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Auditor Report of Sobha Ltd.

Mar 31, 2023

Sobha LimitedReport on the Audit of the Standalone Financial Statements

Opinion

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

2. In our opinion and to the best of our information and according to the explanations given to us, and based on the consideration of the reports of the other auditor as referred to in paragraph 16 below, the aforesaid standalone financial statements give the information required by the Companies Act, 2013 (''the Act'') in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards (''Ind AS'') specified under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015 and other accounting principles generally accepted in India, of the state of affairs of the Company as at 31 March 2023, and its profit (including other comprehensive income), its cash flows and the changes in equity for the year ended on that date.

Basis for Opinion

3. We conducted our audit in accordance with the Standards on Auditing specified under section 143(10) of the Act. Our responsibilities under those standards are further described in the Auditor''s Responsibilities for the Audit of the Standalone Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India (''ICAI'') together with the ethical requirements that are relevant to our audit of the standalone financial statements under the provisions of the Act and the rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained together with the audit evidence obtained by the other auditor, in terms of their report referred to in paragraph 16 of the Other Matter section below is sufficient and appropriate to provide a basis for our opinion.

Emphasis of Matter

4. We draw attention to Note 39(5) to the accompanying standalone financial statement, regarding the search operation carried out by the Income Tax Department at various business premises of the Company and certain other group companies during March 2023. As the Company and certain other group companies have not received any communication on the findings of the investigation by the Income Tax department till date, the impact of this matter on the accompanying standalone financial Statement for the year ended 31 March 2023 and the adjustments (if any) required to these accompanying standalone financial statement, is presently not ascertainable. Our opinion is not modified in respect of this matter.

Key Audit Matters

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

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

Key audit matter

How our audit addressed the key audit matter

1. Revenue recognition for sale of residential units

The Company applies Ind AS 115, Revenue from Contracts with Customers (Ind AS 115) for recognition of revenue from sale of residential units and revenue fromjoint development agreements. Refer note 2.2(a) (I)(i) and 25 to the standalone financial statements for accounting policy and related disclosures.

Revenue is recognised upon transfer of control of residential units to customers for an amount which reflects the consideration the Company expects to receive in exchange for those units. The point of revenue recognition is normally based on the terms as included in the intimation for the handover of unit to the customer on completion of the project, and substantial collection is received. The Company recognises the revenue at a point in time upon handover/deemed handover of the residential units.

For contracts involving sale of residential units, the Company receives the consideration in accordance with the terms of the contract in proportion of the percentage of completion of such real estate project and represents payments made by customers to secure performance obligation of the Company under the contract enforceable by customers. The assessment of such consideration received from customers involves significant judgment in determining if the contracts with customers involves any financing element.

For revenue contracts forming part of joint development arrangements that are not jointly controlled operations (''JDA''), the revenue from the development and transfer of constructed area/revenue share with corresponding land/ development rights received by the Company is measured at the fair value of the estimated construction service rendered by the Company to the landowner under JDA. Such revenue is recognised over a period of time in accordance with the requirements of Ind AS 115.

Ind AS 115 requires significant judgment in determining when ''control'' of the residential units is transferred to the customer. Further, for projects executed through JDA, significant estimate is undertaken by management for determining the fair value of the estimated construction service.

Our audit procedures on revenue recognised from sale of residential units included, but were not limited to the following:

â¢ Evaluated the appropriateness of accounting policy for revenue recognition on sale of residential units in terms of principles enunciated under Ind AS 115;

â¢ Assessed the management evaluation of determining revenue recognition from sale of residential units at a point in time in accordance with the requirements under Ind AS 115;

â¢ Obtained and understood the revenue recognition process, evaluated the design and performed test of controls over revenue recognition including determination of point of transfer of control and completion of performance obligations on a sample basis;

â¢ Inspected, on a sample basis, underlying customer contracts and sale deed/ handover documents, evidencing the transfer of control of the residential units to the customer based on which revenue is recognised at a point in time, and whether the contracts with customers involved any financing element; and

â¢ Visited certain sites during the year for selected projects to understand the nature, status and progress of the projects.

For projects executed during the year in accordance with JDAs, we have performed the following procedures on a sample basis:

â¢ Obtained and understood the revenue recognition process and performed test of controls over revenue recognition including fair valuation of estimated construction service revenue under JDA;

â¢ Obtained and examined the computation of the fair value of the construction service under JDA with reference to project cost estimates and mark up considered by the management;

Key audit matter	How our audit addressed the key audit matter
Revenue recognition for sale of residential units (contâd)
Considering the significance of management judgements and estimates involved and the materiality of amounts involved, aforementioned revenue recognition is identified as a key audit matter.	â¢ Obtained the JDAs entered into by the Company, including addendums thereto and compared the ratio of constructed area/ revenue sharing arrangement between the Company and the landowner as mentioned in the agreement to the computation statement prepared by the management; and â¢ Tested the computation for recognition of revenue over a period of time for revenue contracts forming part of JDA and management''s assessment of stage of completion of projects and project cost estimates. Assessed the adequacy of disclosures included in the standalone financial statements in compliance with the requirements of Ind AS 115.
2. Revenue recognition for contractual construction projects
The Company recognises revenue over a period of time in accordance with Ind AS 115, Revenue from Contracts with Customers (Ind AS 115). Refer note 2.2(a)(l)(ii) and 25 to the standalone financial statements for accounting policy and related disclosures. The Company recognises revenue from construction contracts on the basis of stage of completion (input method) based on the proportion of contract costs incurred at reporting date, relating to the total estimated costs of the contract at completion. The recognition of revenue is therefore dependent on estimates in relation to total estimated costs of each such contract, which is subject to inherent uncertainty as it requires ascertainment of progress of the project, cost incurred till date and balance cost to be incurred to complete the project. Significant judgments are also involved in determining when the underlying performance obligations are satisfied and also determining expected losses, when such losses become probable based on the expected total contract cost. Cost contingencies are included in these estimates to take into account specific risks of uncertainties or disputed claims against the Company, arising within each contract. These contingencies are reviewed by the Management on a regular basis	Our audit procedures on revenue recognition for contractual construction projects included, but were not limited to the following: â¢ Evaluated the appropriateness of accounting policy on revenue recognition for contractual construction projects in terms of principles enunciated under Ind AS 115; â¢ Evaluated the design and tested operating effectiveness of key controls around budgeting of project cost, approval of purchase orders, recording of actual cost, raising of invoices and estimating the cost to complete the project; â¢ Assessed management evaluation of determining revenue recognition for contractual construction projects over a period of time in accordance with the requirements of Ind AS 115; â¢ On a sample basis, tested costs incurred by examining underlying invoices and other applicable documents; â¢ For sample invoices raised during the year, verifying the underlying documents including invoices, work orders and customer acceptance;

Key audit matter	How our audit addressed the key audit matter
Revenue recognition for contractual construction projects(contâd)
throughout the life of the contract and adjusted where appropriate. Considering the significance of management judgements and estimates involved and the materiality of amounts involved, revenue recognition from construction contracts is identified as a key audit matter.	â¢ Compared actual cost with budgeted cost to determine percentage of completion of the project; and â¢ Assessed the adequacy of disclosures included in the standalone financial statements in compliance with the requirements of Ind AS 115.
3. Assessing the recoverability of carrying value of Inventories, advances paid towards land procurement and deposits paid under joint development arrangements (JDA)
Refer note 2.2(c), 2.2(d), 2.2(o), 10, 14 and 13 to the standalone financial statements for accounting policies on inventories, advances paid towards land procurement and deposits paid under JDA (financial asset) and related financial disclosures. As at 31 March 2023, the carrying value of the inventory comprising of Work in progress, Stock of residential units in completed projects and land stock is ? 80,259.42 million, land advances is ? 9,648.96 million and refundable deposits paid under JDA is ? 3,406.74 million, represents a significant portion of the Company''s total assets. The inventories are carried at lower of cost and net realisable value (''NRV''). The determination of the NRV involves estimates based on prevailing market conditions and taking into account the estimated future selling price, cost to complete projects and selling costs. Advances paid by the Company to the seller/ intermediary towards outright purchase of land is recognised as land advance under other assets during the course of transferring the legal title to the Company, whereupon it is transferred to land stock under inventories. Further, deposits paid under joint development arrangements are in the nature of non-refundable/refundable deposits, for acquiring the development rights. On the launch of the project, the non-refundable amount is transferred as land cost to work-in-progress.	Our procedures in assessing the carrying value of the inventories, land advances and deposits paid under JDA included, but were not limited to the following: â¢ Evaluated the appropriateness of accounting policies with respect to inventories, land advances and deposits paid under JDA in terms of principles enunciated under applicable accounting standards; â¢ Evaluated the design and tested operation of internal controls related to testing NRV/ net recoverable value with carrying amount of inventory, land advances and deposits paid under JDA; â¢ Inquired with management to understand key assumptions used in determination of the NRV/ net recoverable value; and â¢ Obtained and tested the computation/ assessment of the NRV/ net recoverable value on a sample basis. For inventory balance: â¢ Compared the NRV to recent sales in the project or to the estimated selling price; â¢ Obtained and assessed the Company''s methodology applied and assumptions used in assessing the net realisable value based on current market conditions and having regard to expected launch of the project, project development plan and expected future sales; â¢ Compared the estimated construction costs to complete each project with the Company''s updated budgets; and

Key audit matter	How our audit addressed the key audit matter
Assessing the recoverability of carrying value of Inventories, advances paid towards land procurement and deposits paid under joint development arrangements (JDA)
The aforesaid deposits and advances are carried at the lower of the amount paid/payable and net recoverable value, which is based on the management''s assessment including the expected date of commencement and completion of the project and the estimate of sale prices and construction costs of the project. We identified the assessment towards recoverability of carrying value of inventory, land advances and deposits paid under JDA as a key audit matter due to the significance of the balance to the standalone financial statements as a whole and the involvement of estimates and judgement in the assessment.	â¢ For land stock, on a sample basis, obtained the fair valuation reports or the published guidance values and reviewed the valuation methodology, key estimates and assumptions adopted in the valuation. Involved auditor''s valuation expert, where such fair valuation reports were obtained. For land advances/ deposits paid under JDA â¢ Obtained an update on the status of the land acquisition/ project progress from the management and verified the underlying documents for related developments in respect of the land acquisition to assess Company''s rights over the land parcels in subject and expected recoverability of land advances / deposits paid under JDA; and â¢ Carried out external confirmation procedures on sample basis to obtain evidence supporting the carrying value of land advance and deposits paid under JDA. Assessed the adequacy of disclosures included in the standalone financial statements in compliance with the applicable accounting standards.
Key audit matter	How our audit addressed the key audit matter
4. Assessment of certain transactions entered into by the Company and recoverability of balances, on which regulatory proceedings are ongoing
The Company had entered into a joint development arrangement with certain landowners in Gurugram, Haryana, in earlier years. In respect of this transaction, the Enforcement Directorate (''ED'') after due investigation has filed a complaint with Adjudicating Authority, Prevention of Money Laundering (''AA-PML''), alleging certain irregularities in respect of the manner of allotment and pricing of certain plots under this project or payment of applicable fees and charges by the Company or the landowners, with respect to the terms and conditions mentioned in the development policy of Haryana Development and Regulation of Urban Areas Act (HDRUAA), 1975 and the bilateral agreement between the land owners	Our audit procedures on this matter included, but were not limited to the following: â¢ Obtained an understanding from the management with respect to process and controls followed by the Company for identification, monitoring of significant developments and impact analysis in relation to the litigations, including completeness thereof;

Key audit matter

How our audit addressed the key audit matter

Assessment of certain transactions entered into by the Company and recoverability of balances, on which regulatory proceedings are ongoing

and Directorate of Town and Country Planning, Haryana (DTCP) resulting in provisional attachment under the Prevention of Money Laundering Act, 2002 (''PMLA'') of land parcels with value of ^2,016.05 million held by Technobuild Developers Private Limited (''TDPL'') disclosed under Note 39(4). The Company has entered into a Memorandum of Understanding (''MoU'') with TDPL for acquiring land parcels using advances extended by the Company, of equivalent value. As per the MoU, TDPL and its affiliates cannot transfer land parcels without prior approval of the Company and the Company has absolute rights over land parcels acquired by TDPL

and its affiliates acquired from such advance given by the Company.

As part of the inquiry process, the Company and its officers have been asked to provide contracts, documents and justification in respect of this transaction by the concerned authorities. The Company and its officers have been responding to the queries raised / documents sought from time to time. During the year, the Company is in receipt of Show Cause Notice (SCN) under the PMLA from AA-PML and the Company in consultation with its legal counsel has responded to allegations made in SCN.

The Company, based on its overall assessment and independent legal opinion obtained, believes that these transactions have been carried out in accordance with all the applicable laws and regulations and the said bilateral agreement and has not identified any adverse material impact to the standalone financial statements.

Considering the significance of the matter which involves uncertainty of outcome due to ongoing proceedings in AA-PML and significant judgements and estimates by the Company on the assessment of the legality and outcome of the above case, this is considered as a key audit matter.

Considering this matter is also fundamental to the understanding of the user of standalone financial statement, we draw attention to Note 39(4) of the standalone financial statements.

â¢ Gaining an understanding of the ongoing regulatory proceedings through discussions with the management, and reading the underlying case related documents, communications and legal opinions to ensure consistency with the explanations provided to us. and we have also assessed the objectivity, experience, competence and independence of management''s expert;

â¢ Evaluated and challenged the Company''s assessment of recoverability of the balances outstanding as at the balance sheet date, the business rationale for entering these transactions, including considering the developments on the matter subsequent to the balance sheet date;

â¢ Engaged auditor''s expert, who obtained an understanding of the current status of the litigation, reviewed independent legal opinion obtained by the management and considered relevant legal provisions and available precedents to validate the conclusions made by the management''s expert;

â¢ Communicated and discussed periodic updates on these transactions with those charged with governance, including the recoverability and management''s business rationale aspects for these transactions; and

â¢ Assessed and validated the adequacy and appropriateness of the disclosures made by the management in the standalone financial statements.

Key audit matter

How our audit addressed the key audit matter

5. Restatement in accordance with Ind AS 8, Accounting Policies, Changes in Accounting Estimates and Errors â(Ind AS 8)â

The accounting policies for restatement of standalone financial statements are set out in Note 2.2(u) to the standalone financial statements.

During the current year, the Company has made restatements relating to (i) capitalisation of borrowing cost (ii) accounting for Joint Development Arrangement (JDAs) [not being jointly controlled operations] (iii) accounting for significant financing element in customer contracts and various other restatements which has been explained in Note 45 of the standalone financial statements. Amongst other things, the aforesaid restatements required detailed re-computation of capitalisation of eligible borrowing costs for earlier years, detailed assessment of all ongoing JDAs entered into by the Company and required significant judgements and estimates to be made on part of the management. Further, assessment of consideration received from customers involves significant judgment in determining if the contracts with customers involves any financing element.

Considering the quantum of amounts involved, the audit efforts required to audit such restatements indepth, frequent interactions with the management and those charged with Governance, the restatement is identified as a key audit matter for the current year audit.

The above matter is also considered fundamental to the understanding of the user of standalone financial statement on account of the restatement of comparative financial information for various corrections of material prior period errors and reclassifications, which are further described in Note 45 of the standalone financial statements.

Our audit procedures on this matter included, but

were not limited to the following:

â¢ Obtained an understanding of the management process for identification of restatement adjustments to be made in the standalone financial statements;

â¢ Evaluated the design and tested the operating effectiveness of internal controls relevant to restatement adjustments;

â¢ Evaluated the appropriateness of the implementation of accounting policies and ensured compliance with the requirements of the respective accounting standards and related authoritative pronouncements;

â¢ Obtained and tested the computation/ workings involved in restatement and understood from the management, the rationale in view of the applicable accounting standards for the restatement adjustments carried out in the standalone financial statements;

â¢ Obtained and assessed the relevant contracts/ agreements for impact assessment of restatement adjustments; and

â¢ Ensured that all restatement adjustments have been dealt with and disclosed in the standalone financial statement in accordance with Ind AS 8, Accounting Policies, Changes in Accounting Estimates and Errors as well as the respective accounting standards (including division II of Schedule III), as relevant.

Information other than the Consolidated Financial Statements and Auditorâs Report thereon

7. The Company''s Board of Directors are responsible for the other information. The other information comprises the information included in the Annual Report but does not include the standalone financial statements and our auditor''s report thereon. The Annual Report is expected to be made available to us after the date of this auditor''s report.

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

In connection with our audit of the standalone financial statements, our responsibility is to read the

other information and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

When we read the Annual Report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial

Statements

8. The accompanying standalone financial statements have been approved by the Company''s Board of Directors. The Company''s Board of Directors are responsible for the matters stated in section 134(5) of the Act with respect to the preparation and presentation of these standalone financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, changes in equity and cash flows of the Company in accordance with the Ind AS specified under section 133 of the Act and other accounting principles generally accepted in India. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

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

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

Auditorâs Responsibilities for the Audit of the Standalone Financial Statements

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

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

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

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

reference to standalone financial statements in place and the operating effectiveness of such controls;

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

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

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

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

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

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

Other Matter

16. The standalone financial statements include the Company''s share in the net profit of? 19.06 million for the year ended 31 March 2023, in respect of share of profit from partnership firm in which the Company has invested, whose financial statements have not been audited by us. These financial statements have been audited by the other auditor whose report has been furnished to us by the management, and our opinion on the standalone financial statements, in so far as it relates to the amounts and disclosures included in respect of this partnership firm, and our report in terms of subsection (3) of Section 143 of the Act in so far as it relates to the aforesaid partnership firm, is based solely on the report of such other auditor.

Our opinion is not modified in respect of this matter with respect to our reliance on the work done by and the report of other auditor.

17. The standalone financial statements of the Company for the year ended 31 March 2022 were audited by the predecessor auditor, B S R & Co. LLP, who have expressed an unmodified opinion on those standalone financial statements vide their audit report dated 20 May 2022.

Report on Other Legal and Regulatory Requirements

18. As required by section 197(16) of the Act based on our audit, we report that the Company has paid

remuneration to its directors during the year in accordance with the provisions of and limits laid down under section 197 read with Schedule V to the Act.

19. As required by the Companies (Auditor''s Report) Order, 2020 (''the Order'') issued by the Central Government of India in terms of section 143(11) of the Act we give in the Annexure I, a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.

20. Further to our comments in Annexure I, as required by section 143(3) of the Act based on our audit, we report, to the extent applicable, that:

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

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

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

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

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

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

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

i. The Company, as detailed in note 39 to the standalone financial statements, has disclosed the impact of pending litigations on its financial position as at 31 March 2023;

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

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company during the year ended 31 March 2023; ;

iv. a. The management has represented that, to the best of its knowledge and belief, as disclosed

in note 47(iv) to the standalone financial statement, no funds have been advanced or loaned or invested (either from borrowed funds or securities premium or any other sources or kind of funds) by the Company to or in any persons or entities, including foreign entities (''the intermediaries''), with the understanding, whether recorded in writing or otherwise, that the intermediary shall, whether, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company (''the Ultimate Beneficiaries'') or provide any guarantee, security or the like on behalf the Ultimate Beneficiaries;

b. The management has represented that, to the best of its knowledge and belief, as disclosed in note 47(v) to the standalone financial statement, no funds have been received by the Company from any persons or entities including foreign entities (''the Funding Parties''), with the understanding, whether recorded in writing or otherwise, that the Company shall,

whether directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (''Ultimate Beneficiaries'') or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries; and

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

v. The final dividend paid by the Company during the year ended 31 March 2023 in respect of such dividend declared for the previous year is in accordance with section 123 of the Act to the extent it applies to payment of dividend;

As stated in note 19 to the accompanying standalone financial statements, the Board of Directors of the Company have proposed final dividend for the year ended 31 March 2023 which is subject to the approval of the members at the ensuing Annual General Meeting. The dividend declared is in accordance with section 123 of the Act to the extent it applies to declaration of dividend.

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

For Walker Chandiok & Co LLP

Chartered Accountants

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

Manish Agrawal

Partner

Membership No: 507000

UDIN: 23507000BGYESJ5744

Bengaluru

29 May 2023.

Mar 31, 2022

Opinion

We have audited the standalone financial statements of Sobha Limited ("the Companyâ), which comprise the standalone balance sheet as at 31 March 2022, the standalone statement of profit and loss (including other comprehensive income), standalone statement of changes in equity and standalone statement of cash flows for the year then ended, and notes to the standalone financial statements, including a summary of the significant accounting policies and other explanatory information.

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Companies Act, 2013 ("Actâ) in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at 31 March 2022, and profit and other comprehensive income, changes in equity and its cash flows for the year ended on that date.

Basis for Opinion

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

Emphasis of matter

We draw attention to note 40 to the standalone financial statements that explains that during the previous years, the Company had entered into a joint development agreement (JDA) in which the counter party, i.e. land owners had obtained a license for setting up a residential township on land parcels. The license is based on the Bilateral Agreement which was entered into between the land owners and District Town and Country Planner (DTCP), Haryana and is governed under the development policy of Haryana Development and Regulation of Urban Areas Act (HDRUAA), 1975.

In respect of this transaction, the concerned authorities are inspecting if there were any irregularities in respect of the manner of allotment and pricing of certain plots under this project by the Company, with respect to the terms and conditions of the license and HRDUAA regulations and also whether the concerned charges were paid pursuant to the change in beneficial interest.

The Company has responded to the concerned authorities on these transactions from time to time. The matter has not yet been concluded, and the duration and outcome of the ongoing regulatory proceedings is presently uncertain.

Our opinion is not modified in respect of this matter.

Key Audit Matters

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

A. Regulatory Inquiry - refer note 40 to the standalone financial statements

Key Audit Matter	How the matter was addressed in our audit
Assessment of certain transactions entered into	Our audit procedures on this matter included the
by the Company and recoverability of balances, on which regulatory inquiries are ongoing	following:
	â¢	Inquired with senior personnel of the Company
During the previous years, the Company has		to understand the status of recovery of
received enquiries from Securities and Exchange		aged receivables and other asset balances
Board of India (SEBI) about certain transactions		outstanding from these transactions pursuant
entered into by the Company in earlier years.		to the manner of settlement as agreed among
SEBI had further summoned the Company under section 11(2), and 11C(2), 11C(3) of the SEBI Act,		the parties to the transactions;
1992 for production of documents and responses	_â¢	Verified the correspondence with the various
in respect of the aforesaid transactions.		parties to recover the outstanding balances;
The enquiries and consequently the Summons	_â¢	Read the Company''s communications to SEBI
were directed to ascertain if there was any		to ensure consistency with the explanations
undue favour towards any individuals in these		and documentatio n / correspondences
specific business transactions carried out by the		provided to us;
Company, which represented aged receivables	_â¢	Evaluated and challenged the Company''s
and other asset balances recoverable from the		assessment of recoverability of the balances
various parties and SEBI had sought responses		outstanding as at the balance sheet date, the
and evidences for the efforts taken by the		business rationale for these transactions and
Company to recover these amounts.		the timing and manner of settlement, including
During the current year, the Company and the		considering the developments subsequent to
other parties to the transactions have agreed to		the balance sheet date;
the manner of settlement of the dues according	_â¢	Evaluated the legal opinions obtained by the
to which the Company is expected to recover the		Company on the implications of adjudication
dues over a period of time. During the current year, SEBI has initiated adjudication proceedings		proceedings initiated on the Company;
against the Company and its officers and issued a	_â¢	Communicated and discussed periodic
Show Cause Notice (SCN) to the Company under		updates on these transactions to those
Rule 4(1) of the SEBI (Procedure for holding inquiry		charged with governance, including the
and imposing penalties) Rules, 1995. The Company, in consultation with its legal		recoverability and business rationale aspects for these transactions;
counsel has responded to the allegations in the	_â¢	Read the minutes of the meetings of the
SCN and also filed a settlement application under		management discussions with the Board of
SEBI (Settlement Proceedings) Regulations, 2018.		Directors and those charged with governance
The matter has not yet been concluded by SEBI.		on this matter;
Considering the significance of the matter which	_â¢	Read the Company''s submission to SEBI for
involves uncertainty of outcome due to ongoing inquiries from SEBI and significant judgements		the settlement application made; and
and estimates by the Company on the realisability of these balances, this is considered as a key audit matter.	_â¢	Considered the adequacy of the disclosures in the standalone financial statements.

B. Revenue recognition - refer note 2.2(a)(ii)(a)	to the standalone financial statements
Key Audit Matter	How the matter was addressed in our audit
Measurement of revenue recorded from sale of	Our audit procedures on revenue recognition on
residential units	sale of residential units included the following:
Revenues from sale of residential units represents	â¢ Evaluation of the Company''s accounting
the largest portion of the total revenues of the	policies for revenue recognition on sale of
Company. Revenue is recognised upon transfer of control of residential units to customers for an amount which reflects the consideration the Company expects	residential units are in line with the applicable accounting standards and their application to customer contracts, including consistent application;
to receive in exchange for those units. The point	â¢ Identifying and testing operating effectiveness
of revenue recognition is normally based on	of key controls around approvals of contracts,
the terms as included in the intimation for the	milestone billing, intimation of handover letters
handover of unit to the customer on completion	and controls over collection from customers;
of the project, post which the contract becomes	â¢ For samples selected, verifying the underlying
non-cancellable by the parties. The Company	documents - handover letter, sale agreement
records revenue at a point in time upon transfer	signed by the customer, handover intimation
of control of residential units to the customers.	mail sent to the customer and the collections
Considering the volume of the Company''s projects,	against the units sold;
spread across different regions within the country	â¢ Cut-off procedures for recording of revenue in
and the competitive business environment, there	the relevant reporting period;
is a risk of revenue being recorded in an incorrect	â¢ Site visits during the year for selected projects
period (for example, through premature revenue	to understand the scope, nature, status and
recognition i.e., recording revenue prior to handover of unit to the customers or improperly	progress of the projects; and
shifting revenues to a later period) in order to	â¢ Considering the adequacy of the disclosures
present consistent financial results. Since revenue	in note 2.2(a)(ii)(a) to the standalone financial
recognition has direct impact on the Company''s	statements in respect of recognising revenue
profitability, there is a possibility of the Company being biased, hence this is considered as a key audit matter.	on sale of residential units.
B. Revenue recognition - refer note 2.2(a)(i) to the standalone financial statements
Key Audit Matter	How the matter was addressed in our audit
Measurement of revenue on contractual	Our audit procedures on revenue recognition on
construction projects recorded over time which	contractual construction projects included the
is dependent on the estimates of the costs to	following:
complete	â¢ Evaluation of Company''s accounting policies
Revenue recognition from contractual projects	for revenue recognition on contractual projects
represents a significant portion of the total	are in line with the applicable accounting
revenues of the Company.	standards and their application to customer contracts, including consistent application;

Key Audit Matter	How the matter was addressed in our audit
Revenue recognition from contractual projects	â¢ Identifying and testing operating effectiveness
involves significant estimates primarily pertaining	of key controls around budgeting of project
to measurement of costs to complete the projects.	cost, approval of purchase orders, recording of
Revenue from projects is recorded based on	actual cost, raising of invoices and estimating
Company''s assessment of the work completed,	the cost to complete the project;
costs incurred and accrued and the estimate of the balance costs to complete. Due to inherent nature of the projects and	â¢ For samples selected during the year, verifying the underlying documents - contracts with customers, invoices raised and collections
significant judgment involved in the estimate of	from the customers;
costs to complete, there is risk of overstatement or understatement of revenue, hence this is considered as a key audit matter.	â¢ Comparing the estimated costs to complete with the budgeted costs and analysis of the
variances, if any; â¢ Sighting approvals for budgeted costs with the rationale for the changes; â¢ Assessment of costs incurred on projects, which is used by the Company to determine the percentage of completion; â¢ Considering the adequacy of the disclosures in note 2.2(a)(i) to the standalone financial statements in respect of judgements taken to recognise revenue for contractual projects; and â¢ Considering the adequacy of the disclosures in note 42 to the standalone financial statements in respect of revenue recognised, cost incurred, amount received/ retentions due from customers, work in progress, value of inventories and profit recognised till date. B. Revenue recognition - refer note 2.2(a)(iii) to the standalone financial statements
Key Audit Matter	How the matter was addressed in our audit
Measurement of revenue recorded from sale of	Our audit procedures on revenue recognition
manufactured products	from sale of manufactured products included the
Revenue is recognised upon transfer of control	following:
of products manufactured by the Company to	â¢ Evaluation of Company''s accounting policies
customers for an amount which reflects the	for revenue recognition on sale of products
consideration the Company expects to receive	manufactured, are in line with the applicable
in exchange for those products. The point of	accounting standards and their application
revenue recognition is normally upon transfer of	to agreement with customers, including
control to the customer on delivery of product.	consistent application;

Key Audit Matter	How the matter was addressed in our audit
Considering the competitive business	â¢ Identifying and testing operating effectiveness
environment, there is a risk of revenue being	of key controls around approvals of sale order
overstated (for example, through premature	received, invoice raised, intimation of delivery
revenue recognition i.e., recording revenue	of product, and controls over collection from
prior to transfer of control to the customers) or	customers;
understated (for example, through improperly	â¢ For samples selected, verifying the underlying
shifting revenues to a later period) in order to	documents - sales order, invoice raised, good
present consistent financial results.	received note authorised by the customer and
Since revenue recognition has direct impact on	the collections;
the Company''s profitability, there is a possibility	â¢ Cut-off procedures for recording of revenue in
of the Company being biased, hence this is considered as a key audit matter.	the relevant reporting period; and â¢ Considering the adequacy of the disclosures in note 2.2(a)(iii) to the standalone financial statements in respect of recognizing revenue on sale of manufactured products.
C.Inventories - refer note 3(b)(iv) to the standalone	financial statements
Key Audit Matter	How the matter was addressed in our audit
Assessment of net realisable value (NRV) of	Our audit procedures to assess the net
inventories Inventories on construction of residential units	realisable value (NRV) of inventories included the following:
comprising ongoing and completed projects,	â¢ Enquiry with the Company''s personnel to
initiated but unlaunched projects and land stock,	understand the basis of computation and
represents a significant portion of the Company''s	justification for the estimated recoverable
total assets.	amounts of the unsold units in both ongoing and completed projects ("the NRV
The Company recognises profit on the sale of each residential unit with reference to the overall profit	assessmentâ);
margin depending upon the total cost incurred on	â¢ Assessing the Company''s valuation
the project. A project comprises multiple units,	methodology for the key estimates, data
the construction of which is carried out over a	inputs and assumptions adopted in the
number of years. The recognition of profit for sale	valuation. This involved comparing the total
of a unit, is therefore dependent on the estimate	cost per sqft with expected average selling
of future selling prices and construction costs.	prices such as recently transacted prices
Further, estimation uncertainty and exposure to	maintained by the Company. For projects
cyclicality exists within long- term projects.	which are not launched and / (or) there are no sales, the total cost per sqft is compared to the selling prices of similar properties located in nearby vicinity of each project â¢ While analysing the expected average selling price, we have performed a sensitivity analysis on the selling price and compared this to the budgeted cost;

Key Audit Matter	How the matter was addressed in our audit
Forecasts of future sales are dependent on	â¢	For our samples of land stock, obtained
market conditions, which can be difficult to		the fair valuation reports and published
predict and be influenced by political and		guidance values for assessing the valuation
economic factors.		methodology, key estimates and assumptions
Considering the significance of the amount of		adopted in the valuation; and
carrying value of inventories and the involvement	_â¢	Verifying the NRV assessment and comparing
of significant estimation and judgement in		the estimated construction costs to complete
assessment of NRV, this is considered as a key		each development with the Company''s
audit matter.		updated budgets.
D. Land Advances - refer note 3(b)(iv) to the standalone financial statements
Key Audit Matter	How the matter was addressed in our audit
Assessment of recoverability of land advances	Our audit procedures to assess the
Land advances represents a significant portion of the Company''s total assets.	recoverability of land advances included the following:
Land advance represents the amount paid towards procurement of land parcels to be used in the future for construction of residential projects. These advances are carried at cost	_â¢	Enquiry with the Company''s personnel on the process of providing land advances and testing of key controls over such land advances paid during the year;
less impairment losses. These land advances are	_â¢	Obtaining explanations from Company''s
converted into land stock as per the terms of		personnel on the long-standing land
the underlying contracts under which these land		advances and understanding Company''s plan
advances have been given. The carrying value		for conversion of the land advances to land
of advances are tested for recoverability by the		stock;
Company by comparing the valuation of land parcels in the same area for which land advances have been given.	â¢	For our samples, verifying the underlying agreements or memorandum of understanding in possession of the Company, based on
Due to the quantum of carrying value of land		which land advances were given, to assess
advances to total assets of the Company and		the Company''s rights over the land parcels
significant estimates and judgements involved in		in subject;
assessing recoverability of land advances, this is considered as a key audit matter.	_â¢	For our samples, obtaining the fair valuation reports of such land parcels for assessing the valuation methodology, key estimates and assumptions adopted in the valuation; and
	_â¢	For our samples, verifying the published guidance values for the area in which these land parcels are situated.

Information Other than the Standalone Financial Statements and Auditorsâ Report Thereon

The Company''s management and Board of Directors are responsible for the other information. The other information comprises the information included in the Company''s annual report, but does not include the financial statements and our auditors'' report thereon.

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

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

Managementâs and Board of Directorsâ Responsibility for the Standalone Financial Statements

The Company''s Management and Board of Directors are responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these standalone financial statements that give a true and fair view of the state of affairs, profit/loss and other comprehensive income, changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) specified under section 133 of the Act. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

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

The Board of Directors is also responsible for overseeing the Company''s financial reporting process.

Auditorâs Responsibilities for the Audit of the Standalone Financial Statements

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

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

â¢ Obtain an understanding of internal control relevant to the audit in order to design audit

procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we

are also responsible for expressing our opinion on whether the company has adequate internal financial controls with reference to financial statements in place and the operating effectiveness of such controls.

â¢ Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures in the standalone financial statements made by the Management and Board of Directors.

â¢ Conclude on the appropriateness of the Management and Board of Directors use of the going

concern basis of accounting and, based on the audit evidence obtained, whether a material

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

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

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

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

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

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditors'' Report) Order, 2020 ("the Orderâ) issued by the Central

Government in terms of section 143 (11) of the Act, we give in the âAnnexure Aâ a statement on

the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.

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

a. We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the 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 standalone balance sheet, the standalone statement of profit and loss (including other comprehensive income), the standalone statement of changes in equity and the standalone statement of cash flows dealt with by this Report are in agreement with the books of account.

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

e. On the basis of the written representations received from the directors as on 31 March 2022 taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 2022 from being appointed as a director in terms of Section 164(2) of the Act.

f. With respect to the adequacy of the internal financial controls with reference to financial statements of the Company and the operating effectiveness of such controls, refer to our separate Report in "Annexure Bâ.

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

a. The Company has disclosed the impact of pending litigations as at 31 March 2022 on its financial position in its standalone financial statements - Refer note 40 to the standalone financial statements;

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

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

d. (i) The management has represented that, to the best of its knowledge and belief, other than as disclosed in the notes to the accounts, no funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other persons or entities ("Intermediariesâ), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall:

â¢ directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever ("Ultimate Beneficiariesâ) by or

â¢ on behalf of the Company or provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.

(ii) The management has represented, that, to the best of its knowledge and belief, other than as disclosed in the notes to the accounts, no funds have been received by the Company

from any persons or entities ("Funding Partiesâ), with the understanding, whether recorded in writing or otherwise, that the Company shall:

â¢ directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever ("Ultimate Beneficiariesâ) by or

â¢ on behalf of the Funding Party or provide any guarantee, security or the like from or on behalf of the Ultimate Beneficiaries.

iii) Based on such audit procedures as considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the representations under sub-clause (d) (i) and (d) (ii) contain any material mis-statement.

e. The dividend declared or paid during the year by the Company is in compliance with Section 123 of the Act.

In our opinion and according to the information and explanations given to us, the remuneration paid by the company to its directors during the current year is in accordance with the provisions of Section 197 of the Act. The remuneration paid to any director is not in excess of the limit laid down under Section 197 of the Act. The Ministry of Corporate Affairs has not prescribed other details under Section 197(16) which are required to be commented upon by us.

for B S R & Co. LLP

Chartered Accountants ICAI Firm registration number: 101248W/W-100022

Amrit Bhansali

Partner

Place : Bengaluru Membership number: 065155

Date : 20 May 2022 UDIN: 22065155AJHJUM1713

Mar 31, 2018

Report on the Audit of the Standalone Indian Accounting Standards (âInd ASâ) Financial Statements

We have audited the accompanying standalone Ind AS financial statements of Sobha Limited (âthe Companyâ), which comprise the Balance Sheet as at 31 March 2018, the Statement of Profit and Loss, the Statement of Changes in Equity and the Statement of Cash Flows for the year then ended, and summary of the significant accounting policies and other explanatory information.

Managementâs Responsibility for the Standalone Ind AS Financial Statements

The Companyâs Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (âthe Actâ) with respect to the preparation of these standalone Ind AS financial statements that give a true and fair view of the state of affairs, profit (including other comprehensive income), changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Ind AS prescribed under Section 133 of the Act.

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

In preparing the financial statements, Management is responsible for assessing the Companyâs ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless Management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Auditorâs Responsibility

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

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

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

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

We are also responsible to conclude on the appropriateness of Managementâs use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the entityâs ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in the auditorâs report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify the opinion. Our conclusions are based on the audit evidence obtained up to the date of the auditorâs report. However, future events or conditions may cause an entity to cease to continue as a going concern.

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

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone Ind AS financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India of the state of affairs of the Company as at 31 March 2018, its profit (including other comprehensive income), changes in equity and its cash flows for the year ended on that date.

Other Matters

a) Corresponding figures for the year ended 31 March 2017 have been audited by another auditor who expressed an unmodified opinion dated 16 May 2017 on the standalone Ind AS financial statements of the Company for the year ended 31 March 2017.

b) We draw attention to Note 2.2 (a) of the standalone Ind AS financial Statements, which states that the Company is in the process of consulting relevant bodies / committee dealing with clarifying matters relating to Ind AS for presentation of revenues and corresponding costs for Joint Development Agreements.

Our conclusion is not modified in respect of these matters.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditorâs Report) Order, 2016 (âthe Orderâ) issued by the Central Government in terms of Section 143(11) of the Act, we give in âAnnexure Aâ a statement on the matters specified in paragraphs 3 and 4 of the Order.

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

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

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

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

d) In our opinion, the aforesaid standalone Ind AS financial statements comply with the Indian Accounting Standards prescribed under Section 133 of the Act.

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

f) With respect to the adequacy of the internal financial controls with reference to financial statements of the Company and the operating effectiveness of such controls, refer to our separate Report in âAnnexure Bâ.

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

i. The Company has disclosed the impact of pending litigations on its financial position in its standalone Ind AS financial statements; Refer Note 38 to the standalone Ind AS financial statements.

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

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

iv. The disclosures in the financial statements regarding holdings as well as dealings in specified bank notes during the period from 8 November 2016 to 30 December 2016 have not been made since they do not pertain to the financial year ended 31 March 2018. However amounts as appearing in the audited standalone Ind AS financial statements for the period ended 31 March 2017 have been disclosed.

Annexure A to the Independent Auditorâs Report

The Annexure A referred to in our report to the members of Sobha Limited (âthe Companyâ) for the year ended 31 March 2018. We report that:

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

(b) The Company has a regular programme of physical verification of its fixed assets by which all fixed assets are verified in a phased manner over a period of 3 years. In our opinion, this periodicity of physical verification is reasonable having regard to the size of the Company and the nature of its assets. Pursuant to the programme, certain fixed assets were physically verified during the year. No material discrepancies were noticed on such verification.

(c) In our opinion and according to the information and explanations given to us and on the basis of our examination of the records of the Company, the title deeds of immovable properties included in property, plant and equipment are held in the name of the Company.

(ii) The inventory has been physically verified by the management during the year. In our opinion, the frequency of such verification is reasonable. The discrepancies noticed on verification between the physical stock and the book records were not material.

(iii) According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured to companies, firms, limited liability partnerships or other parties covered in the register maintained under section 189 of the Companies Act, 2013 (âthe Actâ). Accordingly, the provisions of clause 3(iii) (a), (b) and (c) of the Order are not applicable to the Company.

(iv) In our opinion and according to information and explanation given to us, the company has complied with the provisions of sections 185 and 186 of the Act, with the respect of the loan given, investment made, guarantees and security given.

(v) The Company has not accepted any deposits from the public within the meaning the directives issued by the Reserve Bank of India, provisions of Section 73 to 76 of the Act, any other relevant provisions of the Act and the relevant rules framed thereunder.

(vi) We have broadly reviewed the books of accounts maintained by the Company pursuant to the rules of Central government for the maintenance of cost records under the section 148(1) of companies Act, 2013 in respect of the construction of buildings/structure and the other related activities, and we are of the opinion that prima facie, the specified accounts and records have been maintained. We have however not done a detailed examination.

(vii) (a) According to the information and explanations given to us and on the basis of our examination of the records of the Company, amounts deducted / accrued in the books of account in respect of undisputed statutory dues including provident fund, employees state insurance, income-tax, sales tax, service tax, duty of customs, duty of excise, value added tax, goods and service tax, cess and any other material statutory dues have been regularly deposited during the year by the Company with the appropriate authorities.

According to the information and explanations given to us, no undisputed amounts payable in respect of including provident fund, employees state insurance, income-tax, sales tax, service tax, duty of customs, duty of excise, value added tax, goods and service tax, cess and any other material statutory dues were in arrears, as at 31 March 2018, for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us, there are dues of income Tax or sales Tax or service Tax or duty of customs or duty of excise or value added tax which have not been deposited by the Company on account of disputes except for the following.

Name of the statute	Nature of dues	Amount in million¹	Period to which amount relates	Forum where dispute is pending
Andhra Pradesh Sales Tax Act	Basis of charge of sales tax	2.05	2002-05	High Court
Karnataka Sales Tax Act	Basis of charge of sales tax	127.27	2007-08	High Court
Karnataka Sales Tax Act	Basis of charge of sales tax	25.60	2008-09	High Court
Karnataka Sales Tax Act	Basis of charge of sales tax	27.62	2009-10	High Court
Karnataka Sales Tax Act	Basis of charge of sales tax	67.71	2010-11	High Court
Karnataka Sales Tax Act	Basis of charge of sales tax	43.98	2012-13	High Court
Kerala Sales Tax Act	Basis of charge of sales tax	11.71	2012-13	DC - ( Appeals) Thiruvananthapuram
Kerala Sales Tax Act	Basis of charge of sales tax	29.66	2013-14	DC - ( Appeals) Thiruvananthapuram
Kerala Sales Tax Act	Basis of charge of sales tax	23.52	2011-12	DC - ( Appeals) Thiruvananthapuram
Haryana Sales Tax Act	Basis of charge of sales tax	1.28	2011-12	Commissioner Appeal Gurgaon
Tamil Nadu Value Added Tax Act	Basis of charge of sales tax	5.79	2011-14	Assistant Commissioner (CT)
The Maharashtra Value Added Tax Act	Basis of charge of sales tax	5.87	2008-09	Joint Commissioner of Sales Tax Appeal
The Maharashtra Value Added Tax Act	Basis of charge of sales tax	2.91	2009-10	Joint Commissioner of Sales Tax Appeal
The Maharashtra Value Added Tax Act	Basis of charge of sales tax	6.22	2010-11	Joint Commissioner of Sales Tax Appeal
The Maharashtra Value Added Tax Act	Basis of charge of sales tax	3.93	2013-14	Commissioner of Central Tax
The Maharashtra Value Added Tax Act	Basis of charge of sales tax	0.38	2011-12	Commissioner of Central Tax
The Kolkata Value Added Tax Act	Basis of charge of sales tax	1.00	2009-10	West Bengal commercial taxes appellate
Income Tax Act	Disallowances	1.69	2007-11	Assistant Commissioner of Income Tax
Income Tax Act	Disallowances	153.21	2005-07	High Court
Income Tax Act	Disallowances	23.07	2006-14	Commissioner of Income tax (Appeal) and ITAT
Finance Act,1994 (Service Tax Provisions)	Disallowances	2.66	2002-07	Central Excise and Service Tax Appellate Tribunal
Finance Act,1994 (Service Tax Provisions)	Service tax demand	372.85	2006-12	Central Excise and Service Tax Appellate Tribunal
Finance Act,1994 (Service Tax Provisions)	Service tax demand	48.17	2008-16	Commissioner of Central Tax, GST Commissionerate
Finance Act,1994 (Service Tax Provisions)	Service tax demand	5.32	2012-13	Commissioner of Central Excise and Service Tax (LTU)
Finance Act,1994 (Service Tax Provisions)	Service tax demand	0.33	2008-11	Commissioner of Central Excise and Service Tax (Appeals)
Excise duty	Excise duty demand	6.00	2013-15	Central Excise and Service Tax Appellate Tribunal
Excise duty	Excise duty demand	4.39	2013-15	Assistant Commissioner Central Excise
Customs Act, 1962	Differential tax treatment	1.27	2010-11	Central Excise and Service Tax Appellate Tribunal

*Net of Rs.506.96 million, paid under protest.

(viii) In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to financial institution, banks or debenture holder. The Company did not have any outstanding loans or borrowing from Government.

(ix) According to the information and explanations given to us and based on examination of the records of the Company, the term loans obtained during the year were applied for the purpose for which they were obtained. The Company has not raised any money by way of initial public offer or further public offer (including debt instruments) during the year.

(x) According to the information and explanations given to us, no material fraud on the Company by its officers and employees or fraud by the Company has been noticed or reported during the course of our audit.

(xi) According to the information and explanations given to us and based on examination of the records of the Company, the Company has paid/provided managerial remuneration in accordance with the requisite approvals mandated by the provisions of Section 197 read with Schedule V to the Act.

(xii) According to the information and explanations given to us, in our opinion, the Company is not a Nidhi Company as prescribed under Section 406 of the Act. According to the information and explanations given to us and based on our examination of the records of the Company, transactions with the related parties are in compliance with Sections 177 and 188 of the Act, where applicable, and details of such transactions have been disclosed in the standalone financial statements as required by the applicable accounting standards.

(xiii) According to the information and explanations given to us and based on our examination of the records of the Company, the Company has not made preferential allotment or private placement of shares or fully or partly convertible debentures during the year.

(xiv) According to the information and explanations given to us and based on our examination of the records of the Company, the Company has not entered into non-cash transactions with directors or persons connected with him.

(xv) According to the information and explanation given to us and in our opinion the Company is not required to be registered under Section 45-IA of the Reserve Bank of India Act, 1934.

Annexure - B to the Independent Auditorâs Report

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

We have audited the internal financial controls over financial reporting of Sobha Limited (âthe Companyâ) as of 31 March 2018 in conjunction with our audit of the standalone Ind AS financial statements of the Company for the year ended on that date.

Managementâs Responsibility for Internal Financial Controls

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

Auditorâs Responsibility

Our responsibility is to express an opinion on the Companyâs internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note and the Standards on Auditing, issued by ICAI and deemed to be prescribed under Section 143(10) of the Act, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the ICAI. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.

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

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Companyâs internal financial controls system over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

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

Inherent Limitations of Internal Financial Controls over Financial Reporting

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

Opinion

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

For B S R & Co. LLP

Chartered Accountants

ICAI Firm registration number: 101248W/W-100022

Supreet Sachdev

Partner

Membership number: 205385

Bangalore

19 May 2018

Mar 31, 2017

To the Members of Sobha Limited

Report on the Standalone Ind AS Financial Statements

We have audited the accompanying standalone Ind AS financial statements of Sobha Limited (âthe Companyâ), which comprise the Balance Sheet as at March 31, 2017, the Statement of Profit and Loss, including the statement of Other Comprehensive Income, the Cash Flow Statement and the Statement of Changes in Equity for the year then ended, and a summary of significant accounting policies and other explanatory information.

Managementâs Responsibility for the Financial Statements

The Company''s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (âthe Actâ) with respect to the preparation of these standalone Ind AS financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, cash flows and changes in equity of the Company in accordance with accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) specified under section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 and the Companies (Indian Accounting Standards) Rules, 2015, as amended. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and the design, implementation and maintenance of adequate internal financial control that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the Ind AS financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditorâs Responsibility

Our responsibility is to express an opinion on these standalone Ind AS 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 of the standalone Ind AS financial statements in accordance with the Standards on Auditing, issued by the Institute of Chartered Accountants of India, as specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

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

Opinion

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

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s report) Order, 2016 (âthe Orderâ) issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in the Annexure 1 a statement on the matters specified in paragraphs 3 and 4 of the Order.

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

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

(b) I n 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 including the Statement of Other Comprehensive Income, the Cash Flow Statement and Statement of Changes in Equity dealt with by this Report are in agreement with the books of account;

(d) In our opinion, the aforesaid standalone Ind AS financial statements comply with the Accounting Standards specified under section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 Companies (Indian Accounting Standards) Rules, 2015, as amended;

(e) On the basis of written representations received from the directors as on March 31, 2017, and taken on record by the Board of Directors, none of the directors

is disqualified as on March 31, 2017, from being appointed as a director in terms of section 164 (2) of the Act;

(f) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in âAnnexure 2â to this report;

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

i. The Company has disclosed the impact of pending litigations on its financial position in its standalone Ind AS financial statements - Refer Note 37 to the standalone Ind AS financial statements;

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

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

iv. The Company has provided requisite disclosures in Note 13 to these standalone Ind AS financial statements as to the holding of Specified Bank Notes (SBNs) on November 8, 2016 and December 30, 2016 as well as dealings in Specified Bank Notes during the period from November 8, 2016 to December 30, 2016. Based on audit procedures and relying on management representations, except for the segregation between SBNs and other denominations upon which we are unable to comment on in the absence of necessary details, we report that the amounts disclosed in the said note is in accordance with the books of account maintained by the Company and produced to us for verification.

Other Matter

We did not audit the financial information as regards Company''s share in loss of partnership firm (post tax) amounting to Rs. 108.97 million for the year ended March 31, 2017. The financial information has been audited by other auditors whose reports have been furnished to us, and the Company''s share in profits of partnership firm investments has been included in the accompanying standalone Ind AS financial statements solely based on the report of other auditors. Our opinion is not modified in respect of this matter.

Annexure 1 referred to in paragraph 1 under the heading âReport on other legal and regulatory requirementsâ of our report of even date

Re: Sobha Limited ("the Company")

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

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

(c) According to the information and explanations given by the management, the title deeds of immovable properties included in fixed assets are held in the name of the Company.

(ii) The management has conducted physical verification of inventory at reasonable intervals during the year and no material discrepancies were noticed on such physical verification.

(iii) (a) The Company had subscribed to unsecured debentures to one party covered in the register maintained under Section 189 of the Companies Act, 2013. In our opinion and according to the information and explanations given to us, the terms and conditions of the grant for such debentures are not prejudicial to the Company''s interest.

(b) The unsecured debentures are compulsorily convertible into equity shares on expiry of 19 years from date of issue or on happening of certain events. The Company has sold such debentures during the year in accordance with the terms as stipulated in the agreement. The payment of interest is regular as per the agreed terms.

(c) There is no overdue amount of loans granted to companies, firms or other parties listed in the register maintained under Section 189 of the Companies Act, 2013 which are outstanding for more than ninety days.

(iv) I n our opinion and according to the information and explanations given to us, provisions of Section 185 and 186 of the Companies Act 2013 in respect of loans to directors including entities in which they are interested and in respect of loans and advances given, investments made and, guarantees, and securities given have been complied with by the Company.

(v) The Company has not accepted any deposits from the public.

(vi) We have broadly reviewed the books of account maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under Section 148(1) of the Companies Act, 2013, related to the construction of buildings/ structures and other related activities, and are of the opinion that prima facie, the specified accounts and records have been made and maintained. We have not, however, made a detailed examination of the same.

(vii) (a) The Company is generally regular in depositing with appropriate authorities undisputed statutory dues including provident fund, employees'' state insurance, income-tax, sales-tax, service tax, duty of custom, duty of excise, value added tax, cess and other material statutory dues applicable to it.

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

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

Name of the statute	Nature of dues	Amount ³ (Rs. in millions)	Period to which amount relates	Forum where dispute is pending
Andhra Pradesh Sales Tax Act	Basis of charge of sales tax	26.92	2002-04	High Court
Karnataka Sales Tax Act	Basis of charge of sales tax	30.68	1998-06	Sales Tax Appellate Tribunal
Karnataka Sales Tax Act	Basis of charge of sales tax	64.55	2003-05	High Court
Karnataka Sales Tax Act	Basis of charge of sales tax	127.27	2007-08	High Court
Karnataka Sales Tax Act	Basis of charge of sales tax	25.60	2008-09	High Court
Karnataka Sales Tax Act	Basis of charge of sales tax	28.62	2009-10	High Court
Karnataka Sales Tax Act	Basis of charge of sales tax	67.71	2010-11	High Court
Karnataka Sales Tax Act	Basis of charge of sales tax	43.98	2011-12	High Court
Kerala Sales Tax Act	Basis of charge of sales tax	20.97	2012-13	Deputy Commissioner (Appeals)
Kerala Sales Tax Act	Basis of charge of sales tax	29.66	2013-14	Deputy Commissioner (Appeals)
Tamil Nadu Value Added Tax Act	Basis of charge of sales tax	78.11	2013-14	The Appellate Deputy Commissioner
Tamil Nadu Value Added Tax Act	Basis of charge of sales tax	38.37	2014-15	The Appellate Deputy Commissioner
The Maharashtra Value Added Tax Act	Basis of charge of sales tax	5.87	2008-09	Joint Commissioner of Sales Tax Appeal
The Maharashtra Value Added Tax Act	Basis of charge of sales tax	2.91	2009-10	Joint Commissioner of Sales Tax Appeal
The Maharashtra Value Added Tax Act	Basis of charge of sales tax	6.22	2010-11	Joint Commissioner of Sales Tax Appeal
Income Tax Act	Differential tax treatment	1.65	1999-01	High Court
Income Tax Act	Differential tax treatment	1.89	1999-01	Income Tax Appellate Tribunal
Income Tax Act	Disallowances	10.40	2008-09	Commissioner of Income Tax (Appeal)
Income Tax Act	Disallowances	4.60	2007-11	Additional Commissioner of Income Tax
Income Tax Act	Disallowances	153.21	2005-07	High Court
Income Tax Act	Disallowances	1,330.07	2006-14	Commissioner of Income Tax (Appeal)
Finance Act,1994 (Service Tax Provisions)	Basis of valuation	95.67	2006-08	Central Excise and Service Tax Appellate Tribunal
Finance Act,1994 (Service Tax Provisions)	Service tax demand	790.44	2006-07	Supreme Court
Finance Act,1994 (Service Tax Provisions)	Disallowances	4.23	2002-07	Central Excise and Service Tax Appellate Tribunal
Finance Act,1994 (Service Tax Provisions)	Service tax demand	119.32	2008-11	Central Excise and Service Tax Appellate Tribunal
Finance Act,1994 (Service Tax Provisions)	Service tax demand	387.07	2006-12	Central Excise and Service Tax Appellate Tribunal
Finance Act,1994 (Service Tax Provisions)	Service tax demand	67.72	2012-13	Commissioner of Central Excise and Service Tax (LTU)
Finance Act,1994 (Service Tax Provisions)	Service tax demand	0.33	2008-11	Commissioner of Central Excise and Service Tax (Appeals)
Customs Act, 1962	Differential tax treatment	1.27	2010-11	Central Excise and Service Tax Appellate Tribunal
The Central Excise Act, 1944	Excise duty demand	6.00	2013-16	Central Excise and Service Tax Appellate Tribunal
The Central Excise Act, 1944	Excise duty demand	4.75	2013-15	Commissioner of Central Excise

(viii) In our opinion and according to the information and explanations given by the management, the Company has not defaulted in repayment of dues to a financial institution, bank or debenture holders or government.

(ix) I n our opinion and according to the information and explanations given by the management, the Company has utilized the monies raised by way of debt instruments in the nature of Non-convertible debentures and term loans (representing loans with a repayment period beyond 36 months) for the purposes for which they were raised.

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

(xi) According to the information and explanations given by the management, the managerial remuneration has been paid / provided in accordance with the requisite approvals mandated by the provisions of Section 197 read with Schedule V to the Companies Act, 2013.

(xii) In our opinion, the Company is not a nidhi Company. Therefore, the provisions of clause 3(xii) of the order are not applicable to the Company and hence not commented upon.

(xiii) According to the information and explanations given by the management, transactions with the related parties are in compliance with Section 177 and 188 of Companies Act, 2013 where applicable and the details have been disclosed in the notes to the financial statements, as required by the applicable accounting standards.

(xiv) According to the information and explanations given to us and on an overall examination of the balance sheet, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year under review and hence, reporting requirements under clause 3(xiv) are not applicable to the Company and, not commented upon.

(xv) According to the information and explanations given by the management, the Company has not entered into any non-cash transactions with directors or persons connected with him as referred to in Section 192 of Companies Act, 2013.

(xvi) According to the information and explanations given to us, the provisions of Section 45-IA of the Reserve Bank of India Act, 1934 are not applicable to the Company.

Annexure 2 to the Independent Auditorâs Report of even date on the standalone Ind AS financial statements of Sobha Limited

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

To the Members of Sobha Limited

We have audited the internal financial controls over financial reporting of Sobha Limited (âthe Companyâ) as of March 31, 2017 in conjunction with our audit of the standalone Ind AS financial statements of the Company for the year ended on that date.

Managementâs Responsibility for Internal Financial Controls

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

Auditorâs Responsibility

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

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

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the internal financial controls system over financial reporting.

Meaning of Internal Financial Controls Over Financial Reporting

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

Inherent Limitations of Internal Financial Controls Over Financial Reporting

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

Opinion

In our opinion, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31, 2017, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.

For S.R. Batliboi & Associates LLP

Chartered Accountants

ICAI Firm Registration Number: 101049W/E300004

per Adarsh Ranka

Partner

Membership Number: 209567

Place: Bengaluru, India

Date: May 16, 2017

Mar 31, 2016

We have audited the accompanying standalone financial statements of Sobha Limited [formerly known as Sobha Developers Limited] ("the Company"), which comprise the Balance Sheet as at March 31, 2016, the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management''s Responsibility for the Standalone Financial Statements

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

Auditor''s Responsibility

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

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

Opinion

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

Emphasis of Matter

We draw attention to Note 29 (a) to the financial statements, relating to the notice of termination issued to a buyer by the Company and invoking of the arbitration clause and other legal remedies by the Company under the agreement with such buyer to enforce its rights under the agreement. The management of the Company is confident that it would be able to enforce its rights under the aforesaid agreements and accordingly no adjustments are considered necessary in these financial statements. Our opinion is not qualified in respect of this matter.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s report) Order, 2016 ("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 1 a statement on the matters specified in paragraphs 3 and 4 of the Order.

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

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

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

(c) The 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 standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014;

(e) On the basis of written representations received from the directors as on March 31, 2016, and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2016, from being appointed as a director in terms of Section 164 (2) of the Act;

(f) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in "Annexure 2" to this report;

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

The Company has disclosed the impact of pending litigations on its financial position in its financial statements - Refer Note 29 to the financial statements;

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

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

Other Matter

We did not audit the financial information as regards Company''s share in profits of partnership firm (post tax) amounting to Rs. 83.35 million for the year ended March 31, 2016. The financial information has been audited by other auditors whose reports have been furnished to us, and the Company''s share in profits of partnership firm investments has been included in the accompanying standalone financial statements solely based on the report of other auditors. Our opinion is not modified in respect of this matter.

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

Re: Sobha Limited (''the Company'')

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

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

(c) According to the information and explanations given by the management, the title deeds of immovable properties included in fixed assets are held in the name of the Company.

(ii) The management has conducted physical verification of inventory at reasonable intervals during the year and no material discrepancies were noticed on such physical verification.

(iii) (a) The Company has granted interest free unsecured loan and subscribed to unsecured debentures to two parties covered in the register maintained under Section 189 of the Companies Act, 2013. In our opinion and according to the information and explanations given to us, the terms and conditions of the grant for such loan/ debentures are not prejudicial to the Company''s interest, considering Company''s economic interest in such entities, wherein it has granted interest free loan.

(b) The loan granted is re-payable on demand and the repayment of the principal amount is as demanded and thus, there has been no default on the part of the parties to whom the money has been lent. The unsecured debentures are compulsorily convertible into equity shares on expiry of 19 years from date of issue or on happening of certain events. As explained to us, events warranting conversion of compulsorily convertible debentures have not happened. The payment of interest is regular as per the agreed terms.

(c) There is no overdue amount of loans granted to companies, firms or other parties listed in the register maintained under Section 189 of the Companies Act, 2013 which are outstanding for more than ninety days.

(iv) In our opinion and according to the information and explanations given to us, provisions of Section 185 and 186 of the Companies Act 2013 in respect of loans to directors including entities in which they are interested and in respect of loans and advances given, investments made and, guarantees, and securities given have been complied with by the Company.

(v) The Company has not accepted any deposits from the public.

(vi) We have broadly reviewed the books of account maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under Section 148(1) of the Companies Act, 2013, related to the construction of buildings/ structures and other related activities, and are of the opinion that prima facie, the specified accounts and records have been made and maintained. We have not, however, made a detailed examination of the same.

(vii) (a) The Company is generally regular in depositing with appropriate authorities undisputed statutory dues including provident fund, employees'' state insurance, income-tax, sales-tax, service tax, duty of custom, duty of excise, value added tax, cess and other material statutory dues applicable to it. (b) According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, employees'' state insurance, income-tax, service tax, sales-tax, duty of custom, duty of excise, value added tax, cess and other material statutory dues were outstanding, at the year end, for a period of more than six months from the date they became payable.

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

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

Andhra Pradesh Sales Basis of charge of sales tax 26.92 Tax Act

Karnataka Sales Tax Act Basis of charge of sales tax 30.68

Karnataka Sales Tax Act Basis of charge of sales tax 64.55

Karnataka Sales Tax Act Basis of charge of sales tax 127.27

Karnataka Sales Tax Act Basis of charge of sales tax 25.60

Karnataka Sales Tax Act Basis of charge of sales tax 28.62

Kerala Sales Tax Act Basis of charge of sales tax 20.97

Haryana Sales Tax Act Basis of charge of sales tax 177.03

Income Tax Act Differential tax treatment 1.65

Income Tax Act Differential tax treatment 1.89

Income Tax Act Disallowances 10.40

Income Tax Act Disallowances 4.60

Income Tax Act Disallowances 153.21

Income Tax Act Disallowances 1,236.96

Finance Act, 1994 Basis of valuation 95.67 (Service Tax Provisions)

Finance Act, 1994 Service tax demand 790.44 (Service Tax Provisions)

Finance Act, 1994 Disallowances 4.23 (Service Tax Provisions)

Finance Act, 1994 Service tax demand 119.32 (Service Tax Provisions)

Finance Act, 1994 Service tax demand 392.07 (Service Tax Provisions)

Finance Act, 1994 Service tax demand 67.72 (Service Tax Provisions)

Finance Act, 1994 Service tax demand 0.33 (Service Tax Provisions)

Customs Act, 1962 Differential tax treatment 1.27

The Central Excise Act, Excise duty demand 6.67 1944

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

Andhra Pradesh Sales Tax Act 2002-04 High Court

Karnataka Sales Tax Act 1998-06 Sales Tax Appellate Tribunal

Karnataka Sales Tax Act 2003-05 High Court

Karnataka Sales Tax Act 2007-08 High Court

Karnataka Sales Tax Act 2008-09 High Court

Karnataka Sales Tax Act 2009-10 High Court

Kerala Sales Tax Act 2012-13 Deputy Commissioner (Appeals)

Haryana Sales Tax Act 2012-14 Joint Excise and Taxation Commissioner (Appeals)

Income Tax Act 1999-01 High Court

Income Tax Act 1999-01 Income Tax Appellate Tribunal

Income Tax Act 2008-09 Commissioner of Income Tax (Appeal)

Income Tax Act 2007-11 Additional Commissioner of Income Tax

Income Tax Act 2005-07 High Court

Income Tax Act 2006-14 Commissioner of Income Tax (Appeal)

Finance Act, 1994 2006-08 Central Excise and Service Tax Appellate Tribunal

Finance Act, 1994 2006-07 Supreme Court

Finance Act, 1994 2002-07 Central Excise and Service Tax Appellate Tribunal

Finance Act, 1994 2008-11 Central Excise and Service Tax Appellate Tribunal

Finance Act, 1994 2006-12 Central Excise and Service Tax Appellate Tribunal

Finance Act, 1994 2012-13 Commissioner of Central Excise and Service Tax (LTU)

Finance Act, 1994 2008-11 Commissioner of Central Excise and Service Tax (Appeals)

Customs Act, 1962 2010-11 Central Excise and Service Tax Appellate Tribunal

The Central Excise Act, 1944 2013-16 Central Excise and Service Tax Appellate Tribunal

* Net of Rs. 226.52 million, paid under protest.

(viii) In our opinion and according to the information and explanations given by the management, the Company has not defaulted in repayment of dues to a financial institution, bank or debenture holders or government.

(ix) In our opinion and according to the information and explanations given by the management, the Company has utilized the monies raised by way of debt instruments in the nature of Non-convertible debentures and term loans (representing loans with a repayment period beyond 36 months) for the purposes for which they were raised.

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

(xi) According to the information and explanations given by the management, the managerial remuneration has been paid / provided in accordance with the requisite approvals mandated by the provisions of Section 197 read with Schedule V to the Companies Act, 2013.

(xii) In our opinion, the Company is not a nidhi Company. Therefore, the provisions of clause 3(xii) of the order are not applicable to the Company and hence not commented upon.

(xiii) According to the information and explanations given by the management, transactions with the related parties are in compliance with Section 177 and 188 of Companies Act, 2013 where applicable and the details have been disclosed in the notes to the financial statements, as required by the applicable accounting standards.

(xiv) According to the information and explanations given to us and on an overall examination of the balance sheet, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year under review and hence, reporting requirements under clause 3(xiv) are not applicable to the Company and, not commented upon.

(xv) According to the information and explanations given by the management, the Company has not entered into any non-cash transactions with directors or persons connected with him as referred to in Section 192 of Companies Act, 2013.

(xvi) According to the information and explanations given to us, the provisions of Section 45-IA of the Reserve Bank of India Act, 1934 are not applicable to the Company.

For S.R. Batliboi & Associates LLP

Chartered Accountants

ICAI Firm Registration Number: 101049W/E300004

per Adarsh Ranka

Partner

Membership Number: 209567

Place: Bengaluru, India

Date: May 19, 2016

Mar 31, 2015

Report on the standalone financial statements

We have audited the accompanying standalone financial statements of Sobha Limited [formerly known as Sobha Developers Limited] (''the Company''), which comprise the balance sheet as at March 31, 2015, the statement of profit and loss and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management''s responsibility for the standalone financial statements

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

Auditor''s responsibility

Our responsibility is to express an opinion on these standalone financial statements based on our audit. We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made thereunder. We conducted our audit in accordance with the Standards on Auditing, issued by the Institute of Chartered Accountants of India, as 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 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 standalone financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at March, 31, 2015, and its profit and its cash flows for the year ended on that date.

Other matter

We did not audit the financial information as regards Company''s share in profits of partnership firm (post tax) amounting to Rs. 146.69 million for the year ended March 31, 2015. The financial information has been audited by other auditors whose reports have been furnished to us, and the Company''s share in profits of partnership firm investments has been included in the accompanying standalone financial statements solely based on the report of other auditors. Our opinion is not modified in respect of this matter.

Report on other legal and regulatory requirements

1. As required by the Companies (Auditor''s Report) Order, 2015 ("the Order") issued by the Central Government of India in terms of sub-section (11) of Section 143 of the Act, we give in the Annexure 1 a statement on the matters specified in paragraphs 3 and 4 of the Order.

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

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

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

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

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

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

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

i. The Company has disclosed the impact of pending litigations on its financial position in its financial statements - Refer note 29 to the financial statements;

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

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

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

Re: Sobha Limited (''the Company'')

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

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

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

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

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

(iii) (a) The Company has granted unsecured loan and subscribed to unsecured debentures to two parties covered in the register maintained under section 189 of the Companies Act, 2013. The loan granted is re- payable on demand. We are informed that the Company has not demanded repayment of any such loan during the year, and thus, there has been no default on the part of the parties to whom the money has been lent. The loan given is interest free which is not prima facie prejudicial to the interest of the Company considering Company''s economic interest in such entity. The unsecured debentures are compulsorily convertible into equity shares on expiry of 19 years from date of issue or on happening of certain events. As explained to us, events warranting conversion of compulsorily convertible debentures have not happened. The payment of interest is regular as per the agreed terms.

(b) There is no overdue amount of loans granted to companies, firms or other parties listed in the register maintained under section 189 of the Companies Act, 2013.

(iv) In our opinion and according to the information and explanations given to us and having regard to the explanation that purchases of certain items of inventories and fixed assets are of proprietary nature for which alternative sources are not available to obtain comparable quotations, there is an adequate internal control system commensurate with the size of the Company and the nature of its business, for the purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit, we have not observed any major weakness or continuing failure to correct any major weakness in the internal control system of the Company in respect of these areas.

(v) The Company has not accepted any deposits from the public.

(vi) We have broadly reviewed the books of account maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under section 148(1) of the Companies Act, 2013, related to the construction of buildings/ structures and other related activities, and are of the opinion that prima facie, the specified accounts and records have been made and maintained. We have not, however, made a detailed examination of the same.

(vii) (a) The Company is regular in depositing with appropriate authorities undisputed statutory dues including provident fund, employees'' state insurance, income-tax, sales-tax, excise duty, wealth- tax, service tax, customs duty, cess and other material statutory dues applicable to it.

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

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

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

Andhra Basis of 26.92 2002-04 High Court Pradesh charge Sales of sales Tax Act tax

Karnataka Basis of 30.68 1998-06 Sales Tax Appellate Sales charge Tribunal Tax Act of sales tax

Karnataka Basis of 64.55 2003-05 High Court Sales charge Tax Act of sales tax

Karnataka Basis of 127.27 2007-08 High Court Sales charge Tax Act of sales tax

Income Differential 1.65 1999-01 High Court Tax Act tax treatment

Income Differential 1.89 1999-01 Income Tax Tax Act tax Appellate treatment Tribunal

Income Disallowances 0.40 2008-09 Commissioner of Tax Act Income Tax (Appeal)

Income Disallowances 4.60 2007-11 Additional Tax Act Commissioner of Income Tax

Income Disallowances 153.21 2005-07 High Court Tax Act

Finance Basis of 95.67 2006-08 Central Excise and Act,1994 valuation Service Tax (Service Appellate Tribunal Tax Provisi ons)

Finance Disallowances 4.23 2002-07 Central Excise and Act,1994 Service Tax (Service Appellate Tribunal Tax Provisi ons)

Finance Service tax 119.32 2008-11 Central Excise and Act,1994 demand Service Tax (Service Appellate Tribunal Tax Provisi ons)

Finance Service tax 392.07 2006-12 Central Excise and Act,1994 demand Service Tax (Service Appellate Tribunal Tax Provisi ons)

Finance Service tax 67.72 2012-13 Commissioner of Act,1994 demand Central Excise and (Service Service Tax (LTU) Tax Provisi ons)

Finance Service tax 0.33 2008-11 Commissioner of Act,1994 demand Central Excise and (Service Service Tax Tax (Appeals) Provisi ons)

Customs Differential 1.27 2010-11 Central Excise and Act, 1962 tax Service Tax treatment Appellate Tribunal

* Net of Rs. 191.89 million, paid under protest.

(d) According to the information and explanations given to us, the amount required to be transferred to investor education and protection fund in accordance with the relevant provisions of the Companies Act, 1956 (1 of 1956) and rules made thereunder has been transferred to such fund within time.

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

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

(x) According to the information and explanations given to us, the Company has given guarantee for loans taken by others from bank or financial institutions, the terms and conditions whereof in our opinion are not prima facie prejudicial to the interest of the Company considering Company''s economic interest in such entities.

(xi) Based on information and explanations given to us by the management, term loans (representing loans with a repayment period beyond 36 months) were applied for the purpose for which the loans were obtained.

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

For S.R. Batliboi & Associates LLP ICAI Firm registration number: 101049W Chartered Accountants

per Adarsh Ranka Partner Membership No.: 209567

Place: Bengaluru Date: May 12, 2015

Mar 31, 2014

We have audited the accompanying financial statements of Sobha Developers Limited (''the Company'') which comprise the balance sheet as at March 31, 2014, the statement of profit and loss and the cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management''s responsibility for the financial statements

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with accounting principles generally accepted in India, including the Accounting Standards notified under the Companies Act, 1956 ("the Act"), read with General Circular 8/2014 dated April 04, 2014 issued by the Ministry of Corporate Affairs. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor''s responsibility

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

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

Opinion

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

a) in the case of the balance sheet, of the state of affairs of the Company as at March 31, 2014;

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

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

Report on other legal and regulatory requirements

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

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

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

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

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

d) In our opinion, the balance sheet, statement of profit and loss and cash flow statement comply with the Accounting Standards notified under the Companies Act 1956, read with General Circular 8/2014 dated April 04, 2014 issued by the Ministry of Corporate Affairs;

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

Other matter

We did not audit the financial information as regards Company''s share in profits of partnership firm (post tax) amounting to Rs. 182.64 million for the year ended March 31, 2014. The financial information has been audited by other auditors whose reports have been furnished to us, and the Company''s share in profits of partnership firm investments has been included in the accompanying financial statements solely based on the report of other auditors. Our opinion is not qualified in respect of this matter.

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

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

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

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

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

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

(c) The Company is maintaining proper records of inventory. Discrepancies noted on physical verification of inventories were not material, and have been properly dealt with in the books of account.

(iii) (a) The Company has granted unsecured loan and subscribed to unsecured debentures to two parties covered in the register maintained under section 301 of the Act. The maximum amount involved during the year was Rs. 505.15 million and the year-end balance was Rs. 472.87 million.

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

(c) The loans granted are re-payable on demand and the repayment of the principal amount and interest is as demanded and thus, there has been no default on the part of the parties to whom the money has been lent. The unsecured debentures are compulsorily convertible into equity shares on expiry of 19 years from date of issue or on happening of certain events. As explained to us, events warranting conversion of compulsorily convertible debentures have not happened. The payment of interest is regular as per the agreed terms.

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

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

(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 or continuing failure to correct any major weakness in the internal control system of the Company in respect of these areas.

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

(b) In respect of transactions made in pursuance of such contracts or arrangements exceeding value of Rs. 0.50 million entered into during the financial year, because of the unique and specialized nature of the items involved and absence of any comparable prices, we are unable to comment whether the transactions were made at prevailing market prices at the relevant time.

(vi) The Company has not accepted any deposits from the public.

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

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

(ix) (a) The Company is regular in depositing with appropriate authorities undisputed statutory dues including provident fund, investor education and protection fund, employees'' state insurance, income-tax, sales-tax, excise duty, wealth-tax, service tax, customs duty, cess and other material statutory dues applicable to it.

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

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

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

Andhra Pradesh Sales Tax Act Basis of charge of sales tax 26.92 2002-04 High Court

Karnataka Sales Tax Act Basis of charge of sales tax 30.68 1998-06 Sales Tax Appellate Tribunal

Karnataka Sales Tax Act Basis of charge of sales tax 64.55 2003-05 High Court

Karnataka Sales Tax Act Basis of charge of sales tax 127.27 2007-08 High Court

Income Tax Act Differential tax treatment 1.65 1999-01 High Court

Income Tax Act Differential tax treatment 1.89 1999-01 Income Tax Appellate Tribunal

Income Tax Act Disallowances 0.40 2008-09 Commissioner of Income Tax (Appeal)

Income Tax Act Disallowances 4.60 2007-11 Additional Commissioner of Income Tax

Income Tax Act Disallowances 153.21 2005-07 High Court

Finance Act, 1994 (Service Tax Central Excise and Service Tax Provisions) Basis of valuation 95.67 2006-08 Appellate Tribunal

Finance Act, 1994 (Service Tax Central Excise and Service Tax Provisions) Disallowances 4.23 2002-07 Appellate Tribunal

Finance Act, 1994 (Service Tax Central Excise and Service Tax Provisions) Service tax demand 119.32 2008-11 Appellate Tribunal

Finance Act, 1994 (Service Tax Central Excise and Service Tax Provisions) Service tax demand 315.91 2006-11 Appellate Tribunal

Finance Act, 1994 (Service Tax Commissioner of Central Excise and Provisions) Service tax demand 111.06 2011-12 Service Tax (LTU)

Finance Act, 1994 (Service Tax Commissioner of Central Excise and Provisions) Service tax demand 0.33 2008-11 Service Tax (Appeals)

Customs Act, 1962 Differential tax treatment 1.27 2010-11 Assistant Commissioner (Customs)

* Net of Rs. 153.69 million, paid under protest

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

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

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

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

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

(xv) According to the information and explanations given to us, the Company has given guarantee for loans taken by others from bank or financial institutions, the terms and conditions whereof in our opinion are not prima facie prejudicial to the interest of the Company considering Company''s economic interest in such entities.

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

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

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

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

(xx) The Company has not raised any money by public issues during the year. Accordingly, the provisions of clause 4(xx) of the Order are not applicable to the Company.

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

For S.R. Batliboi & Associates LLP

Firm registration number: 101049W

Chartered Accountants

per Adarsh Ranka

Partner

Membership No.: 209567

Place: Bengaluru

Date: May 22, 2014

Mar 31, 2013

We have audited the accompanying financial statements of Sobha Developers Limited (''the Company'') which comprise the balance sheet as at March 31, 2013, the statement of profit and loss and the cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management''s responsibility for the financial statements

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

Auditor''s responsibility

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

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

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

a) in the case of the balance sheet, of the state of affairs of the Company as at March 31, 2013;

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

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

Report on other legal and regulatory requirements

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

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

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

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

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

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

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

Other matter

We did not audit the financial information as regards Company''s share in profits of partnership firm (post tax) amounting to Rs.131 million for the year ended March 31, 2013. The financial information has been audited by other auditors whose reports have been furnished to us, and the Company''s share in profits of partnership firm investments has been included in the accompanying financial statements solely based on the report of other auditors. Our opinion is not qualified in respect of this matter

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

Re: Sobha Developers Limited

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

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

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

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

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

(c) The Company is maintaining proper records of inventory. Discrepancies noted on physical verification of inventories were not material, and have been properly dealt with in the books of account.

(iii) (a) The Company has granted unsecured loan and subscribed to unsecured debentures to two parties covered in the register maintained under section 301 of the Act. The maximum amount involved during the year was Rs. 866.60 million and the year-end balance was Rs.447.54 million.

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

(c) The loans granted are re-payable on demand and the repayment of the principal amount and interest is as demanded and thus, there has been no default on the part of the parties to whom the money has been lent. The unsecured debentures are compulsorily convertible into equity shares on expiry of 19 years from date of issue or on happening of certain events. As explained to us, events warranting conversion of compulsorily convertible debentures have not happened. The payment of interest is regular as per the agreed terms.

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

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

(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 or continuing failure to correct any major weakness in the internal control system of the Company in respect of these areas.

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

(b) In respect of transactions made in pursuance of such contracts or arrangements exceeding value ofRs. 0.50 million entered into during the financial year, because of the unique and specialized nature of the items involved and absence of any comparable prices, we are unable to comment whether the transactions were made at prevailing market prices at the relevant time.

(vi) The Company has not accepted any deposits from the public.

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

(viii) We have broadly reviewed the books of account maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under section 209(1)

(d) of the Companies Act, 1956, related to the construction of buildings/ structures and other related activities, and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained.

(ix) (a) The Company is regular in depositing with appropriate authorities undisputed statutory dues including provident fund, investor education and protection fund, employees'' state insurance, income-tax, sales-tax, excise duty, wealth-tax, service tax, customs duty, cess and other material statutory dues applicable to it.

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

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

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

Andhra Pradesh Sales Tax Act Basis of charge of sales tax 5.25 2002-04 Sales Tax Appellate Tribunal

Andhra Pradesh Sales Tax Act Basis of charge of sales tax 1.61 2005-08 Sales Tax Appellate Tribunal

Karnataka Sales Tax Act Basis of charge of sales tax 30.68 1998-06 Sales Tax Appellate Tribunal

Karnataka Sales Tax Act Basis of charge of sales tax 64.55 2003-05 High Court

Karnataka Sales Tax Act Basis of charge of sales tax 127.27 2007-08 High Court

Income Tax Act Differential tax treatment 3.54 1999-01 High Court

Income Tax Act Disallowances 0.40 2008-09 Assessing officer

Additional Commissioner of Income Income Tax Act Disallowances 4.60 2007-11 Tax

Income Tax Act Disallowances 153.21 2005-07 High Court

Finance Act,1994 (Service Tax Central Excise and Service Tax Basis of valuation 95.67 2006-08 Provisions) Appellate Tribunal

Finance Act, 1994 (Service Tax Commissioner of Central Excise Disallowances 4.23 2002-07 Provisions) and Service Tax

Finance Act,1994 (Service Tax Central Excise and Service Tax Service tax demand 111.65 2008-11 Provisions) Appellate Tribunal

Customs Act, 1962 Differential tax treatment 1.27 2010-11 Assistant Commissioner (Customs)

* Net ofRs. 142.86 million, paid under protest

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

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

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

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

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

(xv) According to the information and explanations given to us, the Company has given guarantee for loans taken by others from bank or financial institutions, the terms and conditions whereof in our opinion are not prima facie prejudicial to the interest of the Company considering Company''s economic interest in such entities.

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

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

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

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

(xx) The Company has not raised any money by public issues during the year. Accordingly, the provisions of clause 4(xx) of the Order are not applicable to the Company.

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

For SR. Batliboi & Associates LLP

Firm registration number: 101049W

Chartered Accountants

per Adarsh Ranka

Partner

Membership No.: 209567

Place: Bengaluru

Date: May 10, 2013

Mar 31, 2012

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

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

3. As required by the Companies (Auditor's Report) Order, 2003 (as amended) issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956 ('the Act'), 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, statement of profit and loss and cash flow statement dealt with by this report are in agreement with the books of account;

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

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

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

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

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

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

Annexure referred to in paragraph 3 of our report of even date Re: Sobha Developers Limited

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

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

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

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

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

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

(iii) (a) The Company has granted loan to one party covered in the register maintained under section 301 of the Act. The maximum amount involved during the year was Rs 87.11 million and the year-end balance was Rs47.11 million.

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

(c) The loans granted are re-payable on demand. We are informed that the Company has not demanded repayment of any such loan or interest during the year, and thus, there has been no default on the part of the parties to whom the money has been lent.

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

(e) The Company has taken loan from two parties covered in the register maintained under section 301 of the Act. The maximum amount involved during the year was Rs13.48 million and the year end balance was RsNil.

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

(g) The loans taken were re-payable on demand. The repayment of the principal amount was as demanded and payment of interest has been regular.

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

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

(b) In respect of transactions made in pursuance of such contracts or arrangements exceeding value of Rs0.50 million entered into during the financial year, because of the unique and specialized nature of the items involved and absence of any comparable prices, we are unable to comment whether the transactions were made at prevailing market prices at the relevant time.

(vi) The Company has not accepted any deposits from the public.

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

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

(ix) (a) The Company is regular in depositing with appropriate authorities undisputed statutory dues including provident fund, investor education and protection fund, employees' state insurance, income-tax, sales-tax, excise duty, wealth-tax, service tax, customs duty, cess and other material statutory dues applicable to it.

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

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

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

Andhra Pradesh Sales Tax Act Basis of charge of sales tax 5.25 2002-04 Sales Tax Appellate Tribunal

Andhra Pradesh Sales Tax Act Basis of charge of sales tax 1.61 2005-08 Sales Tax Appellate Tribunal

Karnataka Sales Tax Act Basis of charge of sales tax 30.68 1998-06 Joint Commissioner of Commercial Taxes

Karnataka Sales Tax Act Basis of charge of sales tax 64.55 2003-05 High Court

Karnataka Sales Tax Act Basis of charge of sales tax 46.55 2007-08 High Court

Income Tax Act Differential tax treatment 3.54 1999-01 High Court

Income Tax Act Disallowances 0.04 2008-09 Assessing officer

Income Tax Act Disallowances 4.60 2007-11 Additional Commissioner of Income Tax

Finance Act,1994 (Service Tax Central Excise and Service Tax Appellate Basis of valuation 95.67 2006-08 Provisions) Tribunal

Finance Act,1994 (Service Tax Commissioner of Central Excise and Disallowances 4.23 2002-07 Provisions) Service Tax

Finance Act,1994 (Service Tax Commissioner of Central Excise and Service tax demand 111.65 2008-11 Provisions) Service Tax

* Net of Rs 112.72 million, paid under protest

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

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

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

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

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

(xv) According to the information and explanations given to us, the Company has given guarantee for loans taken by others from bank or financial institutions, the terms and conditions whereof in our opinion are not prima facie prejudicial to the interest of the Company considering Company's economic interest in such entities.

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

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

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

(xix) According to the information and explanations given to us, the Company has not issued any debentures during the year. The Company had created security or charge in respect of debentures issued in prior years, which were redeemed during the current year.

(xx) The Company has not raised any money by public issues during the year. Accordingly, the provisions of clause 4(xx) of the Order are not applicable to the Company.

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

For S.R. Batliboi & Associates

Firm registration number: 101049W

Chartered Accountants

per Adarsh Ranka

Partner

Membership No.: 209567

Dubai, UAE

May 06, 2012

Mar 31, 2011

1. We have audited the attached balance sheet of Sobha Developers Limited (the Company) as at March 31, 2011 and also the profit and loss account and the cash flow statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the CompanyÃs management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

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

4. Without qualifying our opinion, we draw attention to Note 25 under Schedule 19, regarding the purchase of material and services in the prior years from private limited companies/ firms, covered under section 297 of the Act, which require prior approval of the Central Government. As indicated in the said note, the Company has filed an application for compounding and obtaining approval from the Company Law Board under Section 621A of the Act. The Company is confident of obtaining the approvals, and pending obtaining such approvals, no adjustments have been made in the financial statements.

5. Further to our comments in the Annexure referred to above, we report that:

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

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

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

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

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

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

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

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

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

Annexure referred to in paragraph 3 of our report of even date Re: Sobha Developers Limited

(i) (a) The Company has maintained proper records

showing full particulars, including quantitative details and situation of fixed assets.

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

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

(ii) (a) The management has conducted physical verification

of inventory at reasonable intervals during the year.

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

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

(iii) (a) The Company has granted loan to one party covered

in the register maintained under section 301 of the Act. The maximum amount involved during the year was Rs. 87.11 million and the year-end balance was Rs. 87.11 million.

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

(c) The loans granted are re-payable on demand. We are informed that the Company has not demanded repayment of any such loan or interest during the year, and thus, there has been no default on the part of the parties to whom the money has been lent.

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

(e) The Company has taken loan from two parties covered in the register maintained under section 301 of the Act. The maximum amount involved during the year was Rs.13.45 million and the year end balance was Rs.13.45 million.

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

(g) The loans taken are re-payable on demand. As informed to us, the lenders have not demanded repayment of any such loan during the year, and thus, there has been no default on the part of the Company. The payment of interest has been regular.

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

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

(b) In respect of transactions made in pursuance of such contracts or arrangements exceeding value of Rs. 0.50 million entered into during the financial year, because of the unique and specialized nature of the items involved and absence of any comparable prices, we are unable to comment whether the

transactions were made at prevailing market prices at the relevant time.

(vi) The Company has not accepted any deposits from the public.

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

(viii) To the best of our knowledge and as explained, the Central Government has not prescribed maintenance of cost records under clause (d) of sub-section (1) of section 209 of the Companies Act, 1956 for the products of the Company.

(ix) (a) The Company is regular in depositing with appropriate authorities undisputed statutory dues including provident fund, investor education and protection fund, employeesÃ state insurance, income- tax, sales-tax, excise duty, wealth-tax, service tax, customs duty, cess and other material statutory dues applicable to it.

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

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

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

Amount* Name of the statute Nature of dues (Rs. in Million) Andhra Pradesh Sales Basis of charge of sales Tax Act tax 5.25

Andhra Pradesh Sales Basis of charge of sales 1.61 Tax Ace Tax

Karnataka Sales Tax Act Basis of charge of sales tax 70.97

Karnataka Sales Tax Act Basis of charge of sales tax 64.55

Income Tax Act Differential tax treatment 3.54

Income Tax Act Disallowances 205.69

Income Tax Act Disallowances 0.04

Finance Act,1994 Basis of valuation 95.67 (Service Tax Provisions)

Finance Act,1994 CENVAT credit 202.94 (Service Tax Provisions)

Finance Act,1994 CENVAT credit 13.41 (Service Tax Provisions)

Finance Act,1994 Disallowances 4.23 (Service Tax Provisions)

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

Andhra Pradesh Sales Tax Act 2002-04 Sales Tax Appellate Tribunal

Andhra Pradesh Sales Tax Act 2005-08 Sales Tax Appellate tribunal

Karnataka Sales Tax Act 1998-06 Joint Commissioner of Commercial Taxes

Karnataka Sales Tax Act 2003-05 High Court

Income Tax Act 1999-01 High Court

Income Tax Act 2005-07 Income Tax Appellate Tribunal

Income Tax Act 2008-09 Assessing Officer

Finance Act, 1994 (Service Tax Provisions) 2006-08 Central Excise and Service Tax Appellate Tribunal

Finance Act, 1994 (Service Tax Provisions) 2005-08 Central Excise and Service Tax Appellate Tribunal

Finance Act, 1994 (Service Tax Provisions) 2009-10 Commissioner of Central Excise and Service Tax

Finance Act, 1994 (Service Tax Provisions) 2002-07 Commissioner of Central Excise and Service Tax

*Net of Rs. 73.45 million, paid under protest

(x) The Company has no accumulated losses at the end

of the financial year and it has not incurred cash losses in the current and immediately preceding financial year.

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

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

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

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

(xv) According to the information and explanations given to us, the Company has given guarantee for loans taken by others from bank or financial institutions, the terms and conditions whereof in our opinion are not prima facie prejudicial to the interest of the Company considering CompanyÃs economic interest in such entities.

(xvi) Based on information and explanations given to us by the management, term loans (representing loans with a repayment period beyond 36 months) were applied for the purpose for which the loans were obtained.

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

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

(xix) According to the information and explanations given to us, the Company has not issued any debentures during the year. The Company had created security or charge in respect of debentures issued in prior years, which were outstanding during the current year.

(xx) The Company has not raised any money by public issues during the year. Accordingly, the provisions of clause 4(xx) of the Order are not applicable to the Company.

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

For S.R. BATLIBOI & ASSOCIATES

Firm registration number: 101049W Chartered Accountants

per Adarsh Ranka Partner Membership No.: 209567

Bengaluru, India May 10, 2011

Mar 31, 2010

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

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

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

4. Without qualifying our opinion, we draw attention to Note 26 under Schedule 19, regarding the purchase of material and services in the prior years from private limited companies/ firms, covered under section 297 of the Act, which require prior approval of the Central Government. In this regard, the Company has fled an application for composition of the offence and obtaining approval from the Company Law Board under Section 621A of the Act. The Company is confident of obtaining the approvals, and pending obtaining such approvals, no adjustments have been made in the financial statements.

5. Further to our comments in the Annexure referred to above, we report that:

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

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

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

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

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

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

a) in the case of the balance sheet, of the state of affairs of the Company as at March 31, 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 cash flow statement, of the cash flows for the year ended on that date.

Annexure referred to in paragraph 3 of our report of even date Re: Sobha Developers Limited

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

(b) The Company has a regular programme of physical verification of fixed assets which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. In accordance with this programme, certain fixed assets were physically verified by the management during the year and we are informed that no material discrepancies were noticed on such verification.

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

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

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

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

(iii) (a) As informed, the Company has granted loan to one party covered in the register maintained under section 301 of the Act. The maximum amount involved during the year was Rs.88.44 million and the year-end balance was Rs.87.11 million. In our opinion and according to the information and explanations given to us, the rate of interest and other terms and conditions for such loan are prima facie not prejudicial to the interest of the Company. According to the information and explanations given to us, there are no specific covenants with regard to the repayment of the loan and the Company has not demanded repayment of the loan or interest during the year, thus, there is no overdue amount and there has been no default on the part of the party to whom the money has been given.

(b) As informed, the Company has taken loan from one party covered in the register maintained under section 301 of the Act. The maximum amount involved during the year was Rs.4.53 million and the year end balance was Rs.4.50 million. In our opinion and according to the information and explanations given to us, the rate of interest and other terms and conditions for such loan are prima facie not prejudicial to the interest of the Company. According to the information and explanations given to us, there are no specific covenants with regard to the repayment of loan. The loan taken is re-payable on demand and the repayment of the principal amount is as demanded and payment of interest has been regular.

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

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

(b) In respect of transactions made in pursuance of such contracts or arrangements exceeding value of Rs.0.50 million entered into during the financial year, because of the unique and specialized nature of the items involved and absence of any comparable prices, we are unable to comment whether the transactions were made at prevailing market prices at the relevant time.

(vi) The Company has not accepted any deposits from the public.

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

(viii) To the best of our knowledge and as explained, the Central Government has not prescribed maintenance of cost records under clause (d) of sub-section (1) of section 209 of the Companies Act, 1956 for the products of the Company.

(ix) (a) According to the records of the Company, the Company is generally regular in depositing with appropriate authorities undisputed statutory dues towards provident fund, investor education and protection fund, employeesÃ state insurance, income-tax, sales-tax, excise duty, wealth-tax, service tax, customs duty, cess and other material statutory dues applicable to it. Further, since the Central Government has till date not prescribed the amount of cess payable under section 441 A of the Companies Act,1956, we are not in a position to comment upon the regularity or otherwise of the Company in depositing the same.

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

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

Name of the Naure of dues Amount* staute (Rs. in Million)

Andhra Pradesh Sales Basis of charge of 5.25 Tax Act sales tax

Andhra Pradesh Sales Basis of charge of sales 1.61 Tax Act tax

Karnataka Sales Tax Basis of charge of sales - Act tax

Income Tax Act Differential tax 3.54 treatment

Income Tax Act Disallowances 27.80

Income Tax Act Disallowances 53.33

Income Tax Act Disallowances 127.76

Finance Act,1994 Basis of valuation 95.67 (Service Tax Provisions)

Finance Act,1994 CENVAT credit 204.11 (Service Tax Provisions) Finance Act,1994 Disallowances 4.23 (Service Tax Provisions)

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

Andhra Pradesh Sales Tax Act 2002-04 Sales tax appellate tribunal

Andhra Pradesh Sales Tax Act 2005-08 Sales Tax Appellate Tribunal

Karnataka Sales Tax Act 1997-04 Joint Commissioner of Commercial Taxes

Income Tax Act 1999-01 High Court

Income Tax Act 2004-05 Income Tax Appellate Tribunal

Income Tax Act 2005-06 Commissioner of Income Tax (Appeals)

Income Tax Act 2006-07 Commissioner of Income Tax (Appeals)

Finance Act,1994 (Service Tax Provisions) 2006-08 Central Excise and Service Tax Appellate Tribunal

Finance Act,1994 (Service Tax Provisions) 2005-08 Central Excise and Service Tax Appellate Tribunal

Finance Act,1994 (Service Tax Provisions) 2002-07 Commissioner of Central Excise and Service Tax

* Net of Rs.73.47 million, paid under protest

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

(xi) Based on our audit procedures and as per the information and explanations given by the management, the Company has either repaid the dues before the year-end or obtained necessary approvals from debenture holders and banks for reschedulement of dues amounting to Rs.110 million and Rs.832 million respectively, the repayment of which was delayed beyond the stipulated dates. The Company has no overdue outstanding in respect of debenture holders and banks as at year-end. The Company has not defaulted in repayment of dues to a financial institution.

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

(xiii) According to the information and explanations given to us, the Company is not a chit fund or a nidhi / mutual benefit fund / society. Terefore, the provisions of clause 4(xiii) of the Companies (AuditorÃs Report) Order, 2003 (as amended) are not applicable to the Company.

(xiv) According to the information and explanations given to us, 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 (AuditorÃs Report) Order, 2003 (as amended) are not applicable to the Company.

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

(xvi) Based on information and explanations given to us by the management, term loans (representing loans with a repayment period beyond 36 months) were applied for the purpose for which the loans were obtained.

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

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

(xix) According to the information and explanations given to us, the Company has not issued any debentures during the year. The Company had created security or charge in respect of debentures issued in prior years, which were outstanding during the current year.

(xx) The Company has not raised any money by public issues during the year. Accordingly, the provisions of clause 4(xx) of the Order are not applicable to the Company.

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

For S.R. BATLIBOI & ASSOCIATES

Firm registration number: 101049W Chartered Accountants

per Navin Agrawal

Partner

Membership No.: 56102

Bengaluru, India April 27, 2010

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