Auditor Report of Madhucon Projects Ltd.

Mar 31, 2018

Report on the Standalone Ind AS Financial Statements

We have audited the accompanying Standalone Ind AS Financial Statements of M/s. Madhucon Projects Limited (“the Company”), which comprise the Balance Sheet as at March 31, 2018, the Statement of Profit and Loss (including Other Comprehensive Income), the statement of Cash Flows and the statement of changes in equity for the year then ended and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Ind AS Financial Statements

The Company’s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (‘the act’) with respect to the preparation of these Standalone Ind AS Financial Statements that give a true and fair view of the financial position, financial performance including other comprehensive income, cash flows and changes in equity of the Company in accordance with the Indian Accounting Standards (Ind As) specified under Section 133 of the Act, read with Companies (Indian Accounting Standards) Rules, 2015 as amended and other the accounting principles generally accepted in India.

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

Auditor’s Responsibility

Our responsibility is to express an opinion on these Standalone Ind AS Financial Statements based on our audit. In conducting our Audit, we have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under.

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

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

We believe that the audit evidence we have obtained is sufficient and appropriate audit evidence to provide a basis for our Audit opinion on the Standalone Ind AS Financial Statements.

Opinion:

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

Emphasis of Matter Paragraph:

a. Note No.2.2 (i), to the financial statements, in relation to carrying value of investments held in and unsecured loans and advances given by the company to its subsidiaries listed in that note, which have been incurring losses and in some of these companies, net worth was fully or substantially eroded. Taking into account the management internal assessment and initiatives to be implemented to improve the profitability in the medium to long term, the management of the company is of the view that carrying value of investments and loans and advances are realizable at the value stated in the books.

b. Note No. 2.2 (ii), to the financial statements, in relation to the Madhucon Mega Mall Private Limited (MMMPL) a subsidiary of the company incorporated for developing shopping mall cum multiplex on leased land taken from Andhra Pradesh housing Board ( Now known as Telangana housing Board) (“The Board”) at Kukatpally in Hyderabad. The board issued letter for revoking the power of attorney and resumption of land. The company got a Status Quo order from Court and the case is pending in the Court. Taking into account the Constitution of and visit made by Cabinet Sub Committee of Telangana Government, Management internal assessment and legal opinion obtained, Management of the Company is confident in succeeding the case and carrying values of investments in and loans sanctioned to MMMPL and realizable at the values stated in the books of accounts.

According to the books of accounts and information and explanations given to us, the investment and balance of loan as at March 31st, 2018 was Rs. 3,500 Lakhs and Rs. 134.44 Lakhs.

c. Note No. 2.4 to the Financial statements indicate that the outstanding Loans and Advances which were granted to Nama Investments Limited and NNR Infra Investments Private Limited in which the Company’s Directors have Interest are realizable at the carrying values in the books of accounts though both these companies have been incurring losses and accumulated losses exceeded the net worth of these companies for the reasons stated in that note.

According to the Books of Accounts and Information and Explanations given to us, the Closing Balances as at March 31st, 2018 with respect to Nama Investments Limited and NNR Investments Limited are Rs. 4189.76 Lakhs and Rs. 511.98 Lakhs respectively. The company has not recognized interest income for the same during current financial year.

d. During the FY 2017-18 the management of the company has made provision for Corporate Social Responsibility (CSR) expenditure which is pertaining to previous financial year (i.e., 2016-17).

e. The Company has defaulted in repayment of dues to Banks and Financial Institutions. Loans outstanding were classified as NPAs by the Banks and Financial Institutions.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor’s Report) Order, 2016 (“the Order”) issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in the Annexure A, a statement on the matters Specified in paragraphs 3 and 4 of the Order.

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

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

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

c) the Balance Sheet, Statement of Profit and Loss including Other Comprehensive Income, the Statement of Cash Flows and the statement of changes in equity dealt with by this Report are in agreement with the books of account;

d) in our opinion, the aforesaid Ind AS Financial Statements comply with the applicable Accounting Standards specified under Section 133 of the Act, read with relevant rules issued there under.

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

f) With respect to the adequacy of the internal financial controls over financial reporting of the company and the operating effectiveness of such controls, refer to our separate report in ‘Annexure B’; and

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

i) The Company has disclosed the pending litigations which would impact its financial position, in its notes to financial statements.

ii) The Company has made provision, as required under the applicable law or accounting standards for material foreseeable losses, if any, on long term contracts.

iii) The company has not complied with the provisions of section 124(5) of the Companies Act, 2013 regarding the remittance of unpaid dividend of FY 2008-09 amounting to Rs. 2,16,049.60 and FY 2009-10 Rs. 2,45,028.80 to Investor Education and Protection Fund (IEPF) within the stipulated period.

Annexure referred to in Independent Auditors Report to the Members of M/s. Madhucon Projects Limited on the Ind AS Financial Statements for the year ended 31^st March 2018, we report that:

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

(b) As explained to us, fixed assets have been physically verified by the management at regular intervals; as informed to us no material discrepancies were noticed on such verification. In our opinion, the frequency of verification is reasonable.

(c) According to the information and explanations given to us and on the basis of our examination of records of the Company, the title deeds of immovable properties are held in the name of the Company as at the Balance Sheet date.

ii. (a) The Inventory has been physically verified during the year by the Management and in our opinion, the frequency of verification is reasonable.

(b) In our opinion, the procedures of the physical verification of inventory followed by the Management are adequate in relation to the size of the Company and the nature of its business.

iii. According to the information and explanations given to us, the Company has granted loans, unsecured, to companies covered in the Register maintained under Section 189 of the Companies Act, 2013. In respect of such loans and having regard to the rollover stipulations for loans to certain parties:

(a) The terms and conditions of the grant of such loans are, in our opinion, prima facie, not prejudicial to the Company’s interest.

(b) The schedule of repayment of principal and payment of interest has not been stipulated and hence we are unable to comment as to whether repayment/receipts of the principal amount and the interest are regular.

(c) In the absence of stipulated schedule of repayment of principal and payment of interest, we are unable to comment as to whether there is any amount which is overdue for more than 90 days and whether reasonable steps have been taken by the Company for recovery of principal amount and interest.

iv. In our opinion and according to the information and explanations given to us, the Company has complied with the provision of sections 185 and 186 of the Act to the extent applicable, in respect of loans, investments, guarantees and security.

v. The Company has not accepted any deposits from the public covered under Section 73 to 76 of the Companies Act, 2013 and rules framed there under to the extent notified.

vi. Pursuant to the rules made by the Central Government of India, the Company is required to maintain cost records as specified under Section 148(1) of the Act in respect of its products. We have broadly reviewed the same, 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 records with a view to determine whether they are accurate or complete.

vii. According to the information and explanations given to us and based on the records of the company examined by us, in respect of the Statutory dues,:

a) There are some delays in depositing undisputed statutory dues including Provident Fund, Employees’ State Insurance, Income-tax, Sales Tax, Service Tax, Customs Duty, Excise Duty, Value Added Tax (VAT), Cess and other statutory dues applicable to it. Undisputed amounts payable in respect thereof, which were outstanding for more than six months from the date they became payable are as follows:

S.No.	Name of the Status	Nature of Due	Period	Rs. in Lacs
1	The Income Tax Act, 1961	Dividend Distribution Tax & Interest on it	2011-12 to 2017-18	78.79
2	Professional Tax	P T PAYABLE	2011-12 to 2017-18	57.95
3	The Employees Provident Funds and Miscellaneous provision Act 1952	Provident Fund	2012-13 to 2017-18	190.62
4	Sales Tax	Sale Tax payable	2013-14 to 2017-18	447.84
5	Works Contract Tax	Works Contract Tax	2014-15 to 2017-18	554.49
6	The Finance Act 1994	Service Tax	2014-15 to 2017-18	339.91
7	The Income Tax Act, 1961	Tax Deducted at Source & Interest on it	2013-14 to 2017-18	192.54
8	Goods and Service Tax	Goods and Service Tax	2017-18	416.57

b) Details of dues of Income-tax, Sales Tax, Service Tax, Customs Duty, Excise Duty, Value Added Tax and CESS which have not been deposited as on March 31, 2018 on account of disputes are given below:

Name of the Statute	Forum where dispute is pending	Period to which the amount relates	Amount involved (Rs. in lakhs)
The Income Tax Act, 1961 Sales Tax	CIT (Appeals), Hyderabad Hon’ble High Court	2009-10 to 2012-13 2001 to 2005 & 2009-10	7,138.61 12,471.29

viii. Based on the examination of books of accounts and related records and according to the information and explanations given by the management, the company has defaulted in repayment of dues to financial institutions and banks during the year, as follows: Delay in Interest payments:

Name of the Bank	Rs. in Lakhs
AXIS BANK	194.39
BANK OF INDIA	164.71
ICICI BANK	463.63
IDBI BANK	597.54
KOTAK MAHINDRA BANK LIMITED	484.03
STATE BANK OF INDIA	471.09
ORIENTAL BANK OF COMMERCE	370.89
Name of the Financial Institution SREI Equipment Finance Ltd.	130.34

Delay in Principal re-payments:

Name of the Bank	As on 31st March 2018
Bank of India	1,767.95
Name of the Financial Institution
SREI Equipment Finance Ltd.	1,849.00

ix. The Company has not raised any moneys by way of initial public officer, further public offer (including debt instruments) and in our opinion and according to the information and explanations given to us, the term loans were applied for the purposes for which they were obtained.

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

xi. As per the information and explanations given to us, managerial remuneration provided are in accordance with approvals mandated by the provisions of section 197 of the Act.

xii. As the Company is not a Nidhi Company and the Nidhi Rules, 2014 are not applicable to it; the Provisions of clause 3(xii) of the order are not applicable to the company.

xiii. The Company has entered into transactions with related parties in compliance with the provisions of Sections 177 and 188 of the Act. The details of such related party transactions have been disclosed in the financial statements as required under Indian Accounting Standard (Ind AS) 24, Related Party Disclosures specified in the Companies (Indian Accounting Standards) Rules, 2015 (as amended) under Section 133 of the Act.

xiv. The Company has not made any preferential allotment of private placement of shares or fully or partly convertible debentures during the year under review. Accordingly, the provisions of clause 3(xiv) of the Order are not applicable to the Company.

xv. The Company has not entered into non-cash transactions with its directors or persons connected with him. Accordingly, the provisions of clause 3(xv) of the Order are not applicable to the Company.

xvi. The Company is not required to be registered under section 45-IA of The Reserve Bank of India Act 1934. Accordingly, the provisions of clause 3(xvi) of the order are not applicable to the Company.

Report on the Internal Financial Controls over Financial Reporting under clause (i) of the Sub-section 3 of the Section 143 of the Companies Act, 2013 (‘The Act’)

We have audited the internal financial controls over financial reporting of M/s. Madhucon Projects Limited (‘the company’) as of 31^st March 2018 in conjunction with our audit of Ind AS Financial Statements of the company for the year ended on that date.

Management’s Responsibility for Internal Financial Controls

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

Auditor’s Responsibility

Our responsibility is to express an opinion on the company’s internal financial controls over financial reporting based on our Audit. We conducted our audit in accordance with the Guidance note on Audit of Internal Financial Controls Over Financial Reporting ( the “Guidance Note”) and the standards on Auditing deemed to be prescribed under section 143(10) of the Act to the extent applicable to an Audit of Internal Financial Controls, both applicable to an audit of Internal Financial Controls and both issued by the ICAI. These standards and guidance note require that we comply with ethical requirements and plan and performed the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.

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

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

Meaning of Internal Financial Controls over Financial Reporting

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

Inherent Limitation of Internal Financial Controls over Financial Reporting

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

Opinion

In our opinion, the company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31^st 2018, based on the internal control over financial reporting criteria established by the company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.

For P. Murali& Co,

Chartered Accountants,

FRN No: 007257S

A Krishna Rao

Place: Hyderabad Partner

Date: 28.05.2018 M.No:020085

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Mar 31, 2016

TO THE MEMBERS OF MADHUCON PROJECTS LIMITED Report on the Financial Statements

We have audited the accompanying financial statements of MADHUCON PROJECTS LIMITED (“the Company”), which comprise the Balance Sheet as at March 31, 2016, the Statement of Profit and Loss, the Cash Flow Statement for the year then ended and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Financial Statements

The Company''s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (“the Act”) with respect to the preparation and presentation 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 principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 (as amended). This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the 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 have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under. We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatements. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company''s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by the Company''s directors, as well as evaluating the overall presentation of the financial statements.

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

Opinion

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

Emphasis of Matters

We draw attention to the following matter in the Notes to the accompanying financial statements for the year ended March 31, 2016:

a. Note No. 2.12(iii) to the financial statements, in relation to Madhucon Mega Mall Private Limited (MMMPL) a subsidiary of the company incorporated for developing shopping mall cum multiplex on leased land taken from Andhra Pradesh Housing Board(the Board) (now known as Telangana Housing Board) at Kukatpally in Hyderabad. The Board issued letter for revoking the power of attorney and resumption of land due to non completion of the project within the time. The Company got a status quo order from Honorable XI ACJ Court, CCC, Hyderabad and the same is pending. Taking in to account the management internal assessment and legal opinion obtained by the management of the Company, it is confident in succeeding the case and carrying values of investments in and loans sanctioned to MMMPL are realizable at the values stated in the books of accounts. According to the books of accounts and information and explanations given to us, the closing balance as at March 31, 2016 is Rs.3633.80 Lakhs.

b. Note No. 2.12(iv) to the financial statements indicates that the outstanding loans and advances which were granted to Nama Investments Limited and NNR Infra Investments Private Limited in which the company''s directors have significant influence and are realizable at the carrying values in the books of accounts though both these companies have been incurring losses and accumulated losses exceeded the net worth of these companies for the reasons stated therein.

According to the books of accounts and information and explanations given to us, the closing balance as at March 31, 2016 with respect to Nama Investments Limited and NNR Investments Limited are Rs.3886.45 Lakhs and Rs.473.34 Lakhs respectively.

c. Note No. 2.12(vii) to the financial statements, in relation to the carrying value of investments held in and unsecured loans and advances given by the Company to the subsidiaries or associates listed in that note, which have been incurring losses and in some of these companies, net worth was fully or substantially eroded. Taking the management''s internal assessment and initiatives to be implemented to improve the profitability in the medium to long run into account, the management of the Company is of the view that carrying value of the investments and loans and advances are realizable at the value stated in the books.

As per the books of accounts and according to information and explanations given to us, the Company has granted interest free loans and advances during the year to these companies is Rs.24039.95 lakhs and closing balances against these loans and advances as at March 31, 2016 are aggregating to Rs.72854.13 lakhs.

Report on Other Legal and Regulatory Requirements

1. As required by the companies (Auditor''s Report) Order, 2016 (“the Order”) issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in the Annexure- A, a statement on the matters specified in the paragraph 3 and 4 of the Order.

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

(a) we have sought and obtained all the information and explanations which to the best 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 dealt with by this report are in agreement with the books of account;

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

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

(f) with respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectives of such controls, refer to our separate report in ‘Annexure-B''; and

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

i. the Company has disclosed the impact of pending litigations if any on its financial position in its financial statements;

ii. the Company has made provision, as required under the applicable law or accounting standards for material foreseeable losses, if any, on long-term contracts including derivative contracts; and

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

Referred to in our Audit Report to the members of the Company on the financial statements for the year ended 31^st March 2016, we report that:

TO THE MEMBERS OF MADHUCON PROJECTS LIMITED

(i) (a) The Company has maintained proper records showing full particulars including quantitative details of Fixed Assets.

(b) All the assets have been physically verified by the management during the year, which in our opinion is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification.

(c) According to the information and explanations given to us and on the basis of our examination of the records of the Company, the title deeds of immovable properties are held in the name of the Company.

(ii) The physical verification of inventory has been conducted at reasonable intervals by the management. The Company is maintaining proper records of inventory and any discrepancies noticed on physical verification are being properly dealt in the books of accounts.

(iii) According to information and explanations given to us, the Company has granted loans to 30parties covered in the register maintained under section 389 of the Act. Out of which 8 parties have been granted interest free loans. (a), (b) & (c) Since the repayment schedule for such loans is not stipulated, we are unable to comment on the regularity of receipt of principal and interest as well as the adequacy of steps taken to recover the amount.

(iv) In our opinion, and according to Information and explanations given to us, the Company has complied with the provisions of section 385 and 386 of the Act to the extent applicable, in respect of loans, investments, guarantees and security.

(iv) According to the information and explanations given to us, the Company has not accepted deposits from the public and therefore, the provisions of Sections 73 to 76 or any other relevant provisions of the Act and Rules there under are not applicable to the Company.

(v) We have broadly reviewed the books of account maintained by the Company pursuant to the Rules made by the Central Government for the maintenance of cost records under sub-section (3) of Section 348 of the Act in respect of Company''s products and services and are of the opinion that, prima facie, the prescribed accounts and records have been made and maintained. We have however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

(vi) a) According to the information and explanations given to us, and on the basis of our examination of the records of the Company, undisputed statutory dues including Provident Fund, Sales tax, Service tax, duty of customs, duty of excise, value added tax, cess and all other statutory dues have been generally regularly deposited with the appropriate authorities except the following:

Name of the Statute	Nature of Dues	Period	Rs. in Lacs
The Income Tax Act, 3963	Dividend Distribution Tax & Interest there on	2033-32 to 2035-36	78.32
The Building and other Construction workers welfare Cess Act, 3996	LabourCess	203 3 -3 2	343.28
Professional Tax	P T Payable	203 3-32 to 2035-36	43.88
The Employees Provident funds and Miscellaneous provision act 3952	Provident Fund	2032-33 to 2035-36	364.34
Sales Tax	Sale Tax payable	2033-34 to 2035-36	390.47
Works Contract Tax	Works Contract Tax	2034-35 to 2035-36	293.98
The Income Tax Act, 3963	Tax Deducted at Source & Interest there on	2035-36	438.93

(b) According to the information and explanations given to us, there are no dues of Income tax, Wealth tax, Sales tax, duty of customs, duty of excise which have not been deposited on account of any dispute, except the following:

Nature of Duty	Dispute pending before	Period	Rs. In Lacs
Income Tax	CIT (Appeals), Hyderabad	2009-10to 2012-13	8701.82
Sales Tax	Hon''ble High Court	2001 to 2005 & 2009-10	5795.52
Entry Tax	Hon''ble Supreme Court	2006-07, 2007-08, 2009-10 & 2010-11	629.11

(vii) Based on the examination of books of accounts and related records and according to the information and explanations given by the management, the company has defaulted in repayment of dues to financial institutions and banks during the year, as follows:

Delay in Interest payments: Amount in Rs. Lakhs

Name of the Bank	0 to 30 days	31 to 60 days	61 to 90 days	91 to 180 days	181 and above days
Axis Bank	128.48	77.71	26.03	0	0
Bank of India	125.42	96.13	98.40	29.32	0
ICICI Bank	1389.51	567.80	435.03	0	0
IDBI Bank	672.52	0	0	0	0
ING Vysya Bank	222.11	202.95	180.00	181.05	0
Oriental Bank of Commerce	263.49	163.76	110.26	59.07	0
Standard Chartered Bank	26.67	0	0	0	0
State Bank of India	326.11	328.57	217.97	0	0
United Bank of India	2.87	5.44	0	4.35	193.52
Name of the Financial Institution
Magma Fincorp Limited	0	0.29	0.05	3.72	14.08
SREI Equipment Finance Ltd.	222.98	150.08	168.38	443.10	33.23

Delay in Principal repayments: Amount in Rs. Lakhs

Name of the Bank	0 to 30 days	31 to 60 days	61 to 90 days	91 to 180 days	181 and above days
ICICI Bank	526.74	533.77	1439.49	0	0
Name of the Financial Institution
Magma Fincorp Limited	0	9.65	0	0	19.59
SREI Equipment Finance Ltd.	278.64	359.04	357.35	1067.63	91.70

The Company has repaid all the above dues on or before 31^st March, 2016 except for an amount of Rs.846.34 lakhs and 853.16 Lakhs pertaining to Interest and principal respectively.

(viii) During the year, no monies were raised by way of public offer or further public offer and as per information and explanations given to us, term loans were applied for the purpose for which they were obtained.

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

(x) As per the information and explanations given to us, managerial remuneration provided are in accordance with approvals mandated by the provisions of section 197 of the Act.

(xi) In our opinion the company is not a chit fund or a nidhi company or mutual benefit fund / society. Accordingly, para 3(xii) of the Order is not applicable.

(xii) As per the explanations and information given to us, transactions with the related parties are in compliance with sections 177 and 188 of the Act, where applicable and the details have been disclosed in the Financial Statements etc., as required by the applicable accounting standards.

(xiii) According to the information explanations given to the company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year.

(xiv) According to the information and explanations given to us and based on our examination of the records of the Company, the Company has not entered into any non cash transactions with directors or persons connected with him during the year. Accordingly, paragraph 3(xv) of the Order is not applicable.

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

For Kota & Company

Chartered Accountants

Firm''s Registration Number: 011982S

K. S. R. K. Prasad

Partner

Membership Number: 022964

Place: Hyderabad

Date :30.05.2016

---

Mar 31, 2015

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

MANAGEMENT'S RESPONSIBILITY FOR THE STANDALONE FINANCIAL STATEMENTS

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

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

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

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

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

OPINION

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

EMPHASIS OF MATTER

We draw attention to the following matter in the Notes to the accompanying financial statements for the year ended March 31, 2015:

1. Note No. 2.11(i) to the financial statements, in relation to the carrying value of investments held and unsecured loans and advances given by the Company in the subsidiaries or associates listed in that note, which have been incurring losses and in some of these companies, net worth was fully or substantially eroded. Taking into account the management's internal assessment and initiatives to be implemented to improve the profitability in the medium to long run, the management of the Company is of the view that the carrying value of the investments and loans and advances are realisable at the value stated in the books. As per the books of accounts and according to the information and explanation given to us, the Company has granted interest free loans and advances to these companies aggregating to Rs. 19646.83 lakhs and closing balances against these loans and advances as at March 31, 2015 are aggregating to Rs.52219.43 lakhs.

2. Note No. 2.11(ii) to the financial statements, regarding the carrying value of loans and advances given by the Company to Vijayawada Machilipatnam Expressways Limited (VMEL), a step down subsidiary though the Concession Agreement of that company with National Highways Authorities of India (NHAI) was terminated by NHAI, and the auditors of VMEL expressed significant doubt on company's ability to continue as a going concern, the management is confident that the carrying value stated in the books of account is realisable for the reasons mentioned in that note. According to the books of accounts, the carrying amount of loans and advances due from VMEL as at March 31, 2015 is Rs.1224.33 lakhs.

3. Note No. 2.11(iii) to the financial statements in relation to Madhucon Mega Mall Private Limited (MMMPL) a subsidiary of the Company incorporated for developing shopping mall cum multiplex on leased land taken from Andhra Pradesh Housing Board (the Board) (now known as Telangana Housing Board) at Kukatpally in Hyderabad. The Board issued letter for revoking the power of attorney and resumption of land. The Company got a status quo order from court and the case is pending in that court. Taking in to account the management internal assessment and legal opinion obtained, management of the Company is confident in succeeding the case and carrying values of investment in and loans sanctioned to MMMPL are realisable at the values stated in the books of accounts. According to the books of accounts and as per the information and explanations given to us, during the year the Company has granted an interest free unsecured loan amounting to Rs.121.25 lakhs and the closing balance as at March 31, 2015 is Rs.3633.65 lakhs in MMMPL.

4. Note No. 2.11(iv) to the financial statements, indicates that the outstanding loans and advances which were granted to Nama Investments Limited and NNR Infra Investments Private Limited in which the Company's directors have significant influence are realisable at the carrying values in the books of accounts though both these companies have been incurring losses and accumulated losses exceeded the net worth of these companies for the reasons stated in that note. According to the books of accounts and as per the information and explanations given to us the closing balances of these unsecured loans and advances as at March 31, 2015 are Rs. 3899.35 lakhs Rs.438.65 lakhs respectively (including interest thereon). Both these companies have invested in the shares of Madhucon Projects Limited.

Our opinion is not modified in respect of the above matters.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

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

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

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

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

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

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

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

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

(i) The Company has disclosed the impact of pending litigations on its financial position in its financial statements.

(ii) The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, and as required on long-term contracts including derivative contracts.

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

ANNEXURE TO THE INDEPENDENT AUDITORS' REPORT

Referred to in paragraph 1 under the heading of "Report on Other Legal and Regulatory Requirements" of our report of even date:

To the Members of Madhucon Projects Limited

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

(b) All fixed assets have been physically verified by the management during the year, but there is a regular programme of verification which, in our opinion is reasonable having regard to the size of the company and the nature of its assets. No material discrepancies have been noticed on such verification.

(ii) (a) The management has conducted physical verification of inventory at reasonable intervals during the year, in our opinion, the frequency of verification is reasonable.

(b) In our opinion and according to the information and explanations provided to us, the procedure 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 is maintaining proper records of inventories. As explained to us, there were no material discrepancies noticed on physical verification of inventories as compared to the book records.

(iii) The Company has granted unsecured loans to 4 parties covered in the register maintained under section 189 of the Act.

(a) & (b) Since the repayment schedule for such loans is not stipulated, we are unable to comment on the regularity of receipt of principal and interest as well as the adequacy of steps taken to recover the amount.

(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 it's business with regard to purchase of inventory, fixed assets and with regard to sale of goods and services. During the course of our audit, we have not observed any continuing failure or major weaknesses in internal controls.

(v) In our opinion and according to the information and explanations given to us, the Company has not accepted deposits from the public and therefore, the provisions of Sections 73 to 76 or any other relevant provisions of the Act and Rules there under are not applicable to the Company.

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

(vii) a) According to the information and explanations given to us, and on the basis of our examination of the records of the Company, undisputed statutory dues including Provident Fund, Employee State Insurance, Income tax, Sales tax, Wealth tax, Service tax, duty of customs, duty of excise, value added tax, cess and all other statutory dues have not been regularly deposited with the appropriate authorities and there have been significant delays in payments. According to the information and explanations given to us, undisputed amounts payable in respect of aforesaid dues were in arrears as at March 31, 2015 for a period of more than six months from the date they became payable are as follows:

S. Rs. In Name of the Statue Nature of Dues Period No. Lacs

1 The Income Tax Act, 1961 Income Tax 2013-14 to 2014-15 371.55

2 The Income Tax Act, 1961 Dividend Tax 2011-12 to 2013-14 40.99

The Building and Other Construction Workers' 3 Welfare Cess Act, 1996 Labour Cess 2011-12 343.28

The Employees' Provident Funds and Miscellaneous 4 Provisions Act, 1952 Provident Fund 2012-13 to 2014-15 217.54

5 The Finance Act, 1994 Service Tax 2013-14 to 2014-15 193.21

6 Sales Tax Sales Tax Payable 2013-14 to 2014-15 340.17

Professional 7 Professional Tax Tax Payable 2011-12 to 2014-15 36.74

b) According to the information and explanations given to us, there are no dues on account of any dispute payable in respect of Income tax, Wealth tax, Sales tax, duty of customs, duty of excise, value added tax and cess except the following:

S. Nature of Forum Period Rs. In Lacs No. Dues

CIT (Appeals), 1 Income Tax Hyderabad 2009-10 to 2012-13 8,701.82

2 Sales Tax Hon'ble High Court 2001 to 2005 & 2009-10 5,795.52 2006-07 , 2007-08,

3 Entry Tax Hon'ble Supreme Court 2009-10 & 2010-11 629.11

c) According to the information and explanations given to us, there is no delay in transfer of funds to Investor Education and Protection Fund.

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

(ix) The details of principal and interest not paid on due dates i.e. the last dates specified in loan documents to the financial institutions and banks during the year are as follows.

Principal Amount Interest Amount Delay in days (Rs. Lakhs) (Rs. Lakhs)

0 to 30 12833.00 2603.29

31 to 60 1963.80 1917.46

61 to 120 1175.87 1071.12

121 to 180 0.97 40.71

181 and above 848.33 -

Out of the above an amount of Rs.11297.10 lakhs towards principal amount and an amount of Rs.5298.13 lakhs towards interest amount was paid before 31st March, 2015

(x) According to the information and explanations given to us, the Company has given guarantee for loans taken by others from banks or financial institutions and the terms and conditions are prima-facie not prejudicial to the interest of the company.

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

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

For Kota & Company

Chartered Accountants

ICAI Firm Regn. No. 011982S

K.S.R.K.Prasad

Partner

Membership Number: 022964

Place : Hyderabad

Date : May 30, 2015

---

Mar 31, 2014

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

Management''s Responsibility for the Financial Statements:

The Company''s Management is responsible for the preparation of these financial statements that give 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") read with the General Circular 15/2013 dated 13th September 2013 of the Ministry of Company Affairs in respect of Section 133 of the Companies Act 2013 and in accordance with the accounting principles generally accepted in India. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

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 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 statement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the Companies internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

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

Opinion

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

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

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

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

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2003, ("the Order) issued by Central Government of India in terms of sub-section (4A) of Section 227 of the Act, we enclose 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 purpose of our audit;

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

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

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

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

Referred to in paragraph 1 under the heading of "Report on Other Legal and Regulatory

Requirements" of our report of even date:

(i) (a) The Company has maintained proper records showing full particulars including quantitative details of Fixed Assets.

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

(c) During the year, the company has not disposed any substantial part of fixed assets.

(ii)

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

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

(c) The Company is maintaining proper records of inventories. As explained to us, there was no material discrepancies noticed on physical verification of inventories as compared to the book records.

(iii) a) According to the information and explanations given to us, the Company has granted loans to four companies covered in the register maintained under section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs. 10,594.64 lakhs and the year-end balance of loans granted to such parties was Rs.10,594.64 lakhs.

(b) In our opinion and according to the information and explanations given to us, the rate of interest on which the unsecured loan has been granted is prima facie not prejudicial to the interest of the Company. Since the company has not entered into a formal agreement for loans given, we are not in a position to comment whether the other terms and conditions on which the loans are granted are prima facie not prejudicial to the interests of the Company.

(c) & (d) Since the repayment schedule for such loans is not stipulated, we are unable to comment on the regularity of receipt of principal and interest payment as well as the adequacy of steps taken to recover the amount.

(e) According to the information and explanations given to us, the Company has taken loan from one company covered in the register maintained under section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs.4,054.19 lakhs and the year-end balance of loans taken from such party was Rs.3,954.19 lakhs.

(f) In our opinion and according to the information and explanations given to us, the rate of interest on which the unsecured loan has been obtained is prima facie not prejudicial to the interest of the Company. Since the company has not entered into a formal agreement for loans taken, we are not in a position to comment whether the other terms and conditions on which the loans are taken are prima facie not prejudicial to the interests of the Company.

(g) Since the repayment schedule for such loans is not stipulated, we are unable to comment on the regularity of repayment of principal and interest payment.

(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 it''s business with regard to purchase of inventory, fixed assets and with regard to sale of goods. During the course of our audit, we have not observed any continuing failure or major weaknesses in internal controls.

(v) According to the information and explanations given to us, the transactions made in pursuance of contracts or agreements entered in the register maintained under Sec. 301 of the Act and exceeding the value of Rs. 5 lakhs in respect of any party during the year have been made at price which are reasonable having regard to prevailing market price 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 and therefore, the provisions of Section 58A and 58AA or any other relevant provisions of the Act and Rules there under are not applicable to the Company.

(vii) In our opinion, the Company has an internal audit system which needs to be improved so as to commensurate with the size and nature of it''s business.

(viii) We have broadly reviewed the books of account maintained by the Company pursuant to the Cost Accounting Record Rules 2011 prescribed by the Central Government under Section 209(1) (d) of the Companies Act and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. We have however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

(ix) a) According to the information and explanations given to us, and on the basis of our examination of the records of the Company, amounts deducted/accrued in the books of account in respect of applicable undisputed statutory dues including Provident Fund, Income tax, Sales tax, Wealth tax, Seivice tax, professional tax and other materia! statutory dues have not been regularly deposited with the appropriate authorities and there have been significant delays in payments. According to the information and explanations given to us, undisputed amounts payable in respect of aforesaid dues outstanding for more than six months from the date they became payable as at 31st March 2014 are as follows:

Statement of Arrears of Statutory Dues Outstanding for More than Six Months:

Amount (Rs. Period to which Name of the Statute Nature of dues Lakhs) the amount relates

Provident Fund Employee & 124.67 2011-2014 Employer Contribution

Professional Tax Of Employees 27.43 2011-2014

Income Tax TDS 133.73 2013-2014

ServiceTax Service Tax 254.86 2013-2014

VAT VAT 71.08 2013-2014

Income Tax Dividend Tax 25.83 2013-2014

b) According to the information and explanations given to us, disputed statutory dues that have not been deposited on account of disputed matters pending before appropriate authorities are as under.

Name of the Amount Period to which Forum where Statute (Rs. Lakhs) it relates dispute is Pending 2001-02 to 2004-05 Sales Tax 5,795.52 & 2009-10 Hon''ble AP High Court

2006-07, 2007-08, Hon''ble Rajastan Entry Tax 629.11 2009-10 & 2010-11 High Court

Income Tax 6,621.52 2009-10 AY to CIT (Appeals), 2011-12 AY Hyderabad

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

(xi) The details of principal and interest not paid on due dates i.e. the last dates specified in loan documents to the Financial Institutions and Banks during the year are as follows:

Delay in days Principal Amount Interest Amount (Rs. Lakhs) (Rs. Lakhs)

0 to 30 2812.25 4302.40

31 to 60 1718.06 1993.54

61 to 120 6870.02 1422.42

121 to 180 3420.61 221.17

181 to 278 2122.72 10.74

Out of these dues, an amount of Rs. 6,690.56 lakhs and Rs.5,798.77 lakhs pertaining to principal and interest respectively have been paid before 31st March, 2014. Rs. 6,848.58 lakhs of principal and Rs. 1,141.39 lakhs of interest was restructured before 31st March, 2014

(xii) The Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

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

(xiv) According to the information and explanations given to us, the company is not dealing in or trading in shares securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Companies (Auditor''s Report) Order, 2003 are not applicable to the company

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

(xvi) Based on the examination of the books of account, term loans were applied for the purpose for which the loans were obtained.

(xvii) According to the information and explanations given to us and on an overall examination of the balance sheet of the company, we report that the Company has used funds raised on short-term basis for long-term investment.

(xviii) According to the information and explanations given to us, the Company has not made preferential allotment of shares during the period under audit.

(xix) According to the information and explanations given to us during the period covered by our audit report, the company has not issued debentures.

(xx) According to the information and explanations given to us during the period covered by our audit report, the company had not raised money by public issue.

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

For Kota & Company Chartered Accountants Firm Registration Number : 011982S

K. Siva Rama Krishna Prasal PARTNER Membership Number: 022964

Date : 30/05/2014 Place: Hyderabad

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Mar 31, 2013

Report on Financial Statements:

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

Management''s Responsibility for the Financial Statements:

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

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 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 auditors'' judgment, including the assessment of the risks of material misstatement of the financial statement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

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

Opinion

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

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

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

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

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2003, ("the Order) issued by Central Government of India in terms of sub-section (4A) of Section 227 of the Act, we enclose 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 purpose of the audit;

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

c. the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt with the books of account;

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

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

Annexure to the Independent Auditor''s Report

Referred to in Paragraph 1 under the heading of "Report on Other Legal and Regulatory Requirements" of our report of even date:

To the Members of Madhucon Projects Limited.

(i) In respect of its fixed assets:

(a) The Company is maintaining proper records to show full particulars including quantitative details and situation of fixed assets.

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

(c) During the year, the company has not disposed any substantial part of fixed assets so as to affect the going concern.

(ii) In respect of its inventories:

(a) As explained to us, the inventories have been physically verified during the year by the management. In our opinion, the frequency of verification is reasonable.

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

(c) In our opinion and according to the information and explanations given to us, the Company is maintaining proper records of inventories. As explained to us, there were no material discrepancies noticed on physical verification of inventories as compared to the book records.

(iii) (a) According to the information and explanations given to us, the Company has granted loans to eight companies covered in the register maintained under section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs.13,366.36 lakhs and the year-end balance of loans granted to such parties was Rs.13,366.36 lakhs.

(b) In our opinion and according to the information and explanations given to us, the rate of interest on which the unsecured loan has been granted is prima facie not prejudicial to the interest of the Company. Since the company has not entered into a formal agreement for loans given, we are not in a position to comment whether the other terms and conditions on which the loans are taken are prima facie not prejudicial to the interests of the Company.

(c) & (d) Since the repayment schedule for such loans is not stipulated, we are unable to comment on the regularity of receipt of principal and interest payment as well as the adequacy of steps taken to recover the amount.

(e) The company has not taken loans from parties covered in the register maintained under section 301 of the Companies Act, 1956 and hence sub-clauses (f) and (g) 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, fixed assets and with regard to sale of goods. During the course of our audit, we have not observed any continuing failure or major weaknesses in internal controls.

(v) According to the information and explanations given to us, the transactions made in pursuance of contracts or agreements entered in the register maintained under Sec. 301 of the Companies Act and exceeding the value of Rs. 5 lakhs in respect of any party during the year have been made at price which are reasonable having regard to prevailing market price 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 and therefore, the provisions of Section 58A and 58AA or any other relevant provisions of the Companies Act, 1956 and Rules there under are not applicable to the Company.

(vii) In our opinion, the Company has an internal audit system which needs to be improved so as to commensurate with the size and nature of its business.

(viii) We have broadly reviewed the books of account maintained by the Company pursuant to the Cost Accounting Record Rules 2011 prescribed by the Central Government under Section 209(1) (d) of the Companies Act and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. We have however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

(ix) a) According to the information and explanations given to us and on the basis of our examination of the records of the Company, amounts deducted/accrued in the books of account in respect of applicable undisputed statutory dues including provident fund, income-tax, sales-tax, wealth tax, service tax, professional tax, customs duty, excise duty, cess have not been regularly deposited with the appropriate authorities and there have been significant delays in payments. According to the information and explanations given to us, undisputed amount payable in respect of statutory dues out standing for more than six months as at 31st March 2013 are as follows:

(x) In our opinion, the Company has no accumulated losses at the end of the financial year. The Company has not incurred cash loss in the current financial year or immediately preceding financial year.

(xi) Based on the examination of the books of account and related records and according to the information and explanations provided to us, the Company has defaulted in repayment of dues to the banks in some cases.Period and amountof default existing at the balance sheet date are as follows:

(xii) The Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

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

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

(xv) According to the information and explanations given to us, the Company has given guarantee for loans taken by others from banks or financial institutions. In our opinion, the terms and conditions are not prejudicial to the interest of the Company.

(xvi) According to the information and explanations given to us, term loans raised during the year have been applied for the purposes for which they were raised.

(xvii) According to the information and explanations given to us and on an overall examination of the balance sheet of the company, we report that the company has used part of funds raised on short-term basis for long-term investment.

(xviii) According to the information and explanations given to us, the Company has not made preferential allotment of shares to a company covered in the register maintained under Section 301 of the Companies Act, 1956.

(xix) According to the information and explanations given to us during the period covered by our audit report, the company has not issued debentures.

(xx) According to the information and explanations given to us during the period covered by our audit report, the company had not raised money by public issue.

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

For Kota & Company

Chartered Accountants

Firm Registration Number : 011982S

K.Siva Ramakrishna Prasad

PARTNER

Membership Number: 022964

Place : Hyderabad

Date : 30.05.2013

---

Mar 31, 2012

(1) We have audited the attached Balance Sheet of Madhucon Projects Limited ("the Company") as at 31st March, 2012, and the Statement of Profit and Loss and Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

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

(4) Further to our comments in the Annexure referred to in paragraph 3 above, we report that:

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

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

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

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

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

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

a) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2012; and

(b) in the case of the Statement of Profit and Loss, of the loss 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.

Annexure to the Auditor's Report

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

(i) In respect of its fixed assets:

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

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

(c) According to the information and explanations given to us, no substantial part of the fixed assets has been disposed off during the year to affect the going concern aspect.

(ii) In respect of its inventory:

(a) As explained to us, the inventory has been physically verified during the year by the management. In our opinion, the frequency of verification is reasonable.

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

(c) In our opinion and according to the information and explanations given to us, the Company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book records were not material.

(d) The Company has reasonable system of authorization at proper levels and an adequate system of internal control commensurate with the size of the Company and the nature of its business on issue of stores and allocation of stores and labour of jobs.

(iii) (a) According to the information and explanations provided to us, the Company has granted unsecured loans aggregating Rs.4383.50 lakhs to 7companies during the year covered in the register maintained under section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs.17552.65 lakhs (11 parties) and the year end balance of the loans granted to such parties was Rs.16896.91lakhs (11 parties).

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

(c) & (d) According to the information and explanations given to us, the principle and interest are payable on demand and there is no repayment schedule and hence we are unable to comment on the regularity of receipt/ repayment of principal and interest payment.

(e) According to the information and explanations given to us, the Company has not taken loan, secured or unsecured from companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956 and accordingly, paragraphs (iii) (e), (f) and (g) of CARO are not applicable.

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

(v) (a) According to the information and explanations given to us, we are of the opinion that the particulars of all 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 explanation given to us, the transactions made in pursuance of contracts or arrangements entered in the Register maintained u/s 301 of the Companies Act, 1956 and exceeding the value of Rs. 5,00,000 in respect of each party during the year, have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time as per the information available with the Company.

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

(vii) In our opinion, internal audit system of the Company needs to be improved so as to commensurate with the size and nature of its business.

(viii) We have broadly reviewed the books of account maintained by the Company pursuant to the Cost Accounting record Rules 2011 prescribed by the Central Government under section 209(1d) of the Companies act,1956 and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

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

(b) According to the information and explanations given to us, no significant undisputed amounts payables in respect of income tax, sales tax, wealth tax, service tax, customs duty and excise duty were in arrears, as at 31st March 2012for a period of more than six months from the date they became payable.

(c) According to information and explanation given to us and the 022964records of the Company examined by us, there are no dues on account of Income Tax, Sales Tax, Customs Duty, Excise Duty Cess and other statutory dues as at 31st March 2012, which have not been deposited on account of dispute except the following:

S. No. Nature of due Amount (Rs. in lakhs) Period From where dispute is pending

1 Income Tax 7244.20 2000-01 to Appeal with ITAT, Hyderabad 2007-08

2. Sales Tax 974.03 Demand raised Appeal pending with in 2004-05 Hon'ble High Court of AP.

(x) In our opinion, the Company doesn't have any accumulated losses andalso there are no cash losses during the financial year covered by our audit due to commercial operations.

(xi) According to the information and explanations given to us, the Company has defaulted in repayment of dues to a financial institutions and banks. Details are as follows:

Amount of Default Rs. in Lakhs Period of Delays in days (as at 31.03.2012)

Principal Interest

498.87 153.08 01-30

40.46 8.40 31-60

(xii) The Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

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

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

(xv) The Company has given guarantees for loans taken by others from banks or financial institutions. In our opinion and according to the information and explanations given to us, the terms and conditions are not prejudicial to the interest of the Company.

(xvi) In our opinion, and according to the information and explanations given to us the term loans have been applied for the purposes for which they were obtained.

(xvii) According to the information and explanations given to us, no short-term borrowings have been used for long-term investments.

(xviii) According to the information and explanations given to us, the Company has not made preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Act.

(xix) According to the information and explanations given to us during the period covered by our audit report, the Company had not issued debentures.

(xx) According to the information and explanations given to us during the period covered by our audit report, the Company had not raised money by public issue.

(xxi) According to the information and explanations given to us, no fraud was reported on or by the Company.

For KOTA & COMPANY

Chartered Accountants

FRN 011982S

Place : Hyderabad K.S.R.K.Prasad

Date : 28.08.2012 PARTNER

M.No. 022964

---

Mar 31, 2011

(1) We have audited the attached balance sheet of Madhucon Projects Limited, as at 31st March 2011, the profit & loss account and also the cash flow statement for the year ended on that date annexed thereto. These Financial Statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

(3) As required by the Companies (Auditor's Report) Order, 2003 issued by the Central Government In terms of Sub-Section (4A) of Section 227 of the Companies Act, we enclose in the Annexure a Statement on the matters specified in paragraphs 4 and 5 of the said order.

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

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

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

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

(iv) In our opinion, the balance sheet, profit and loss account and cash flow statement dealt with by this report comply with the Accounting Standards referred to in Sub-Section (3C) of section 211 of the Companies Act.

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

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

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

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

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

Annexure to the Auditor's Report (As referred to in paragraph 3 of our report of even date)

1. In respect of fixed assets:

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

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

(c ) During the year, the company has disposed few items of machinery. According to the information and explanations given to us we are of the opinion that the sale of the said part of plant and machinery has not affected the going concern status of the company.

2. In respect of its inventories:

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

(b) The Procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the company and the nature of its business.

(c ) The company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book records were not material.

(d) The company has a reasonable system of authorization at proper levels and an adequate system of internal control commensurate with the size of the company and the nature of its business on issue of stores and allocation of stores and labour of jobs.

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

(a) The company has granted unsecured loans to companies, firms & other parties covered In the register maintained under Section 301 of the Act. The number of parties are 14 (Fourteen) and the amount involved is Rs. 517069.40 lakhs.

(b) The rate of interest and other terms and conditions of the above loans are not prima facie, prejudicial to the interest of the company.

(c ) The principle and interest are payable on demand and there is no repayment schedule.

(d) In respect of the said loans, the same are repayable on demand and therefore the question of overdue does not arise.

(e) The Company has taken loans during the year from companies, firms or other parties covered in the register maintained under section 301 of The Companies Act 1956. The same are repayable on demand. The rate of interest and other terms and conditions are not prima facie prejudicial to the interest of the Company. The number of parties are (1) and the maximum out standing balance during the year is and the year end balance is Rs. 2112 lakhs.

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 nature of its business with regard to purchase of inventory, fixed assets and with regard to the sale of goods and services.

5. In respect of contracts or arrangements referred to in Section 301 of the Companies Act, 1956.

(a) According to information and explanation given to us, we are of the opinion that the transactions that need to be entered in to the register maintained u/s 301 of the companies Act, 1956 have been so entered.

(b) In our opinion and according to the information and explanation given to us, the transactions made in pursuance of contracts or arrangements entered in the Register maintained u/s 301 of the Companies Act, 1956 and exceeding the value of Rs. 5,00,000 in respect of each party during the year, have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time as per the information available with the Company.

6. The Company has not accepted any deposits from the public during the year.

7. In our opinion, the company has an adequate internal audit system commensurate with the size and nature of its business.

8. According to the information and explanations given to us the Central Government has not prescribed the maintenance of cost records under Section 209(1) (d) of the Companies Act for any of the products of the company.

9. In respect of statutory dues:

(a) The company has generally deposited with appropriate authorities undisputed Statutory dues including Provident Fund, Investor Education Protection Fund, Employee's State Insurance, Income Tax, Sales Tax, Wealth Tax, Customs Duty, Excise Duty, Cess and other material statutory dues applicable to it.

(b) According to the information and explanation given to us, no undisputed amounts payable in respect of Income Tax, Sales Tax. Customs Duty, Excise Duty and Cess were in arrears, as at 31.03.2011 for a period of more than six months from the date they became payable.

(c ) According to information and explanation given to us and the records of the Company examined by us, there are no dues on account of Income Tax, Sales Tax, Customs Duty, Excise Duty Cess and other statutory dues as at 31st March 2011, which have not been deposited on account of dispute except the following:

S. No. Nature of due Amount (in lakhs) Period From where dispute is pending

1 Income Tax 4279.56 2000-01 to Second appeal to be filed with ITAT, 2008-09 Hyderabad

2. Sales Tax 974.03 Demand raised Appeal pending with Hon'ble High in 2004-05 Court of AP

10. The company does not have any accumulated losses and has not incurred any cash losses during the current financial year and immediately preceding financial period.

11. Based on the examination of the books of account and related records and according to the information and explanations provided to us, the company has not defaulted in repayment of dues to the banks.

12. The Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

13. In our opinion, the Company is not a Chit Fund/Nidhi/Mutual Benefit Fund/Society therefore, the provisions of clause (xiii) of paragraph 4 of the Order are not applicable to the Company.

14. The Company has maintained proper records of investments in shares, securities, debentures and others and timely entries have been made therein. All the investments have been held by the company in its own name.

15. According to the information and explanations given to us, the company has given guarantee for loans taken by others from bank or Financial Institutions:

Sl. No. Name of the Company Guarantee ( Rs. in lakhs) No. of Shares Pledged

1 Nama Hotels Private Limited 25293 13821000

2 Madurai - Tuticorin Expressways Ltd - 73454000

3 Madhucon Infra Limited 20000 -

16. The Company has raised new term loans during the year. The term loans outstanding at the beginning of the year and those raised during the year have been applied for the purposes for which they were raised.

17. Based on the examination of the books of account and related records and according to the information and explanations provided to us, the company has not utilized funds raised on short-term basis for long term investment and vice versa.

18. The company has not made any preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Companies Act, 1956.

19. The Company has not issued secured debentures during the year.

20. There are no shares issued during the said period under review.

21. According to the information and explanations given to us, no fraud on or by the company has been noticed or reported during the year. For KOTA & COMPANY

Chartered Accountants

FRN 011982S

K.S.R.K.Prasad

Place: Hyderabad PARTNER

Date: 30.08.2011 M.No. 022964

---

Mar 31, 2010

(1) We have audited the attached Balance Sheet of Madhucon Projects Limited (the "Company") as at 31st March 2010, the Profit & Loss Account and also the Cash Flow Statement for the year ended on that date annexed thereto. These Financial Statements are the responsibility of the companys management. Our responsibility is to express an opinion on these financial statements based on our audit.

(2) We conducted our audit in accordance with the Auditing Standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosure 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 (Auditors 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 of India (the "Act") 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 explanation given to us, we enclose in the Annexure a Statement on the matters specified in paragraphs 4 and 5 of the said order.

(4) Further to our comments in the Annexure referred to in paragraph 3 above, we report that:

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

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

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

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

(v) On the basis of written representations received from the Directors, as on 31st March 2010 and taken on record by the Board of Directors, none of the Directors is disqualified as on 31st March 2010 from being appointed as a Director in terms of clause (g) of Sub-Section (1) of the Section 274 of the Companies Act, 1956;

(vi) In our opinion and to the best of our information and according to the explanations given to us, the said 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 2010;

b) in the case of the Profit and Loss Account, of the profit for the ended on that date; and

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

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

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

(c) During the year, the company has disposed few items of machinery. According to the information and explanations given to us we are of the opinion that the sale of the said part of plant and machinery has not affected the going concern status of the company.

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

(b) The Procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the company and the nature of its business.

(c) The company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book records were not material.

(d) The company has a reasonable system of authorization at proper levels and an adequate system of internal control commensurate with the size of the company and the nature of its business on issue of stores and allocation of stores and labour of jobs.

(iii) (a) The company has granted unsecured loans to companies, firms & other parties covered In the register maintained under Section 301 of the Act. The number of parties are 3 (Three) and amount involved is Rs. 1735 Lakhs.

(b) The rate of interest and other terms and conditions of the above loans are not prima facie, prejudicial to the interest of the company.

(c) The company is regularly receiving principal amount and interest.

(d) The company has taken reasonable steps for recovery of principal and interest wherever 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 nature of its business with regard to purchase of inventory, fixed assets and with regard to the sale of goods.

(v) (a) According to information and explanation given to us, we are of the opinion that the transactions that need to be entered in to the register maintained u/s 301 of the companies Act, 1956 have been so entered.

(b) In our opinion and according to the information and explanation given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained u/s 301 of the Companies Act, 1956 in the receipt of any party during the year, have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

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

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

(viii) According to the information and explanations given to us the Central Government has not prescribed the maintenance of cost records under Section 209(1) (d) of the Companies Act for any of the products of the company.

(ix) (a) The company has generally deposited with appropriate authorities undisputed Statutory dues including Provident Fund, Investor Education Protection Fund, Income Tax, Sales Tax, Wealth Tax, Custom Duty, Excise Duty, Cess and other material statutory dues applicable to it.

(b) According to the information and explanation given to us, no undisputed amounts payable in respect of Income Tax, Wealth Tax, Sales Tax. Customs Duty, Excise Duty and Cess were in arrears, as at 31.03.2010 for a period of more than six months from the date they became payable.

(c ) According to information and explanation given to us and the records of the Company examined by us, there are no dues on account of Income Tax, Sales Tax, Customs Duty, Excise Duty Cess and other statutory dues as at 31st March 2010, which have not been deposited on account of dispute except the following:

S. No. Nature of due Amount (in lakhs) Period From where dispute is pending

1 Entry Tax 36.16 2002-03 STAT Hyderabad 2003-04

2. Sales Tax 974.03 2004-05 STAT Hyderabad

(x) The company does not have any accumulated losses and has not incurred any cash losses during the current financial year and immediately preceding financial period.

(xi) Based on the examination of the books of account and related records and according to the information and explanations provided to us, the company has not defaulted in repayment of dues to the banks.

(xii) The company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

(xiii) According to the information and explanations given to us, the company has given guarantee for loans taken by others from Bank or Financial Institutions:

Sl. No. Name of the Company Guarantee Pledge

(Rs. In lakhs) of Shares (nos)

1 Madhucon Sugars & Power Industries Limited 15145.00

2 PT Madhucon Indonesia 2825.61

3 Nama Hotel Private Limited 25293.00

4 Madhucon Agra Jaipur Expressways Ltd 31744000

5 TN DK Expressways Ltd. 38042000

6 Trichy Tanjavur Expressways Ltd 33000000

7 Madurai Tuticorin Expressways Ltd 73454000

8 Simhapuri Energy Pvt Ltd. 85180600

(xiv) Based on the examination of the books of account and related records and according to the information and explanations provided to us, the company has not utilized funds raised on short-term basis for long term investment and vice versa.

(xv) There are no shares issued during the said period under review.

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

For KOTA & COMPANY

Chartered Accountants

FRN 011982S

Place: Hyderabad K.S.R.K.Prasad

Date: 21.08.2010 PARTNER

M.No. 022964