Auditor Report of Elder Pharmaceuticals Ltd.

Jun 30, 2014

Report on the Financial Statements

We have audited the accompanying financial statements of Elder Pharmaceuticals Limited ("the Company") which comprise the Balance Sheet as at 30th June, 2014, and the Statement of Profit and Loss and the Cash Flow Statement for the year ended on that date, and a summary of significant accounting policies and other explanatory notes.

Management''s Responsibility for the Financial Statements

Management is responsible for the preparation and presentation of financial statements that give a true and fair view of the financial position, financial performance and cash flow of the Company in accordance with applicable Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act 1956 ("the Act") read with the General Circular 15/2013 dated 13 September 2013 of the Ministry of Corporate Affairs in respect of section 133 of the Companies Act, 2013. This responsibility includes the designing, implementing and maintenance of internal control relevant to the preparation and presentation of financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditors'' Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with 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 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 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 modified audit opinion.

Basis for Qualified Opinion

1. Fixed Assets

Some of the company''s Plant & Machineries acquired/installed have not been put to use and some have been operational for a small fraction of the installed capacity. Further, Capital work-in-progress-being carried forward as such since previous year''s, are yet to be capitalized and put to use. On such assets, the company has not provided for impairment loss.

Non provision of impairment loss is a departure from AS-28 "Impairment of Assets" as prescribed under the Act. Management has neither provided a Technical Evaluation Report nor a Valuation Report in order to arrive at the fair value and, consequently, quantifying the possible impairment loss on these assets could not be arrived.

2. Long Term Loans & Advances

i) Writing off Trade Advances and Other Advances

Pursuant to the authorization of resolution passed by the Board of Directors, the Company has written off Trade Advances Rs. 17,624.04 lacs and other advances Rs. 85,532.10 lacs, made to various parties on current account either during the year or in earlier financial years. We have been informed that there were no stipulations for repayments thereof.

The reasons for writing off, details to ascertain financial capability of these parties and confirmation/details of these accounts were not made available to us. Also, we have not been provided any information and documentary evidence in respect of actions initiated by the company for recovery of these advances.

ii) Capital Advances, Trade Advances and Other Advances:

As regards to Capital Advances Rs. 3,041.00 lacs, Trade Advances Rs. 3,625.57 lacs and Other Advances (net) paid for Brand Building Payments Rs. 7,850.00 lacs, documentation/confirmation as also reconciliation, if any, were not made available to us for our verification and examination.

3. Trade Receivables

Pursuant to the Resolution passed by the Board of Directors, the Company has written off during the year Trade Receivables aggregating to Rs. 32,270.76 lacs since the same has not been acquired by Torrent Pharmaceuticals Limited (Refer Note No. 29). The company has stated that Trade Receivables pertaining to products transferred to Torrent Pharmaceuticals Limited cannot be recovered.

We have neither been provided confirmation to verify the balance of such accounts nor actions initiated by the company for recovery of such Trade Receivables.

4. Legal suits

As informed, various legal suits have been filed against the Company under various Acts and Statutes applicable to the Company, the same are being contested by the Company at various foras. The outcome of such suits and their impact on the affairs of the Company were not made available/explained to us.

Emphasis of Matter

Without qualifying our report, we draw attention to the following points:

1. We draw attention to Note No. 40 of the Notes annexed to and forming part of the financial statements stating that the financial statements are being prepared on a going concern basis, notwithstanding the fact that the Company has sold and transferred its branded domestic formulations business in India and Nepal to Torrent Pharmaceuticals Limited on a slump sale basis. There are major liabilities outstanding towards vendors, statutory dues and payment to fixed deposit holders and non-convertible debenture holders. These events cast significant doubt on the ability of the Company to continue as a going concern. The appropriateness of the said basis is interalia dependent on the Company''s ability to streamline its operations as well as infusing requisite finance to meet its short term and long term financial obligations and other statutory liabilities.

The Company mentions that the proceeds of such sale and transfer were used to repay financial obligations of banks/institutions. Further, for details of exceptional items and working thereof, refer Note No. 29.

2. We draw your attention to Note No. 29 of the Notes annexed to and forming part of the financial statements. With a view to reducing the debts of the Company, the Board of Directors of the Company had approved the proposal to restructure the Company''s business involving either raising of capital, hiving off of assets or other strategic options and had appointed advisors for the purpose. The Company had offered for sale on slump sale basis its business of sale, marketing and distribution of the products of Team A-2 and Team B - Gynae through sales force or otherwise, in India and Nepal (excluding exports from India and Nepal) which included amongst others, intellectual property, current assets, specified liabilities, employees, data and records, third party manufacturing contracts, C & F agreements, etc. as a going concern and a definitive Business Transfer Agreement was signed with Torrent Pharmaceuticals Limited, Ahmedabad, on 13 December 2013 for a total consideration of Rs. 200,400.00 lacs. The said slump sale transaction was consummated and closed on 29 June 2014.

3. Balances under Trade Receivables, Inter-division balances, Loans & Advances in several cases as also in case of a few Bank Accounts have not been reconciled / confirmed and consequently reconciliation / adjustments, if any, required upon such confirmation are not ascertainable. (Refer Note No. 33)

4. The company provides gratuity benefit to its employees as per AS 15 "Employee Benefits". Based on actuarial valuation as at March 31,2014, the Company was having plan assets of Rs. 965.58 lacs against the actuarial liability of Rs. 1,293.94 lacs. (Refer to Note No. 37).

Our opinion is not qualified in respect of these matters.

Opinion

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

I. In the case of Balance Sheet, of the state of affairs of the Company as at 30th June, 2014;

II. In the case of Statement of Profit and Loss, of the Profit of the Company for the year ended on that date; and

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

Report on Other Legal and Regulatory Requirements

1) As required by the Companies (Auditors'' Report) Order, 2003 ("the Order") issued by the Central Government of India in terms of sub-section (4A) of the section 227 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said 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, the Statement of Profit and Loss and the Cash Flow Statement referred to in this report are in agreement with the books of account;

d) in our opinion, the Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statement comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act 1956 read with the General Circular 15/2013 dated 13 September 2013 of the Ministry of Corporate Affairs in respect of section 133 of the Companies Act, 2013;

e) in absence of written representation from the Directors as on 30th June, 2014, we could not ascertain whether any of the Director is disqualified as on 30th June, 2014 from being appointed as director in terms of Clause (g) of sub- section (1) of section 274 of the Act.

Other Matters

1. The company has not deposited or invested a sum not less than 15% of the amount of debentures maturing during the year ending on the 31st day of March next following in one or more of the methods as specified in clarification issued by Ministry of Corporate Affairs vide circular no. 04/2013 dated 11/02/2013 regarding Debenture Redemption Reserve

2. Pursuant to the authorization of resolution passed by the Board of Directors, the Company has excluded inventories aggregating to Rs. 9,575.92 lacs from the closing stock during the year. The company has stated that Inventories pertaining to products transferred which were not acquired by Torrent Pharmaceuticals Limited, are to be destroyed and cannot be carried forward in closing stock.

Our opinion is not qualified in respect of these matters.

Annexure to the Independent Auditors'' Report

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

Based on the audit procedures performed for the purpose of reporting a true and fair view on the financial statements of the Company and taking in to consideration, the information and explanations given to us during the course of audit, we report that:

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

b) As explained to us, some of the fixed assets of the Company have been physically verified by the management during the year in accordance with a phased program of verification designed to cover all the fixed assets over a period of three years, which in our opinion, is reasonable having regard to the size of the Company and nature of its assets. The discrepancies noticed on such physical verification were not material and have been properly dealt with in the books of account.

c) The fixed assets disposed off during the year were not substantial and therefore do not affect the going concern status of the Company.

II. a) As explained to us, the inventories have been physically verified by the management at regular intervals during the year. The intervals at which the inventories have been verified are, in our opinion, reasonable in relation to the size of the Company and nature of its business.

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

c) The Company has maintained proper records of inventories. As explained to us, there was no material discrepancies noticed on physical verification of inventory.

III. In respect of loans, secured or unsecured, granted or taken by the Company to/from companies, firms or parties covered in the register maintained under section 301 of the Companies Act, 1956;

a) The Company has granted unsecured loans to a wholly owned subsidiary and a joint venture company covered in the register maintained under section 301 of the Companies Act, 1956. In respect of the said loans the maximum amount outstanding at any time during the year is Rs. 21,542.57 lacs and the year- end balance is Rs. 21,542.57 lacs.

The Company has also given interest free advance to related parties covered in the register maintained under section 301 of the Companies Act, 1956. In respect of the said loans the maximum amount outstanding at any time during the year is Rs. 8,426.87 lacs and the year-end balance is Rs. 8,095.47 lacs. The loans also include Rs. 1,123.48 lacs due from a company for more than three years whose net worth is negative.

b) As per the information and explanations given to us, the terms and conditions of such loan given to the subsidiary and the joint venture company covered in the register maintained under section 301 of the Companies Act, 1956 are prejudicial to the interest of the company since these loans do not have any provision for interest payment.

c) As per the information and explanations given to us, the principal amounts of the said loans are repayable on demand and there is no repayment schedule.

d) According to the information and explanations given to us the Company has not taken loans from the parties listed in the register maintained under section 301 of the Companies Act. 1956.

IV. According to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business for the purchase of inventory, fixed assets and for the sale of goods and services.

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

b) In our opinion and according to the information and explanations given to us, transactions made in pursuance to such contracts or arrangements are specialized in nature and comparable prices are not always determinable and the price is charged are prima facie reasonable.

VI. In our opinion and according to the information and explanations given to us, the Company has accepted the deposit from the public to which the directives issued by the Reserve bank of India, provisions of sections 58A and 58AA of the Companies Act, 1956 and the Companies [Acceptance of Deposits] Rules, 1975 are applicable.

However, the Company has not complied with the provisions of Section 58A of the Companies Act, 1956 and the Companies [Acceptance of Deposits] Rules, 1975 in relation to the following issues:

a. The company has defaulted in repayment of public deposits or part thereof and interest thereupon.

b. The Company has not kept required liquid assets with scheduled bank in respect of public deposit maturing on or before 30.06.2014 as per Rule 3A of Companies [Acceptance of Deposit] Rules, 1975.

c. The Company Law Board, Mumbai Bench (CLB), vide its order dated March 29, 2014, has directed to the Company to pay principal and interest by 30.04.2014 due to 12 depositors who have made an application under section 58A (9) of the Companies Act, 1956 and to file an affidavit of compliance of the same order with the CLB by 01.05.2014.

The CLB again vide its order dated July 11, 2014, has directed to the Company to pay principal and/or interest to senior citizens by August 10,2014 and to other depositors by September 9, 2014. The CLB has directed the Company to file an affidavit by 15.09.2014 for compliance of the said order.

d. The company has also borrowed short term funds from non-corporate entities.

VII. The Company has an internal audit system which needs to be strengthened commensurate with the size and the nature of its business.

VIII. The Central Government has prescribed maintenance of Cost Records under Section 209(1)(d) of the Companies Act, 1956 in respect of certain manufacturing activities of the Company. We have broadly reviewed the accounts and records of the Company in this connection and are of the opinion, that prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the same. The cost audit report was also not available for our verification.

IX. a) As per information and explanations given to us, the Company has been irregular in depositing the undisputed statutory dues including Provident Fund, Income tax, sales tax, Service Tax and Employees State Insurance with the appropriate authorities and there has been serious delay in many cases.

The following undisputed statutory dues were outstanding as on 30th June 2014 for a period of more than six months from the date they become payable:

Sr. Name of the Statute Nature of the Dues Financial Year No

1 Income Tax Act, 1961 TDS on Salaries *2013-14 TDS on Others *2013-14 Dividend distribution 2011-12 tax

2 Professional Tax Act, 1975 Profession Tax 2012-13 *2013-14

3 Employees'' State Insurance Employees'' State 2012-13 Act, 1948 Insurance Fund *2013-14

4 The Finance Act, 1994 Service Tax 2012-13 *2013-14

Sr. Name of the Statute Amount Payment made up to the No (Rs.) date of Auditor''s Report

1 Income Tax Act, 1961 3,87,02,800/- Not paid 1,16,96,009/- 99,94,521/-

2 Professional Tax Act, 1975 4,08,925/- Not paid 13,76,355/-

3 Employees'' State Insurance 2,654/- Not paid Act, 1948 3,83,451/-

4 The Finance Act, 1994 19,35,990/- Not paid 11,42,320/- * Figures for financial year 2013-2014 are in respect of period upto December 31, 2013.

b) According to the information and explanations given to us, the dues in respect of Income tax, sales tax, custom duty, excise duty and service tax that has not been deposited with the appropriate authorities on account of dispute and the forum where the disputes are pending as on 30th June, 2014 are as given below:

Sr. Name of the Nature of dues Period to which the No. statute amount relates

1 Income Tax Block assessment dues Block period 1.4.95 to 18.9.2001

2 Income Tax Assessment dues Assessment Year 2002 - 2003

3 Income Tax Assessment dues Assessment Year 2008 - 2009

4 Service tax Reversal ratio of service September 06 to tax attributable for March 2012 manufacture of exempted goods under rule 6(5) of CENVAT Credit Rules (CCR)

5 Service tax The opening balance lying April 2012 to March with Input Service 2013 Distributor (ISD) as on 1.4.2012 is not to be considered while distributing the credit by ISD to Nerul unit. The earlier Show Cause Notice (SCN) Sept 2006 to March 2012 is adjudicated on eligibility of each unit on the basis of turnover of each unit during the year and the credit lying with ISD has no relevance.

6 Service tax Service Tax payable on October 06 to March reverse charge method. 2011

7 Service tax CENVAT availed on. 2009-10,2011-12 improper documents

8 Service tax Rebate claim sanctioned, 2012-13 received but reviewed by Excise Dept and disputed that one of the document is not in the name of the exporter.

9 Service tax Protective demand in April 2013 to Sept continuation to 2013 earlier SCN

10 Service tax ISD credit April 2007 to Mar 2008, April 2010 to March 2011

Sr. Name of the Forum where the Amount No. statute dispute is pending (Rs.in Lacs)

1 Income Tax High court,Mumbai 216.53 2 Income Tax High court, Mumbai 23.66

3 Income Tax Commissioner of 28.39 Income Tax

4 Service tax Commissioner Service 461.32 tax, Belapur

5 Service tax Commissioner Service 107.07 tax, Belapur

6 Service tax Commissioner 40.01 (Appeal)

7 Service tax Commissioner 2.68 (Appeal)

8 Service tax Joint secretary to Govt 0.98 of India, Ministry of Finance.

9 Service tax Additional 22.25 Commissioner of Central Excise Belapur

10 Service tax Additional 5.23 Commissioner of Central Excise Belapur

X. The Company has no accumulated losses and has not incurred any cash losses during the financial year covered by our audit or in the immediately preceding financial year.

XI. According to information and explanations given to us and based on the documents and records produced before us, the Company has defaulted in repayment of principal dues to debenture holders amounting to Rs. 4,042.69 lacs as at the balance sheet date.

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

XIII. In our opinion and according to the information and explanations given to us, the nature of activities of the company does not attract any special statute applicable to chit fund and nidhi/ mutual benefit fund/ society

XIV. As per information and explanation given to us, the Company is not dealing or trading in shares, securities and other investments.

XV. According to the information and explanations given to us and the records examined by us, the terms and conditions of the guarantee given by the company for loans taken by others from a bank are not prejudicial to the interest of the company.

XVI. To the best of our knowledge and belief and according to the information and explanation given to us by the management the term loans availed by the Company were, prima facie, applied by the Company during the year for the purpose for which the loans were obtained.

XVII. According to the Cash Flow statement and other records examined by us and the information and explanations given to us, on overall basis, funds raised on short term basis, have prima facie, not been used during the year for long term investments.

XVIII. The company has not made any preferential allotment of shares to parties or companies covered in the register maintained under section 301 of the companies act, 1956.

XIX. As per information and explanation given to us and based on records examined by us the company has created charge in respect of debentures.

XX. To the best of our knowledge and belief and according to the information and explanation given to us, the company has not raised any money through a public issue during the year.

XXI. In our opinion and according to the information and explanations given to us, read with para 2 of Basis of Qualified Opinion, no fraud on or by the Company has been noticed or reported during the year, which causes the financial statements to be materially misstated.

For S.S.KHANDELWAL & CO. Chartered Accountants (Firm Registration No.105064W)

S.S. Khandelwal Proprietor Membership No. 031487

Mumbai, 27 August, 2014

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Jun 30, 2013

Report on the Financial Statements

We have audited the accompanying financial statements of Elder Pharmaceuticals Limited ("the Company") which comprise the Balance Sheet as at 30th June, 2013, and die Statement of Profit and Loss and the Cash Flow Statement for the extended period of fifteen months from I st April, 2012 to 30th June, 20 i 3, and a summary of significant accounting policies and other explanatory notes.

Management''s Responsibility for the Financial Statements

Management is responsible for die preparation and presentation of financial statements that give a true and fair view of the financial position , financial performance and cash flow of die Company in accordance widi applicable Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act 1956 ("the Act"). This responsibility includes: designing, implementing and maintenance of internal control relevant to die preparation and presentation of financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditors'' Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with 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 die 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 die financial statements. The procedures selected depend on die 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, die auditor considers internal control relevant to the Company''s preparation and fair presentation of 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 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.

Basis for Qualified Opinion

1) The company has not deposited or invested a sum not less than 15% of the amount of Debenture maturing during the year ending on 30th June, 2013 in one or more of the, methods as specified in clarification issued by Ministry Of Corporate Affairs, Government af India regarding Debenture Redemption Reserve.

2) Trade advances included in long term loans and advances are subject to confirmation and reconciliation and documentation.

Qualified Opinion

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

i) In the case of Balance Sheet, of the state of affairs of the Company as at 30* June, 2013;

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

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

Emphasis of matter

I) We draw attention to note no. (33) to the financial statements. With a view to reducing the debts of the Company, the board of directors has approved the proposal to restructure the Company''s business involving either raising of capital, hiving of assets or other strategic options and have appointed advisers for this purpose. The advisers have carried out due diligence of the Company''s operations. No strategy has yet been finalized.

The ultimate outcome of the matter on the affairs of the company cannot presently be determined and ascertained.

2) We draw attention to note no. (34) to the financial statements wherein subsequent to close of Accounting year some lenders have filed legal cases against the Company, its directors and other officers under section 138 of the Negotiable Instruments Act 1981. In some cases winding up petition under section 433 and 434 of the Companies Act 1956 has also been filed.

As explained to us, the Company in some cases has made part payments and settlement negotiations are initiated in other cases. The ultimate outcome of the matters on the affairs of the Company cannot presently be determined.

3) We draw attention to Note No.(35) to the financial statements stating that some lenders/ bankers/ non- convertible debenture holders have served the notices on the Company for dishonoring of the cheques and default in payment of their dues under various acts governing dishonoring of cheques and default in repayments of loans. As informed, the Company has been negotiating payment modalities with such lenders/ bankers/ non- convertible debenture holders.

In above cases, if no settlement/negotiations arrived at, the operations of the Company may adversely be affected. However, the ultimate outcome of the matters on the affairs of the Company cannot presently be determined/ ascertained.

4) We draw attention to note no. (36) to the financial statements stating that one of the lender has filed winding up petition under section 433 and 434 of the Companies Act, 1956 and arbitration proceedings have commenced. The court has granted time up to 15th September 2013 for settlement of the dues.

In the said case if the Company fails to honor its commitment, the operations of the Company may adversely be affected.

Our opinion is not qualified in respect of these matters.

Report on Other Legal and Regulatory Requirements

1) As required by the Companies (Auditors'' Report) Order, 2003 ("the Order") issued by the Central Government of India in terms of sub-section (4A) of the section 227 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said 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, the Statement of Profit and Loss and the Cash Flow Statement referred to in this report are in agreement with the books of account;

d) In our opinion, the Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statement comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act 1956.

e) On the basis of the written representation received from the Directors as on 30th June, 2013 and taken on record by the Board of Directors, none of the Directors is disqualified as on 30th June, 2013 from being appointed as director in terms of Clause (g) of sub- section (I) of section 274 of the Act 1956.

Annexure to the Independent Auditors'' Report

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

Based on the audit procedures performed for the purpose of reporting a true and fair view on the financial statements of the Company and taking in to consideration, the information and explanations given to us during the course of audit, we report that:

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

b) As explained to us, some of the fixed assets of the Company have been physically verified by the management during the year in accordance with a phased program of verification designed to cover all the fixed assets over a period of three years, which in our opinion, is reasonable having regard to the size of the Company and nature of its assets. The discrepancies noticed on such physical verification were not material and have been properly dealt with in the books of account.

c) The fixed assets disposed off during the year were not substantial and therefore do not affect the going concern status of the Company

2 a) As explained to us, the inventories have been physically verified by the management at regular intervals during the year. The intervals at which the inventories have been verified are, in our opinion, reasonable in relation to the size of the Company and nature of its business.

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

c) The Company has maintained proper records of inventories. As explained to us, there was no material discrepancies noticed on physical verification of inventory.

3 In respect of loans, secured or unsecured, granted or taken by the Company to/from companies, firms or parties covered in the register maintained under section 301 of the Companies Act, 1956;

a) The Company has granted unsecured loans to a wholly owned subsidiary and a joint venture company covered in the register maintained under section 301 of the Companies Act, 1956. In respect of the said loans the maximum amount outstanding at any time during the year is 7 12,170.92 lacs and the year- end balance is 7 11,310.30 lacs.

The Company has also given advance to five parties as trade advance, the maximum amount outstanding at any time during the year is 7 6,968.66 lacs and the yearend balance is 76,929.37 lacs, out of which 71,123.47 lacs is due for more than three years.

b) As per the information and explanations given to us, the terms and conditions of such loan given to the subsidiary and the joint venture company covered in the register maintained under section 301 of the Companies Act, 1956 are not prima facie prejudicial to the interest of the Company.

c) As per the information and explanations given to us, the principal amounts of the said loans are repayable on demand and there is no repayment schedule.

d) According to the information and explanations given to us the Company has not taken loans from the parties listed in the register maintained under section 301 of the Companies Act. 1956.

4 In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business for the purchase of inventory, fixed assets and for the sale of goods and services. In our opinion and according to the information and explanations given to us, there is no continuing failure to correct major weaknesses in such internal control systems.

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

b) In our opinion and according to the information and explanations given to us, transactions made in pursuance to such contracts or arrangements are specialized in nature and comparable prices are not always determinable and the price is charged are prima facie reasonable.

6 In our opinion and according to the information and explanations given to us, the Company, except in cases of short term borrowings from parties for Working Capital requirements, has complied with the provisions of sections 58A and 58AA, of the Companies Act and Companies (Acceptance of Deposits) Rules, 1975 with regard to the deposits accepted from the public.

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

8 The Central Government has prescribed maintenance of Cost Records under Section 209(l)(d) of the Companies Act, 1956 in respect of certain manufacturing activities of the Company. We have broadly reviewed the accounts and records of the Company in this connection and are of the opinion, that prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the same.

9 a) As per information and explanations given to us the Company has been irregular in depositing the undisputed statutory dues including Provident Fund, Income tax, sales tax, Service Tax and Employees State Insurance and there has been a serious delay in many cases.

The Company has been regular in respect of payments of statutory dues payable under Investor Education and Protection Fund, Customs Duty, Excise Duty, Cess and other statutory dues with the appropriate authorities and there were no undisputed amounts payable in respect of such dues which have remained outstanding as at 30th June, 2013 for a period exceeding six months from the date they become payable. -

Sum of 71267.32 lacs in respect of Income Tax dues towards Tax deducted at source, 73.42 lacs in respect of Employees State Insurance and 717.79 lacs in respect of Service Tax were outstanding as on 30th June, 2013 for a period of more than six months from the date they become payable.

10 The Company has no accumulated losses and has not incurred any cash losses during the financial year covered by our audit or in the immediately preceding financial year.

11 According to information and explanations given to us and based on the documents and records produced before us, the Company has defaulted in repayment of dues to banks and debenture holders amounting to 74418.28 lacs and 72116.74 lacs respectively as at the balance sheet date.

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

13 In our opinion and according to the information and explanations given to us, the nature of activities of the company does not attract any special statute applicable to chit fund and nidhi/ mutual benefit fund/ society

14 The Company has maintained proper records of the transactions and contracts in respect of dealing in shares, securities and other investments and timely entries have been made therein. All shares, securities and other investments have been held by the Company in its own name.

15 According to the information and explanations given to us and the records examined by us, the terms and conditions of the guarantee given by the company for loans taken by others from a bank are not prejudicial to the interest of the company.

16 lb the best of our knowledge and belief and according to the information and explanation given to us by the management the term loans availed by the Company were, prima facie, applied by the Company during the year for the purpose for which the''loans were obtained.

17 According to the Cash Flow statement and other records examined by us and the information and explanations given to us, on all overall basis, funds raised on short term basis, have prima facie, not been used during the year for long term investments.

18 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.

19 As per information and explanation given to us and based on records examined by us the company has created charge in respect of debentures.

20 To the best of our knowledge and belief and according to the information and explanation given to us, the company has not raised any money through a public issue during the year.

21 In our opinion and according to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during die year, which causes the financial statements to be materially misstated.

For S.S.KHANDELWAL & CO. Chartered Accountants

(Firm Registration No. 105064W)

S.S. Khandelwal

Proprietor

Mumbai, 29th August, 2013 Membership No. 031487

---

Mar 31, 2012

1) We have audited the attached Balance Sheet of ELDER PHARMACEUTICALS LIMITED as at March 31, 2012, 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 (Auditors' Report) Order, 2003 issued by the Central Government of India under sub-section (4A) of the section 227 of the Companies Act, 1956, and on the basis of such checks of the books and records of the Company as we considered appropriate and according to the information and explanations given to us, we give 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:

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 it appears from our examination of those books;

c) The Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statement referred to in this report are in agreement with the books of account;

d) In our opinion, the Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statement, dealt by this report are in compliance 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 representation received from the Directors and taken on record by the Board of Directors, we report that none of the Directors are disqualified as on 31stMarch, 2012 from being appointed as director in terms of Clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956.

f) In our opinion, and to the best of our information and according to the explanations given to us, the said accounts read with the significant accounting policies and other notes thereon 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:-

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

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

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

Annexure to the Auditors' Report

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

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

b) As explained to us, the management during the year has physically verified the Fixed assets in a phased periodical manner, which in our opinion is reasonable, having regard to the size of the Company and nature of its assets. No material discrepancies were noticed on such physical verification.

c) During the year the Company has not disposed of a substantial part of its fixed assets.

2 a) As explained to us, the management at regular intervals during the year has physically verified inventories.

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

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

3 In respect of loans, secured or unsecured, granted or taken by the Company to/from companies, firms or parties covered in the register maintained under section 301 of the Companies Act, 1956;-

a) The Company has granted interest free unsecured loans to a wholly owned subsidiary and a joint venture company covered in the register maintained under section 301 of the Companies Act, 1956. In respect of the said loans the maximum amount outstanding at any time during the year is Rs. 8658.66 lacs and the year- end balance is Rs. 8658.66 lacs.

b) As per the information and explanations given to us, the terms and conditions of such interest free loan given to the subsidiary and the joint venture company covered in the register maintained under section 301 of the Companies Act, 1956 are not prima facie prejudicial to the interest of the Company.

c) As per the information and explanations given to us, the principal amounts of the said loans are repayable on demand and there is no repayment schedule. Therefore the question of overdue amount does not arise.

d) According to the information and explanations given to us the Company has not taken loans from the parties listed in the register maintained under section 301 of the Companies Act. 1956.

4 In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business for the purchase of inventory, fixed assets and for the sale of goods. During the course of our audit, we have not observed any major weakness in internal controls in respect of the above area.

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

b) Based on the information and explanations given to us, we are of the opinion that the transactions made in pursuance of the contracts or agreements entered in the register maintained under section 301 of the Companies Act, 1956 and exceeding the value of Rs. 5 lakhs in respect of any party during the year have been made at reasonable prices, having regard to the prevailing market price at the relevant time.

6 In our opinion and according to the information and explanations given to us, the Company has complied with the provisions of sections 58A and 58AA of the Companies Act and Companies (Acceptance of Deposits) Rules, 1975 with regard to the deposits accepted from the public.

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

8 The Central Government has prescribed maintenance of Cost Records under Section 209(1)(d) of the Companies Act, 1956 in respect of certain manufacturing activities of the Company. We have broadly reviewed the accounts and records of the Company in this connection and are of the opinion, that prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the same.

9 a) As per information and explanations given to us the Company generally been regular in depositing the undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Sales Tax, Customs Duty, Excise Duty, Cess and other statutory dues with the appropriate authorities and there were no undisputed amounts payable in respect of such dues which have remained outstanding as at 31st March 2012 for a period exceeding six months from the date they become payable. In respect of income tax liability the Company was generally regular in depositing the undisputed dues with the authorities.

b) The disputed statutory dues that have not been deposited on account of matters pending before appropriate authorities are as under.

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

Income Tax Block assessment dues Block period 1.4.1995 High Court, Mumbai 216.53 to 18.9.2001

Income Tax Assessment dues A. Y 2002 - 03 High Court, Mumbai 23.66

Income Tax Assessment dues A. Y 2008 - 09 Commissioner of Income Tax 28.39

Customs Duty Adjudi cation officer August 2002 Customs, Excise & 25.00 to April 2008 Service Tax Appellate Tribunal

Sales Tax Assessment dues F.Y 2008-09 Asst. Commissioner, Commercial 17.42 Taxes, Bihar

Sales Tax Assessment dues F.Y 2003-04 Asst. Commissioner, Commercial 18.79 Taxes, West Bengal

Service Tax Reversal ratio of service tax attribu table September 2006 Commissioner, Service Tax, Belapur 490.63 for manu facture of exempted goods to March 2010 under rule 6(5) of CCR

Service Tax Eligi bility of S.T on CHA & C&F agent September 2006 Commissioner, Service Tax, Belapur 1.45 to March 2011

Service Tax S. T payable on reverse charge method. October 06 to March 2011 Commissioner, Service Tax, Belapur 0.54

10 The Company has no accumulated losses and has not incurred any cash losses during the financial year covered by our audit or in the immediately preceding financial year.

11 According to information and explanations given to us and based on the documents and records produced before us, the Company has not defaulted in repayment of dues to banks as at the balance sheet date.

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

13 In our opinion and according to the information and explanations given to us, the nature of activities of the company does not attract any special statute applicable to chit fund and nidhi/ mutual benefit fund/ society.

14 The Company has maintained proper records of the transactions and contracts in respect of dealing in shares, securities and other investments and timely entries have been made therein. All shares, securities and other investments have been held by the Company in its own name.

15 According to the information and explanations given to us and the records examined by us , the terms and conditions of the guarantee given by the Company for loans taken by others from a bank are not prejudicial to the interest of the Company.

16 To the best of our knowledge and belief and according to the information and explanation given to us by the management the term loans availed by the Company were, prima facie, applied by the Company during the year for the purpose for which the loans were obtained.

17 According to the Cash Flow statement and other records examined by us and the information and explanations given to us, on all overall basis, funds raised on short term basis, have prima facie, not been used during the year for long term investments.

18 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.

19 As per information and explanation given to us and based on records examined by us the Company has created charge in respect of debentures

20 To the best of our knowledge and belief and according to the information and explanation given to us, the Company has not raised any money through a public issue during the year.

21 In our opinion and according to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the year, which causes the financial statements to be materially misstated.

For S S KHANDELWAL & CO.

Chartered Accountants

(Firm Registration No:105064W)

(S S KHANDELWAL)

(Proprietor)

Membership No.31487

Mumbai, 9th August, 2012

---

Mar 31, 2011

1) We have audited the attached Balance Sheet of ELDER PHARMACEUTICALS LIMITED as at March 31, 2011, the related Profit and Loss Account of the Company 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.

31 As required by the Companies (Auditors' Report) Order, 2003, issued by the Central Government of India under sub-section (4AJ of the section 227 of the Companies Act, 1956, and on the basis of such checks of the books and records of the Company as we considered appropriate and according to the information and explanations given to us, we give in the Annexure a statementonthe-fiiaUeiS'apweWreit'iH'pw'ByiupliB'itMiiiU 5uRhesaid Order.

4) Further to our comments in the Annexure referred to above, we report that:

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

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

c) The Balance Sheet, Profit and Loss Account and the Cash Flow Statement referred to in this report are in agreement with the books of account;

d) In our opinion, the Cash Flow Statement, Profit and Loss Account and the Balance Sheet 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 representation received from the Directors and taken on record by the Board of Directors, we report that none of the said Directors is disqualified as on SI^March, 2011 from being appointed as director in terms of Clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956.

f) In our opinion, and to the best of our information and according to the explanations given to us, the said accounts read with the notes thereon 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-.-

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

ii) In the case of the Profit and Loss Account of the Profit of the Company for the year ended on that date; and

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

Annexure to the Auditors' Report.

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

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

b) As explained to us, the management during the year has physically verified the fixed assets in a phased periodical manner, which in our opinion is reasonable, having regard to the size of the Company and nature of its assets. No material discrepancies were noticed on such physical verification.

c) In our opinion, the Company has not disposed of a substantial part of its fixed assets during the year and the going concern status of the Company is not affected.

2) a) As explained to us, the management at regular intervals during the year, has physically verified inventories.

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

c) The Company has maintained proper records of inventories. As explained to us, there was no material discrepancies noticed on physical verification of inventory.

3I a) The Company has not granted unsecured loans, to any company listed in the register maintained under section 301 of the Companies Act, 1956.

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

c) The loan outstanding at the year end is at call and has not been recalled during the year. The Company is generally regular in payment of interest.

d) There are no overdue amounts exceeding T 1.00 lac.

el According to the information and explanations given tous, the Company has not taken loans from the parties listed in the register maintained under section 301 of the Companies Act, 1956.

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

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

b) Based on the information and explanations given to us, we are of the opinion that the transactions made in pursuance of the contracts or agreements entered in the register maintained under section 301 of the Companies Act, 1956 and exceeding the value of Rs.5 lakhs in respect of any party during the year have been made at reasonable prices, having regard to the prevailing market price at the relevant time.

6) In our opinion and according to the information and explanations given to us, the Company has complied with the provisions of sections 58A and 58AA of the Companies Act, 1956 and Companies (Acceptance of Deposits) Rules, 1975 with regard to the deposits accepted from the public.

7) The Company has an internal audit system commensurate with the size and the nature of its business.

8) The Central Government has prescribed maintenance of Cost Records under Section 209(1 )(d) of the Companies Act, 1956 in respect of certain manufacturing activities of the Company. We have broadly reviewed the accounts and records of the Company in this connection and are of the opinion, that prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the same.

9) al According to the records of the Company, undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Customs Duty, Excise Duty, Cess and other statutory dues have been regularly deposited with the appropriate authorities.

b) The disputed statutory dues that have not been deposited on account of matters pending before appropriate authorities are as under.

No. Name of the Statute Nature of the dues Forum where dispute Amount is pending (Rs. Lacs)

1 Income Tax Block assessment dues High Court, Mumbai 216.53

2 Income Tax Assessment dues High Court, Mumbai 23.66

3 Income Tax Assessment dues Commissioner of Income Tax 28.39

4 Customs Act Adjudication Order Customs, Excise & Service Tax 25.00 Appellate Tribunal

5 Sales Tax Assessment dues Asst.Commissioner Commercial 17.56 Tax, Bihar

10) The Company has no accumulated losses and has not incurred any cash losses during the financial year covered by our audit or in the immediately preceding financial year.

11) According to information and explanations given to us and based on the documents and records produced before us, the Company has not defaulted in repayment of dues to banks as at the balance sheet date.

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

13) In our opinion and according to the information and explanations given to us, the nature of activities of the Company does not attract any special statute applicable to chit fund and nidhi/ mutual benefit fund/ society.

14) According to information and explanations given to us and based on the documents and records produced before us, the Company is'not dealing or trading in shares, securities, debentures and other investments.

15) According to the information and explanations given to us and the records examined by us , the terms and conditions of the guarantee given by the Company for loans taken by others from a bank are not prejudicial to the interest of the Company.

16) To the best of our knowledge and belief and according to the information and explanations given to us, term loans availed by the Company were, prima facie, applied by the Company during the year for the purpose for which the loans were obtained

17) According to the Cash Flow statement and other records examined by us and the information and explanations given to us, on overall basis, funds raised on short term basis, have prima facie, not been used during the year for long term investments.

18) 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.

19) As per information and explanations given to us and based on records examined by us the Company has created charge in respect of debentures issued during the year.

20) To the best of our knowledge and belief and according to the information and explanations given to us, the Company has not raised any money through a public issue during the year.

21) In our opinion and according to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the year, which causes the financial statements to be materially misstated.

For S S KHANDELWAL & CO.

Chartered Accountants

(Registration No. 105064W)

SS KHANDELWAL Proprietor

Membership No. 31487

Mumbai,

12th August, 2011

---

Mar 31, 2010

1) We have audited the attached Balance Sheet of ELDER PHARMACEUTICALS LIMITED as at March 31, 2010, the related Proft and Loss Account of the Company 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 (Auditors’ Report) Order, 2003 as amended by the Companies (Auditor’s Report) Order, 2004 (together ‘the Order’), issued by the Central Government of India in terms of sub-section (4A) of the section 227 of the Companies Act, 1956 and on the basis of such checks of the books and records of the Company as we considered appropriate and according to the information and explanations given to us, we report that:

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

b) As explained to us, the management during the year has physically verified the fixed assets in a phased periodical manner, which in our opinion is reasonable, having regard to the size of the Company and nature of its assets. No material discrepancies were noticed on such physical verification.

c) In our opinion, the Company has not disposed off a substantial part of its fixed assets during the year and the going concern status of the Company is not affected.

ii) a) As explained to us, the management at regular intervals during the year has physically verified inventories.

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

c) The Company has maintained proper records of inventories. As explained to us, there was no material discrepancies noticed on physical verification of inventory.

iii) According to the information and explanations given to us, the Company has not taken loans from the parties listed in the Register maintained under Section 301 of the Companies Act, 1956. We have relied on the representation of the management that the monies due from parties referred to in note No. 17 of Schedule 20, are advances and not in the nature of loans. .

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

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

b) Based on the information and explanations given to us, we are of the opinion that the transactions made in pursuance of the contracts or agreements entered in the register maintained under section 301 of the Companies Act, 1956 and exceeding the vale of Rs.5 lakhs in respect of any party during the year have been made at reasonable prices, having regard to the prevailing market price at the relevant time.

vi) In our opinion and according to the information and explanations given to us, the Company has complied with the provisions of sections 58A and 58AA of the Companies Act and Companies (Acceptance of Deposits) Rules, 1975 with regard to the deposits accepted from the public.

vii) The Company has an internal audit system commensurate with the size and the nature of its business.

viii) The Central Government has prescribed maintenance of Cost Records under Section 209(1)(d) of the Companies Act, 1956 in respect of certain manufacturing activities of the Company. We have broadly reviewed the accounts and records of the Company in this connection and are of the opinion, that prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the same.

ix) a) According to the records of the Company, undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Customs Duty, Excise Duty, Cess and other statutory dues have been regularly deposited with the appropriate authorities.

b) The disputed statutory dues that have not been deposited on account of matters pending before appropriate authorities are as under.

No. Name of the Nature of the dues Forum where dispute Amount Statute is pending (Rs. Lacs)

1 Sales Tax Assessment Dues Asst. Commissioner 8.61 Commercial Tax, West Bengal

2 Sales Tax Assessment Dues Asst. Commissioner 8.95 Commercial Tax, Rajasthan

3 Income Tax Assessment Dues Commissioner of 73.79 Income Tax

4 Customs Act Adjudication Order Customs, Excise & 49.50 Service Tax Appellate tribunal

5 Central Excise Adjudication Order Customs, Excise & 12.55 Service Tax Appellate tribunal



x) The Company has no accumulated losses and has not incurred any cash losses during the fnancial year covered by our audit or in the immediately preceding financial year.

xi) Based on our audit procedures and according to the information and explanations given to us, we are of the opinion that the Company has not defaulted in repayment of dues to financial institutions and banks.

xii) To the best of our knowledge and belief and according to the information and explanation given to us, term loans availed by the Company were, prima facie, applied by the Company during the year for the purpose for which the loans were obtained.

xiii) According to the Cash Flow statement and other records examined by us and the information and explanations given to us, on all overall basis, funds raised on short term basis, have prima facie, not been used during the year for long term investments.

xiv) In our opinion and according to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the year, which causes the financial statements to be materially misstated.

xv) In our opinion and according to the information and explanations given to us, the nature of the Company’s business/activities during the year are such that clauses xii, xiii, xiv, xviii, xix, and xx of Para 4 of the Companies (Auditors’ Report) Order are not applicable to the Company.

4) Further to our comments in paragraph (3) above, we state that:

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

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

c) The Balance Sheet, Profit and Loss Account and the Cash Flow Statement referred to in this report are in agreement with the books of account;

d) In our opinion, the Cash Flow Statement, Profit and Loss Account and the Balance Sheet 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 representation received from the Directors and taken on record by the Board of Directors, we report that none of the said Directors is disqualified as on 31st March, 2010 from being appointed as director in terms of Clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956.

f) In our opinion, and to the best of our information and according to the explanations given to us, the said accounts read with the notes thereon 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:-

i) In the case of the Balance Sheet of the state of affairs of the Company as at 31st March, 2010 and

ii) In the case of the Profit and Loss Account of the Profit of the Company for the year ended on that date.

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

For S.S.KHANDELWAL & CO.

Chartered Accountants

(Firm Registration No:105064W)

S.S. Khandelwal

Place : Mumbai Proprietor

Dated : 18th August, 2010 Membership No.31487