Auditor Report of Glodyne Technoserve Ltd.

Mar 31, 2013

We have audited the accompanying financial statements of GLODYNE TECHNOSERVE LIMITED ("the Company"), which comprise the Balance Sheet as at 31st March , 2013, the Statement of Profit and Loss and the Cash Flow Statement for the year then ended, and a summary of the significant accounting policies and other explanatory information.

Management's Responsibility for the 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 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 controls relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatements, 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 the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with the ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal controls 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 the accounting policies used and the reasonableness of the accounting estimates made by the Management, as well as evaluating the overall presentation of the financial statements.

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

Basis for Qualified Opinion

We also draw attention to the Note 4 in the financial statements regarding writing off of Advances (net of tax impact) amounting to Rs. 20,659.50 Lakhs directly against the opening balance of Statement of Profit and Loss instead of debiting to the Statement of Profit and Loss, which in our opinion, is not in accordance with the Generally Accepted Accounting Principles and in particular Accounting Standard -5 "Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies" Had the same been debited to the Statement of Profit and Loss, the Profit for the year (net of tax) would have reduced by the same amount.

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 in conformity with the accounting principles generally accepted in India:

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

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

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

Other Matter

1. The Company has exposure in the nature of Investment and Loans and advances to the extent of Rs. 459.76 Lakhs and Rs. 3,331.04 Lakhs respectively in M/s Smaarftech Technologies Private Limited (a subsidiary). On the basis of book value of the said subsidiary, there is a diminution in the book value of the said Investment and loans and advances, which in the opinion of Management, is of temporary in nature and hence no provision for diminution is required in this regard.

2. The Company has encountered pressure on its liquidity to pay to its Lenders / Vendors due to declining realization of debtors, advances coupled with delay / cost overruns in execution / delay in Regulatory approvals in certain projects. The Company has also defaulted on its loan repayment and interest servicing obligations in respect of certain borrowings and non-payment of certain statutory dues. The Company has also received legal notices from the some of the lenders /vendors for such defaults in repayment. The Company has rescheduled certain loan / lease obligations with the concurrence of its lenders and is taking measures to shorten the recovery / conversion cycle in respect of its receivables / advances. In the opinion and based on the risk assessment conducted by the Management of the Company, this is a temporary phase and there is no doubt / uncertainty regarding Company's ability to continue as a Going Concern. Hence the said assumption has been followed for preparing the financials for the current financial year. The appropriateness of assumption of going concern is dependent upon the Company's ability to raise requisite finance / generate cash flows in future to meet its obligations, including financial support to its subsidiaries.

Our opinion is not qualified in respect of these matters.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order, 2003("the Order") as amended by Companies (Auditor's Report) (Amendment) Order 2004 (together 'the Order') issued by the Central Government in terms of Section 227(4A) of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order on the basis of such checks of the books and records of the company as we considered appropriate and the information and explanation given to us during the course of audit.

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 it appears from our examination of those books;

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

(d) Except for the effects of the matter described in the Basis for the Qualified Opinion paragraph, 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 Act.

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

Annexure to the Auditors' Report

[Referred to in paragraph (3) of our report of even date to the members of Glodyne Technoserve Limited]

(i) (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets for additions to Fixed Assets, with records in respect of certain acquisitions being under updation.

(b) The Company has a phased programme for verification of all fixed assets over a period of three/four years. In accordance with the programme, fixed assets are verified and any material differences will be adjusted upon reconciliation with the records and documents. However the management does not expect any major discrepancies between the book records and physical inventory.

(c) The fixed assets disposed off during the year were not substantial, and therefore, do not affect the going concern assumption.

(ii) (a) As informed to us, the inventories have been physically verified by the Management. In our opinion, the frequency of such verification is reasonable.

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

(c) On the basis of our examination of records of inventory, in our opinion and according to the information and explanations given to us, the Company has maintained proper records of inventory and no material discrepancies were noticed on physical verification of the stocks as compared to the book records.

(iii) (a) The Company has granted unsecured loans to Five Wholly Owned Subsidiaries. The aggregate maximum amount involved during the year and the year-end balance of these loans was Rs. 31, 671.46 Lakhs.

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

(c) Since the loans mentioned in para (iii) (a) above are without any fixed repayment schedule, the question of examining the regularity of repayment of the Principal amount and interest thereon, does not arise.

(d) For the same reasons given in para (iii) (c) above, the question of examining the overdue amount and commenting on the reasonableness of the steps taken by the Company for the recovery of such loans does not arise.

(e) The Company has taken Unsecured loans from two Companies covered in the Register maintained under Section 301 of the Act. The aggregate maximum amount involved during the year as well as aggregate year-end balance of these loans was Rs. 195.78 Lakhs.

(f) In our opinion and according to the information and explanations given to us, the rate of interest and other terms and conditions for the loans mentioned in para (iii) (e) above, are prima facie not prejudicial to the interest of the Company.

(g) Since the loans mentioned in para (iii) (e) above are without any fixed repayment schedule, the question of examining the regularity of repayment of the Principal amount and interest thereon, does not arise.

(iv) In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business with regard to fixed assets and sale of goods and services. In our opinion, Internal control in respect of purchase of Inventory needs to be strengthened. Further, on the basis of our examination of books and records of the Company, and according to the information and explanations given to us, we have neither come across nor have been informed of any continuing failure to correct major weakness in the aforesaid internal control system.

(v) (a) In our opinion and according to the information and explanations given to us, we are of the opinion that the particulars of contracts or arrangements referred to in Section 301 of the Act have been entered in the register required to be maintained under that section.

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

(vi) In our opinion and according to the information and explanations given to us, the Company has not accepted deposits from the public during the year.

(vii) The Company has appointed a firm of Chartered Accountants to carry out its internal audit function. In our opinion, internal audit system is commensurate with its size and nature of its business.

viii) According to the information and explanations given to us and to the best of our knowledge, the Central Government has not prescribed maintenance of cost records under clause (d) of sub section (1) of Section 209 of the Act for the products / services of the Company.

(ix) (a) According to the information and explanations given to us and according to the books and records examined by us, in our opinion, the company has not been regular in depositing with the appropriate authorities undisputed statutory dues relating to Provident fund, Employee State Insurance, Profession Tax, Value Added Tax, Service Tax, T.D.S. and Income Tax.

Total amount of such statutory dues outstanding as on 31st March 2013 (as estimated by the Management) for a period of more than six months from the date they became payable are as under:

Provident Fund and Employee State Insurance Fund dues- Rs. 60.93 Lakhs, T.D.S. dues Rs. 796.43 Lakhs, Dividend Distribution Tax Rs. 310.41 Lakhs, Income Tax Rs. 400.00 Lakhs, Service Tax Rs. 3.80 Lakhs, and Value added Tax Rs. 2.90 Lakhs, have remained outstanding as at 31st March 2013 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 no dues which have not been deposited on account of any dispute with the Statutory authorities, except Rs. 50.08 Lakhs, Rs. 86.11 Lakhs and Rs. 309.11 Lakhs being disputed Income Tax demands for Assessment Year 2005-06, 2006-07 and 2007-08 respectively. All these demands being contested by the Company in appeals pending before the Commissioner (Appeals).

(x) The Company neither has accumulated losses as at 31st March 2013 nor has it incurred any cash losses during the current financial year or in the immediately preceding financial year.

(xi) Based on the information and explanations given to us, the Company has during the year, defaulted in repayment of its dues (principal as well as Interest thereon) to certain Banks. The aggregate amount involved (as estimated and accounted by the Management) amounted to Rs. 18,514.58 Lakhs (as detailed in Note no.6 and 9 of Notes to Financial Statements) and the period of default ranged from 2 months to 10 months in respect of these dues as on Balance sheet date. Further, as informed to us, certain borrowings of the Company have been rescheduled during the year.

(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 share, debentures and other securities.

(xiii) In our opinion and according to the information and explanation given to us, the Company is not a chit fund or a nidhi / mutual benefit fund /society.

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

(xv) According to the information and explanations given to us, the Company has given Guarantees to banks in respect of loans taken by two of its subsidiaries, as detailed in Note 40 to the financial statements. These guarantees have not been covered by any security. However, as the one of the business activities of companies is to promote the business of these subsidiaries and considering long term involvement of these companies, in our opinion, these guarantees are prima facie not prejudicial to the interest of the Company.

(xvi) In our opinion and according to the information and explanations given to us, the Company has applied the term loans for the purpose for which such loans were obtained.

(xvii) Based on the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, in our opinion, there are no funds raised on a short term basis which have been used for long term investment.

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

(xix) As the Company has not issued any debentures, question of commenting on the securities created in respect thereof does not arise.

(xx) The company has not raised any money by public issue during the year. Accordingly clause 4(xx) of the Order is not applicable.

(xxi) During the course of our examination of the books of account and records of the Company carried out in accordance with the generally accepted auditing practices in India, we have not come across any instance of fraud on or by the Company, noticed or reported during the year, nor have we been informed of such case by the Management.

For N M Kapadia & Co Chartered Accountants FRN: 107072W

Nilesh M. Kapadia Partner Mumbai: 30th May 2013 Membership No.: 033697

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Mar 31, 2011

1. We have audited the attached Balance Sheet of GLODYNE TECHNOSERVE LIMITED ("the Company") as at 31st March, 2011 and related Profit and Loss Account and Cash Flow Statement of the Company for the year ended on that date, annexed thereto. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

3. As required by the Companies (Auditor's Report) Order, 2003 as amended by Companies (Auditor's Report) (Amendment) Order, 2004 (together 'the Order') issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956 ('the Act'), and on the basis the information and explanations given to us and books and records examined by us in the normal course of audit and to the best of our knowledge and belief we give in the Annexure a statement on the matters specifed 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 purpose of the audit;

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

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

d) 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 Act, to the extent applicable;

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

f) In our opinion and to the best of our information and according to the explanations given to us, the said accounts, read together with the notes thereon, 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 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 for the year ended on that date; and

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

[Referred to in paragraph (3) of our report of even date to the members of Glodyne Technoserve Limited]

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

(b) The fixed assets of the Company have been physically verifed by the Management during the year at regular intervals. In our opinion, the periodicity of verifcation is reasonable having regard to the size of the Company and the nature of its assets. As informed to us, no material discrepancies were noticed on such verifcation.

(c) The fixed assets disposed off during the year were not substantial, and therefore, do not affect the going concern assumption.

(ii) (a) As informed to us, the inventories have been physically verifed by the Management. In our opinion, the frequency of such verifcation is reasonable.

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

(c) On the basis of our examination of records of inventory, in our opinion and according to the information and explanations given to us, the Company has maintained proper records of inventory and no material discrepancies were noticed on physical verifcation of the stocks as compared to the book records.

(iii) (a) The Company has granted unsecured loans to seven subsidiaries covered in the register maintained under Section 301 of the Act. The maximum amount involved during the year wasRs. 19,083.81 Lakhs and the year end balance of these loans was Rs. 18,858.61 Lakhs.

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

(c) Since the loans mentioned in para (iii) (a) above are without any fixed repayment schedule, the question of examining the regularity of repayment of the Principal amount and interest thereon, does not arise.

(d) For the same reasons given in para (iii) (c) above, the question of examining the overdue amount and commenting on the reasonableness of the steps taken by the Company for the recovery of such loans does not arise except for advances amounting to Rs. 46.55 Lakhs for which the provision for doubtful recovery has been made

(e) In our opinion and according to information and explanations given to us, the Company has not taken any loan, secured or unsecured from any party covered in the register maintained under Section 301 of the Act. Hence clause 4(iii) sub clauses (f) and (g) of the said order are not applicable.

(iv) In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business with regard to purchase of inventory and fixed assets and for sale of goods and services. Further, on the basis of our examination of books and records of the Company, and according to the information and explanations given to us, we have neither come across nor have been informed of any continuing failure to correct major weakness in the aforesaid internal control system.

(v) (a) In our opinion and according to the information and explanations given to us, we are of the opinion that the particulars of contracts or arrangements referred to in Section 301 of the Act have been entered in the register required to be maintained under that section.

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

(vi) In our opinion and according to the information and explanations given to us, the Company has not accepted deposits from the public during the year.

(vii) The Company has appointed a frm of Chartered Accountants to carry out its internal audit function. In our opinion, internal audit system is commensurate with its size and nature of its business.

(viii) According to the information and explanations given to us and to the best of our knowledge, the Central Government has not prescribed maintenance of cost records under clause (d) of sub-section (1) of Section 209 of the Act for the products/ services of the Company.

(ix) (a) According to the information and explanations given to us and according to the books and records examined by us, in our opinion, the Company has been generally regular in depositing with the appropriate authorities undisputed statutory dues including Provident fund, Employee State Insurance, Value Added Tax (VAT), Service Tax, Income Tax and other material statutory dues applicable to it except certain instances of delays were noticed. According to the information and explanations given to us, there are no undisputed amounts payable in respect of such statutory dues which have remained outstanding as at 31st March 2011 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 no dues which have not been deposited on account of any dispute with the Statutory authorities, except Rs. 25.28 Lakhs, Rs. 15.43 Lakhs and Rs. 20.57 Lakhs being disputed Income Tax demands for Assessment Year 2005-06, 2006-07 and 2007-08 respectively. All these demands being contested by the Company in appeals pending before the Commissioner (Appeals).

(x) The Company neither has accumulated losses as at 31st March, 2011 nor has it incurred any cash losses during the current financial year or in the immediately preceding financial year.

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

(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 share, debentures and other securities.

(xiii) In our opinion and according to the information and explanation given to us, the Company is not a chit fund or a nidhi / mutual benefit fund /society

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

(xv) According to the information and explanations given to us, the Company has given Guarantees to banks in respect of loans taken by two of its subsidiaries. In our opinion, the terms and conditions of such guarantees are prima facie not prejudicial to the interest of the Company.

(xvi) In our opinion and according to the information and explanations given to us, the Company has applied the term loans for the purpose for which such loans were obtained.

(xvii) Based on the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, in our opinion, there are no funds raised on a short term basis which have been used for long term investment.

(xviii) During the year under Audit, the Company has issued Convertible warrants amounting to Rs. 1,080 Lakhs to one of the Companies covered in the register maintained under section 301 of the Act. In our opinion and according to the information and explanations given to us, the price at which the said warrants have been issued is not prejudicial to the interest of the Company.

(xix) As the Company has not issued any debentures, question of commenting on the securities created in respect thereof does not arise.

(xx) The Company has not raised any money by public issue during the year. Accordingly clause 4(xx) of the Order is not applicable.

(xxi) During the course of our examination of the books of account and records of the Company carried out in accordance with the generally accepted auditing practices in India, we have not come across any instance of fraud on or by the Company, noticed or reported during the year, nor have we been informed of such case by the Management.

For N M Kapadia & Co

Chartered Accountants FRN : 107072W

Nilesh M. Kapadia

Partner

Membership No.033697 Place : Mumbai Date : August 5, 2011