of Rs.11.51 lakhs and there are delays in payment of interest and term loan installments to Banks and an amount of Rs.185.41 lakhs outstanding towards interest and term loan installments at the year end on 31.03.2011 was paid in the subsequent year 2011-12.

xii) In our opinion and according to the information and explanations given to us, the company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

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 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) In our opinion and according to the information and explanations given to us, the terms and conditions on which the company has given guarantees for loans taken by others (Cheran Cement Limited and S.P.Y.Agro Industries Limited) from banks or financial institutions (SIPCOT in respect of Cheran Cement Ltd and State Bank of India, State Bank of Hyderabad; Bank of India, Syndicate Bank and Indian Overseas Bank in respect of S.P.Y.Agro Industries Limited) are not prima facie, prejudicial to the interest of the company

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

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. No long-term funds have been used to finance short-term assets except permanent working capital.

xviii) According to the information and explanations given to us, during the year under report, the company has not made preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Companies Act, 1956.

xix) According to the information and explanations given to us, during the period covered by our audit report, the company has not issued any debentures and hence creation of securities does not arise.

xx) According to the information and explanations given to us, during the year covered by our report, the company has not raised any money by public issue.

In our opinion and according to the information and explanations given to us, no fraud on or by the company has been noticed or reported during the course of our audit.

For Brahmayya & Co., Chartered Accountants Firm's Registration No.000514S

B. DAIVADHEENAM REDDY Partner M.No.026450

Hyderabad (Camp) Dt. 30 May, 2011


Mar 31, 2010

1. We have audited the attached Balance Sheet of M/s.Panyam Cements & Mineral Industries Limited, as at 31st March, 2010 and the Profit and Loss Account and also 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 the auditing standards generally accepted in India. Those Standards require that we plan and .perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

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

4. 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, except Accounting Standard-15, Accounting for Retirement Benefits, regarding gratuity on actuarial valuation.

v) On the basis of written representations received from the directors, as on 31st March, 2010 and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March, 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, "subject to non provision of gratuity liability on actuarial valuation in respect of employees and the amount of gratuity liability is not ascertained by the company," 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 3V March, 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 Re: M/s. Panyam Cements & Mineral Industries Limited. Referred to in paragraph 3 of our report of even date;

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

(b) All the assets have not been physically verified by the management during the 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) During the year, the company has not disposed off substantial part of fixed assets and the going concern status of the company is not affected.

ii) (a) Theinventory has been physically verified during the year by the management. In our opinion, the frequency of verification is reasonable.

(b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the company and the nature of its business.

(c) The company has maintained proper records of inventory. As explained to us, the discrepancies noticed on verification between the physical stocks and the book records were not material.

iii) (a) The company had taken unsecured loans in the earlier years from one Ex-Director (Director as on the date of loan taken) and during the year from Associates/parties covered in the register maintained under section 301 of the Companies Act, 1956 and the maximum amount involved during the year was Rs.492.06 lakhs and the year end balance was Rs.452.06 lakhs. There are companies covered in the register maintained under section 301 of the Companies Act, 1956 to which the company has granted loans/advances. The maximum amount involved during the year was Rs.8483.77 lakhs and the year end balance of loans granted to such parties was Rs. 7989.14 lakhs.

(b) In our opinion and according to the information and explanations given to us, the rate of interest wherever applicable and other terms and conditions on which loans have been taken from/granted to companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956 are not, prima facie, prejudicial to the interest of the company.

(c) In respect of loans taken/granted by the company, the interest and the principal amount is repayable/receivable on demand.

(d) There is no overdue amount in respect of loans taken from or granted to companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956, since these are repayable/receivable on demand.

iv) In our opinion and according to the information and explanations given to us, there are adequate

internal control procedures commensurate with the size of the company and the nature of its business with regard to purchase of inventory, fixed assets and with regard to the sale of goods. During the course of our audit, we have not observed any continuing failure to correct major weakness in internal controls.

v) (a) According to the information and explanations given to us, we are of the opinion that the transactions that need to be entered into the register maintained under section 301 of the Companies Act, 1956 have been so entered.

(b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and exceeding the value of rupees five lakhs in respect of any party during the year have been made 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, the company

has not accepted any public deposits under the provisions of Section 58A and 58AA of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975. No order has been passed by the Company Law Board.

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 relating to materials, labour and other items of cost 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 we are of the opinion, that prima facie, the prescribed accounts and records have been made and maintained. We have not however, made a detailed examination of the same.

ix) (a) According to the records of the company, the company is generally regular in depositing with appropriate authorities undisputed statutory dues including provident fund, employees state insurance, income-tax, sales tax, wealth tax, customs duty, excise duty, cess and other material statutory dues applicable to it except royalty and Income-Tax deducted/collected at source.

(b) According to the information and explanations given to us, the following undisputed amounts payable in respect of income tax, wealth tax, sales tax, customs duty, excise duty and cess were in arrears, as at 31st March, 2010 for a period of more than six months from the date they became payable and the due dates for payment of arrears of royalty and sales tax dues have been considered taking into consideration the deferment for payment of the said dues sanctioned by the Government of Andhra Pradesh as per G.O.Ms.No.307 dated 24th May, 2006.

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

Amount Name of the Nature of Rs. Lakhs Period to Which

Statute the Dues (Net of Payments) the amount relates

I Cement Division : / CAO:

APGSTAct Andhra Pradesh Sales Tax 36.11 Arrears upto 2005-06

CSTAct Central Sales Tax 0.33 2006-07

K.G.S.T. Act Karnataka State Sales Tax 29.73 1998-99 to 2005-06

C.S.T.Act Karnataka State Central

Sales Tax 2.01 1998-99 and 1999-2000

T.N.G.S.T.Act Tamilnadu Sales Tax 51.88 March 1999 to Feb.2000

GoaG.S.T.Act Goa Sales Tax 11.55 Feb.1999 to Feb.2000

A.P.G.S.TAct Consignment Sales Tax 45.78 1998-99 to 2003-04

(Consignment

Agents in different

States)

AP VAT Act,2005 Value Added Tax 0.12 2008-09

Profession Tax Act Profession Tax collections 1.13 October 2000 to August 2005

Profession Tax Act Profession Tax collections 2.41 Sept. 1999 to April 2005

Income Tax Act, 1961 I.T.D.S. from Salaries 4.90 2003-04

Income Tax Act,1961 I.T.D.S. from Interest 25.56 2001-02,2003-04 to 2005-06

Income Tax Act, 1961 I.T.D.S. from Professional 1.24 2002-03, 2003-04 to 2005-06

Income Tax Act,1961 I.T.D.S. from contractors 1.96 2000-01 and 2001-02

Income Tax Act, 1961 I.T.D.S. from contractors 14.14 December 1999 to Aug.05

Income Tax Act, 1961 T.C.S.on Royalty 4.23 2007-08 and 2008-09 arrears.

Non- Agricultural NALA on factory land 8.61 1993-94 and from 1999-200

Land Assessment Tax to June 2009.

Mines and Minerals Dead Rent/cess on limestone 2.33 1984-85 to 1986-87

Mines and Minerals Royalty on limestone 56.52 April 2009 to August 2009

Mines and Minerals Welfare cess on Limestone 3.45 2001-02 and 2003-04

Mines and Minerals State Cess on Limestone 9.86 2006-07 to August 2009

Panchayat Tax Act Property Tax 4.75 1998-99 to 2006-07

E.P.FAct P.F. Recoveries and 79.98 April 2005 to December 2005 contributions

(c) According to the information and explanations given to us, the following are the statutory dues of sales tax, income tax, customs duty, wealth tax, excise duty and cess which have not been deposited on account of dispute.

Name of the Nature of Amount Statute the Dues Rs. Lakhs

(Net of Paymen TNGSTAct Tamilnadu Sales Tax 5.56

I.T.Act Penalty for late on 3.50 payment of ITDS

Central CENVAT credits 232.36 Excise Act availed on D.G.Sets disallowed by the Dept.

--do-- CENVAT credit availed 4.80 on Proclain Shovel

--do-- CENVAT credit availed 4.37 on refractory bricks

-do- CENVAT credit 24.52 availed on service tax paid on outward freight

-do- -do- 28.54

-do- -do- 12.88

-do- Differential Duty for 40.63 Supplies made to Direct parties

-do- Duty on captive consumption 1.46

-do- -do- 0.87

-do- -do- 0.75

-do- Differential Duty 42.37

on D.G.Set

-do- -do- 10.24

-do- Cenvat on Capital Goods 41.77 -do- Irregular availment 413.38 of CENVAT Credit Differential duty on 3.39 gypsum quantity and refund claim P.F.Act Penal damages for 277.35 delay payments. K.S.T.Act Sales Tax Dues and 415.46 interest upto 21.11.08

Name of the Period to Forum where Statue Which the dispute is amount relates pending

TNGST Act 1994-95 Remanded to Assessing Officer by the Appellate Tribunal

I.T. Act 1999-00 Appellate Tribunal

2000-01

Central Feb.97 to Commissioner Excise Act June 1999 (Appeals)

-do- 1994-95 A.P.High Court

-do- 1994-95 A.P.High Court

-do- December 06 Commissioner to August 07 Tirupathi

-do- September 07- Commissioner, February 08 Tirupati.

-do- April 2009 Commissioner August 2009 Tirupati.

-do- March 2007 to Appeal in CESTAT, Bangalore February 2008

-do- 2007-08 Appeal in CESTAT Bangalore

-do- 2008-09 Appeal in CESTAT Bangalore

-do- 2009-10 Asst. Commissioner, Kurnool

-do- 2007-08 Appeal in CESTAT, Bangalore

-do- 2004-05 A.P.High Court

-do- 2008-09 Commissioner, Tirupathi.

-do- July 2006 to -do- November 2007

-do- 2009-10 Asst.Commissioner.Kurnool

P.F.Act May 1999 to Commissioner of Pro- Sept.2001 vident Fund,Kadapa

K.S.T.Act 1997-98 to Dy.Commissioner 2000-01 of Commercial Taxes,Bangalore



x) In our opinion, the accumulated losses of the company are more than fifty percent of its net worth. The company has not incurred cash losses during the financial year covered by our audit and the immediately preceding financial year.

xi) In our opinion and according to the information and explanations given to us, the company has not defaulted in repayment of dues to Banks, Financial Institutions and debenture holders except interest dues to J.M.Capital Management Private Limited of Rs.11.51 lakhs and there are delays in payment of term loan installments to Banks and an amount of Rs.13.75 lakhs outstanding at the year end on 31.03.2010 was paid in the subsequent year 2010-11.

xii) In our opinion and according to the information and explanations given to us, the company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

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

xv) In our opinion and according to the information and explanations given to us, the terms and conditions on which the company has given guarantees for loans taken by others (Cheran Cement Limited and S.P.Y.Agro Industries Limited) from banks or financial institutions (SIPCOT and TIIC in respect of Cheran Cement Ltd and State Bank of India, State Bank of Hyderabad; Bank of India, Syndicate Bank and Indian Overseas Bank in respect of S.P.Y.Agro Industries Limited) are not prima facie, prejudicial to the interest of the company.

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

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. No long-term funds have been used to finance short-term assets except permanent working capital.

xviii) According to the information and explanations given to us, during the year under report, the company has not made preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Companies Act, 1956.

xix) According to the information and explanations given to us, during the period covered by our audit report, the company has not issued any debentures and hence creation of securities does not arise.

xx) According to the information and explanations given to us, during the year covered by our report, the company has not raised any money by public issue.

xxi) In our opinion and according to the information and explanations given to us, no fraud on or by the company has been noticed or reported during the course of our audit.

For Brahmayya & Co.,

Chartered Accountants

Firms Registration No.000514S

Hyderabad (Camp) B.DAIVADHEENAM REDDY

Dt. 29th May, 2010 Partner

M.No.026450