Auditor Report of Pioneer Embroideries Ltd.

Mar 31, 2018

Report on the Standalone Financial Statements

We have audited the accompanying standalone financial statements of Pioneer Embroideries Limited (“the Company”), which comprise the Balance Sheet as at 31st March, 2018, the Statement of Profit & Loss, the Cash Flow Statement for the year then ended, and a summary of the significant accounting policies and other explanatory information.

Management’s Responsibility for the Standalone Financial Statements

The Company’s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (“the Act”) with respect to the preparation of these standalone financial statements that give a true and fair view of the state of affairs (financial position), profit or loss (financial performance including other comprehensive income), cash flows and changes in equity of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (“Ind AS”) specified under Section 133 of the Act., This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding 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 misstatement.

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

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

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India including Ind AS specified under Section 133 of the Act, of the state of affairs (financial position) of the Company as at 31st March, 2018, and its loss (financial performance including comprehensive income), its cash flows and the changes in equity for the year ended on that date.

Other Matter

The audited standalone financial statements for the year ended 31st March, 2017, was carried out and reported by M/s M B A H & CO, vide their unmodified audit report dated 29th May, 2017, whose report has been furnished to us by the management and which has been relied upon by us for the purpose of our audit of the standalone financial statements. Our audit report is not qualified in respect of this matter.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor’s Report) Order, 2016 issued by the Central Government in terms of Section 143(11) of the Act (hereinafter referred to the “Order”), and on the basis of such checks of the books and records of the Company as we considered appropriate and according to the information and explanations given to us, we give in the Annexure “A” a statement on the matters specified in paragraphs 3 and 4 of the Order.

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

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

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

(c) The Standalone Financial Statements dealt with by this Report are in agreement with the books of account.

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

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

(f) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate report in “Annexure B”.

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

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

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

iii. there is no amount that is required to be transferred to the Investor Education and Protection Fund by the Company.

iv. The disclosure requirements relating to holding as well as dealings in Specified Bank Notes were applicable for the period from 8th November, 2016 to 31st December, 2016, which are not relevant to these standalone financial statements. Hence, reporting under this clause is not applicable.

Annexure “A” to the Independent Auditors’ Report

Referred to in Paragraph 1 under Report on Other Legal and Regulatory Requirements, of the Independent Auditors’ Report of even date to the members of Pioneer Embroideries Limited on the standalone financial statements for the year ended 31st March, 2018.

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

b) As explained to us, fixed assets, according to the practice of the Company, are physically verified by the management in accordance with the phased verification program, which, in our opinion, is reasonable having regards to the size of the Company and the nature of its fixed assets. No material discrepancies have been noticed on such verification.

c) The title deeds of immovable properties, as disclosed in Note 3 on fixed assets to the financial statements, are held in the name of the Company, except for leasehold land and building acquired pursuant to the scheme of merger, having a carrying value of Rs.60.24 lakhs as at 31st March, 2018.

ii. The physical verification of inventory excluding stocks with third parties has been conducted at reasonable intervals by the management. In respect of inventory lying with the third parties, these have substantially been confirmed by them. The discrepancies noticed on physical verification of inventory as compared to book records were not material and have been appropriately dealt with in the books of the Company.

iii. As per the information and explanation given to us and the records produced before us for verification, the Company has granted unsecured loans to two companies covered in the register maintained under Section 189 of the Act.

a) In respect of the aforesaid loans, the terms and conditions under which such loans were granted are not prejudicial to the Company’s interest except that these loans are interest free.

b) As explained to us, receipt of principal amount is on demand basis and there is no fixed repayment schedule.

c) There is no overdue amount as these loans are on demand basis.

iv. In our opinion and according to the information and explanations given to us, the Company has complied with the provisions of section 185 and 186 of the Act in respect of the loans, investments, guarantees, and securities except that such loans are given interest free.

v. In our opinion and according to the information and explanations given to us, the Company has not accepted deposits, in terms of directives issued by the Reserve Bank of India and the provisions of Sections 73 to 76 or any other relevant provisions of the Act and the rules framed there under.

vi. We have broadly reviewed the books of accounts maintained by the Company in respect of products where, pursuant to Rules made by the Central Government of India, the maintenance of cost records has been prescribe under sub-section (1) of section 148 of the Act, and are of 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 and complete.

vii. a) According to the information and explanations given to us, the Company is generally regular in depositing undisputed statutory dues including provident fund, employees’ state insurance, income-tax, sales-tax, service tax, duty of customs, duty of excise, value added tax, cess and other statutory dues with the appropriate authorities. There are no undisputed statutory dues which are in arrears, as at 31st March, 2018 for a period of more than six months from the date they became payable.

b) According to the information and explanations given to us, details of dues of income-tax or sales-tax or service tax or duty of customs or duty of excise or value added tax, which have not been deposited as on 31st March, 2018 on account of any dispute are given below:

Particulars	Year to which the matter pertains	Forum where matter is pending	Amount (Rs. in lakhs)
Duty of excise	F.Y. 2001-02	Commissioner Appeal	33.58
Income-tax	Block A.Y. 1999-00 to 2004-05	CIT (Appeals)	49.01
Income-tax	A.Y. 2002-03	CIT (Appeals)	13.33
Service-tax	F.Y. 2007-08 to 2010-11	Commissioner Appeal	123.85

viii. In our opinion and according to the information and explanations given to us, the Company has defaulted in repayment of loans or borrowings to financial institutions and banks during the year. However, there is no overdues as on 31st March, 2018.

ix. 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.

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

xi. According to the information and explanations given to us, managerial remuneration has been paid or provided in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Act.

xii. In our opinion, the Company is not a Nidhi Company.

xiii. According to the information and explanations given to us, all 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, as required by the applicable Ind AS.

xiv. According to the information and explanations given to us, the company has made a preferential allotment of equity shares during the year under review and the requirement of section 42 of the Act have been complied with and the amount raised have been used for the purposes for which the funds were raised.

xv. According to the information and explanations given to us, the company has not entered into any non-cash transactions with directors or persons connected with them covered under Section 192 of the Act.

xvi. According to the information and explanations given to us, the company is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934.

Annexure “B” to the Independent Auditors’ Report Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Act.

We have audited the internal financial controls over financial reporting of Pioneer Embroideries Limited (“the Company”), as of 31st March, 2018 in conjunction with our audit of the standalone 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.

Auditors’ 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, issued by ICAI and deemed to be prescribed under section 143(10) of the Act, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.

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

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

Meaning of Internal Financial Controls over Financial Reporting

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

Inherent Limitations of Internal Financial Controls Over Financial Reporting

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

Opinion

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

For S.K. Naredi & Co.

Chartered Accountants

(Firm’s Registration No.: 003333C)

RAHUL NAREDI

Place: Mumbai Partner

Date: 28th May, 2018 Membership Number: 302632

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Mar 31, 2016

Report on the Standalone Financial Statements

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

Management’s Responsibility for the Standalone Financial Statements

The Company''s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (“the Act”) with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with 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 misstatement.

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

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

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at 31^st March, 2016, and its profit and its 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, 2016 issued by the Central Government in terms of sub-section (11) of section 143 of the Act (hereinafter referred to the “Order”), and on the basis of such checks of the books and records of the Company as we considered appropriate and according to the information and explanations given to us, we give in the Annexure "A" a statement on the matters specified in paragraphs 3 and 4 of the Order.

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

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

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

(c) The Balance Sheet, the Statement of Profit and Loss, 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 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 effectiveness of such controls, refer to our separate report in “Annexure B”.

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

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

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

iii. there is no amount that is required to be transferred to the Investor Education and Protection Fund by the Company.

Annexure “A” to the Independent Auditors'' Report

Referred to in Paragraph 1 under Report on Other Legal and Regulatory Requirements, of the Independent Auditors’ Report of even date to the members of Pioneer Embroideries Limited on the standalone financial statements for the year ended 31^st March , 2016.

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

b) As explained to us, fixed assets, according to the practice of the Company, are physically verified by the management in accordance with the phased verification program, which, in our opinion, is reasonable having regards to the size of the Company and the nature of its fixed assets. No material discrepancies have been noticed on such verification.

c) The title deeds of immovable properties, as disclosed in Note 10 on fixed assets to the financial statements, are held in the name of the Company, except for leasehold land and building acquired pursuant to the scheme of merger, having a carrying value of Rs.60.24 lacs as at 31^st March, 2016.

ii. The physical verification of inventory excluding stocks with third parties has been conducted at reasonable intervals by the management. In respect of inventory lying with the third parties, these have substantially been confirmed by them. The discrepancies noticed on physical verification of inventory as compared to book records were not material and have been appropriately dealt with in the books of the Company.

iii. As per the information and explanation given to us and the records produced before us for verification, the Company has granted unsecured loans to four companies and one limited liability partnership covered in the register maintained under Section 189 of the Act.

a) In respect of the aforesaid loans, the terms and conditions under which such loans were granted are not prejudicial to the Company''s interest except that these loans are interest free.

b) As explained to us, receipt of principal amount is on demand basis and there is no fixed repayment schedule.

c) There is no overdue amount as these loans are on demand basis.

iv. In our opinion and according to the information and explanations given to us, the Company has complied with the provisions of section 185 and 186 of the Act in respect of the loans, investments, guarantees, and securities except that such loans are given interest free.

v. In our opinion and according to the information and explanations given to us, the Company has not accepted deposits, in terms of directives issued by the Reserve Bank of India and the provisions of Sections 73 to 76 or any other relevant provisions of the Act and the rules framed there under.

vi. We have broadly reviewed the books of accounts maintained by the Company in respect of products where, pursuant to Rules made by the Central Government of India, the maintenance of cost records has been prescribe under sub-section (1) of section 148 of the Act, and are of 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 and complete.

vii. a) According to the information and explanations given to us, the Company is generally regular in depositing undisputed statutory dues including provident fund, employees’ state insurance, income-tax, sales-tax, service tax, duty of customs, duty of excise, value added tax, cess and other statutory dues with the appropriate authorities. There are no undisputed statutory dues which are in arrears, as at 31^st March, 2016 for a period of more than six months from the date they became payable.

b) According to the information and explanations given to us, details of dues of income-tax or sales-tax or service tax or duty of customs or duty of excise or value added tax, which have not been deposited as on 31^st March, 2016 on account of any dispute are given below:

Particulars	Year to which the matter pertains	Forum where matter is pending	Amount (Rs. in lacs)
Duty of excise	F.Y. 2001-02	Commissioner Appeal	46.14
Income-tax	Block A.Y. 1999-00 to 2004-05	CIT (Appeals)	49.01
Income-tax	A.Y. 2002-03	CIT (Appeals)	13.33
Service-tax	F.Y. 2007-08 to 2010-11	Commissioner Appeal	128.08

viii. In our opinion and according to the information and explanations given to us, the Company has defaulted in repayment of loans or borrowings to financial institutions and banks. The details of the period and amount of default are as under:

Name of the Financial Institution/ Bank	Period of Default	Amount of default as at the Balance Sheet Date (Rs. in lacs)
Corporation Bank	2011-2016	100.00
Small Industrial Development Bank of India	2011-2016	91.25
Union Bank of India	March 16	21.56
Landes Bank Baden Wurttemberg, Germany	October 15 to March 16	95.53

ix. 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.

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

xi. According to the information and explanations given to us, managerial remuneration has been paid or provided in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Act.

xii. In our opinion, the Company is not a Nidhi Company.

xiii. According to the information and explanations given to us, all 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, as required by the applicable accounting standards.

xiv. According to the information and explanations given to us, the company has made a preferential allotment of equity shares during the year under review and the requirement of section 42 of the Act have been complied with and the amount raised have been used for the purposes for which the funds were raised.

xv. According to the information and explanations given to us, the company has not entered into any non-cash transactions with directors or persons connected with them.

xvi. According to the information and explanations given to us, the company is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934.

For M B A H & CO

Chartered Accountants

(Firm Registration Number: 121426W)

MAHESH BHAGERIA

Place: Mumbai Partner

Date: May 12, 2016 Membership Number: 034499

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Mar 31, 2015

Report on the Standalone Financial Statements

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

Management''s Responsibility for the Standalone Financial Statements

The Company''s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with 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 thereunder.

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

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

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

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at 31st March, 2015, and its profit/loss and its 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, 2015 issued by the Central Government in terms of sub-section (11) of section 143 of the Act (hereinafter referred to the "Order"), and on the basis of such checks of the books and records of the Company as we considered appropriate and according to the information and explanations given to us, we give in the Annexure a statement on the matters specified in paragraphs 3 and 4 of the Order.

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

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

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

(c) The Balance Sheet, the Statement of Profit and Loss, 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 31st March, 2015 taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2015 from being appointed as a director in terms of Section 164 (2) of the Act.

(f) 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 did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses;

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

Annexure to Auditors'' Report

Referred to in Paragraph 1 under Report on Other Legal and Regulatory Requirements, of our report of even date to the members of Pioneer Embroideries Limited on the standalone financial statements for the year ended March 31,2015.

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

b) As explained to us, fixed assets, according to the practice of the Company, are physically verified by the management in accordance with the phased verification program, which, in our opinion, is reasonable having regards to the size of the Company and the nature of its fixed assets. No material discrepancies have been noticed on such verification.

ii. a) As explained to us, the physical verification of inventories has been conducted at reasonable intervals by the management.

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 and there were no material discrepancies noticed on physical verification.

iii. a) As per the information and explanation given to us and the records produced before us for verification, the Company has granted unsecured loans to companies covered in the register maintained under Section 189 of the Companies Act.

b) As explained to us, receipt of principal amount is on demand basis and there is no fixed repayment schedule. All these loans are interest free.

c) There is no overdue amount more than rupees one lakh as these loans are on demand basis.

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

v. In our opinion and according to the information and explanations given to us, the Company has not accepted deposits, in terms of directives issued by the Reserve Bank of India and the provisions of Sections 73 to 76 or any other relevant provisions of the Companies Act and the rules framed there under.

vi. According to the information and explanations given to us, the maintenance of cost records has not been specified by the Central Government under Section 148(1) of the Companies Act.

vii. a) According to the information and explanations given to us, the Company is generally regular in depositing undisputed statutory dues including provident fund, employees'' state insurance, income-tax, sales-tax, wealth tax, service tax, duty of customs, duty of excise, value added tax, cess and other statutory dues with the appropriate authorities. There are no undisputed statutory dues which are in arrears, as at 31st March, 2015 for a period of more than six months from the date they became payable.

b) According to the information and explanations given to us, details of dues of income-tax or sales-tax or wealth tax or service tax or duty of customs or duty of excise or value added tax or cess, which have not been deposited as on 31st March, 2015 on account of any dispute are given below:

Particulars Year to which the Forum where matter Amount matter pertains pending (RS. in lacs)

Duty of excise F.Y. 2001-02 Commissioner Appeal 46.14

Income-tax Block A.Y. 1999-00 to 2004-05 CIT(Appeals) 49.01

Income-tax A.Y. 2002-03 CIT (Appeals) Commissioner Appeal 13.33

Service-tax F.Y. 2007-08 to 2010-11 Appeal 128.08

c) In our opinion and according to the information and explanations given to us, amount required to be transferred to investor education and protection fund in accordance with the relevant provisions of the Companies Act and Rules made thereunder has been transferred to such fund within time.

viii. The Company''s accumulated losses at the end of the financial year are less than fifty per cent of its net worth and it has not incurred cash losses in the financial year and in the immediately preceding financial year.

ix. In our opinion and according to the information and explanations given to us, the Company has defaulted in repayment of dues to financial institutions and banks. The details of the period and amount of default are as under:

Name of the Financial Institution/ Bank Period of Default Amount(RS. in lacs)

State Bank of India 2011-2015 1,904.40

Corporation Bank 2011-2015 528.80

SIDBI 2011-2015 136.19 Union Bank of India Jan 15 to March 15 163.89*

*Since paid in April 15

x. In our opinion and according to the information and explanations given to us, the terms and conditions on which the Company has given guarantee for loans taken by its subsidiary from bank is not prima facie prejudicial to the interest of the Company, except that in view of substantial losses in the subsidiary Hakoba Lifestyle Ltd., the Company might be asked to honor guarantee.

xi. 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.

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 M B A H & CO Chartered Accountants (Firm Registration Number: 121426W)

MAHESH BHAGERIA Place: Mumbai Partner Date: 21st May, 2015 Membership Number: 034499

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Mar 31, 2014

1. We have audited the accompanying financial statements of Pioneer Embroideries Limited (the "Company"), which comprise the Balance Sheet as at March 31, 2014, the Statement of Profit & Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information, which we have signed under reference to this report.

Management''s Responsibility for the Financial Statements

2. The Company''s Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards referred to in sub-section (3C) of Section 211 of ''the Companies Act, 1956'' of India (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

3. 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.

4. 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 statements, whether due to fraud or error. In making those risk assessments, the auditors consider 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.

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

Opinion

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

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

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

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

Emphasis of Matter

7. We draw attention to following Notes having impact on the Financial Statements:

a) Note 16.1, 16.2 & 16.3 relating to treatment of investments in subsidiaries aggregating to Rs.2,214.55 lacs as long term and non provision of erosion in values, though the net worth of all subsidiaries have been fully eroded.

b) Note 16.3 (b) considering loan of Rs.545.41 lacs to Subsidiary S. R Investments Limited as doubtful. The Company has provided Rs.388.39 lacs as bad debts as per the permission given by RBI.

c) Note 11.2, 16.4, 30 & 35 relating to non confirmation of balances, the effect of which is not known. Our opinion is not qualified in respect of these matters.

Report on Other Legal and Regulatory Requirements

8. As required by ''the Companies (Auditor''s Report) Order, 2003'', as amended by ''the Companies (Auditor''s Report) (Amendment) Order, 2004'', issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Act (hereinafter referred to as the "Order"), and on the basis of such checks of the books and records of the Company as we considered appropriate and according to the information and explanations given to us, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

9. 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 dealt with by this report comply with the Accounting Standards notified under the Act rear with General Circular no. 15/2013 dated September 13, 2013 of Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013;

e) On the basis of written representations received from the directors as on March 31, 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.

Annexure to Auditors'' Report

Referred to in paragraph 8 of the Auditors'' Report of even date to the members of Pioneer Embroideries Limited on the financial statements for the year ended March 31, 2014.

i. a. The fixed assets register of the Company is under preparation for the current year updation. It has generally maintained records showing full particulars including quantitative details and situation of fixed assets.

b. As explained to us, fixed assets, according to the practice of the Company, are physically verified by the management in accordance with the phased verification programme, which, in our opinion, is reasonable having regards to the size of the Company and the nature of its fixed assets. No material discrepancies have been noticed on such verification.

c. The Company has not disposed off any substantial part of its fixed assets so as to affect its status of going concern.

ii. a. As explained to us the inventories have been physically verified during the year by the management at reasonable intervals and in case of stock lying with outside parties, they have substantially confirmed the same.

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 inventory and there were no material discrepancies noticed on physical verification.

iii. a. As per the information and explanation given to us and the records produced to us for our verification, the Company has granted loans secured or unsecured, to seven such company, firm or other parties covered in the register maintained under Section 301 of the Companies Act, 1956 (Act). The maximum balance outstanding during the year is Rs.8,982.49 lacs and the closing balance as on year ending was Rs.8,091.86 lacs.

b. Except the Interest free loan and advances, granted by the Company secured or unsecured loans, the terms and conditions of the loans granted are not prejudicial to the interest of the Company.

c. As explained to us, payment of principal amount and interest, if any, are on demand basis and there is no repayment schedule.

d. There is no overdue amount more than Rs.1 lac as loans and advances are on demand basis.

e. As per the information and explanation given to us and the records produced to us for our verification, the Company has not taken any loans and advances, secured or unsecured, from such companies, firms and other parties covered in the register maintained under Section 301 of the Companies Act, 1956.

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 for the sale of goods. Further, on the basis of our examination of the books and records of the Company, and according to the information and explanations given to us, we have neither come across nor have been informed of, any continuing failure to correct major weaknesses in the aforesaid internal control system.

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 explanations given to us, the transactions made in pursuance of such contracts or arrangements and exceeding the value of Rupees Five lacs in respect of any party during the year have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

vi. In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits from the public within the meaning of Sections 58A and 58AA of the Act and rules framed there under.

vii. In our opinion, the Company has an internal audit system commensurate with its size and the nature of its business, but needs further strengthening.

viii. We have broadly reviewed the books of account maintained by the Company in respect of products where, pursuant to Rules made by the Central Government of India, the maintenance of cost records has been prescribed under clause (d) of sub-section (1) of section 209 of the Act, and are of the opinion that, prime 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.

ix. a. According to the information and explanations given to us, the Company is generally regular in depositing with appropriate authorities undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income-tax, Wealth-tax, Service-tax, Custom Duty, Excise Duty, Cess and other statutory dues applicable to it.

b. According to the information and explanations given to us, no undisputed amounts payable in respect of Wealth-tax, Service-tax, Custom Duty, Excise Duty and Cess were in arrears, as at 31st March, 2014 for a period of more than six months from the date they became payable except Income tax of Rs.60.31 lacs for A.Y 2007-08 and Fringe benefit tax of Rs.5.73 lacs for the A.Y. 2007-08, of Rs.4.66 lacs for the A.Y. 2008-09, of Rs.9.89 lacs for the A.Y. 2009-10.

c. According to the information and explanations given to us, details of dues of Sales Tax, Income Tax, Customs Duty, Wealth Tax, Service Tax, Excise Duty and Cess, which have not been deposited as on 31st March, 2014 on account of any dispute are given below:

Particulars Year to which the matter pertains Forum where matter is pending Amount (Rs. in lacs)

Custom Duty F.Y. 1997-98 H''ble Supreme Court 18.40

Excise Duty F.Y. 2001-02 Commissioner Appeal 46.14

Income Tax Block A.Y. 1999-00 to 2004-05 CIT (Appeals) 49.01

Income Tax A.Y. 2002-03 CIT (Appeals) 13.33

Income Tax A.Y. 2010-11 CIT (Appeals) 93.43

x. The Company has accumulated losses as at the end of the financial year and has not incurred cash losses in the financial year ended on that date.

There was cash loss in the immediately preceding financial year.

xi. In our opinion and according to the information and explanations given to us, the Company has defaulted in repayment of dues to financial institutions and banks as at the balance sheet date.

xii. According to the information and explanations given to us, the Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities. Therefore, provisions of Clause 4(xii) of the Order are not applicable to the Company.

xiii. In our opinion, the Company is not a chit fund or a nidhi / mutual benefit fund / society.

xiv. In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. The Company has maintained proper records of the transactions and all the investments have been held by the Company in its own name.

xv. In our opinion and according to the information and explanations given to us, the terms and conditions on which the Company has given guarantees for loans taken by its subsidiary from banks are not prima facie prejudicial to the interest of the Company, except that in view of substantial losses in the subsidiary Hakoba Lifestyle Ltd., the Company might be asked to honour guarantee.

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 explanation given to us and on an overall examination of the Balance Sheet of the Company, we report that no funds raised on short term basis have been used for long term investment.

xviii. The Company has not made preferential allotment of shares to companies covered in the register maintained under Section 301 of the Act during the year.

xix. The Company has not issued any debentures during the year.

xx. The Company has not raised any money by public issue during the year.

xxi. According to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the course of our audit.

For M B A H & CO

Chartered Accountants

(Firm Registration Number: 121426W)

MAHESH BHAGERIA

Place: Mumbai Partner

Date: May 23, 2014 Membership Number: 034499

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Mar 31, 2013

Report on the Financial Statements

1. We have audited the accompanying financial statements of Pioneer Embroideries Limited (the "Company"), which comprise the Balance Sheet as at March 31, 2013, the Statement of Profit & Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information, which we have signed under reference to this report.

Management''s Responsibility for the Financial Statements

2. The Company''s Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards referred to in sub-section (3C) of Section 211 of ''the Companies Act, 1956'' of India (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

3. 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.

4. 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 statements, whether due to fraud or error. In making those risk assessments, the auditors consider 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.

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

Basis for Qualified Opinion

6. Note 35 relating to exchange difference arising in relation to fixed assets, which are purchased out of the Foreign Currency Term Loans, is charged to the carrying cost of the assets, which is not in accordance with the Accounting Standard 11, otherwise loss would have been higher by Rs.34.11 lacs.

Qualified Opinion

7. In our opinion, and to the best of our information and according to the explanations given to us, except for the effect of the matter described in paragraph 6, the accompanying financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

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

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

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

Emphasis of Matter

8. We draw attention to following Notes having impact on the Financial Statements:

a) Note 19.1 & 19.2 relating to treatment of investments in subsidiaries aggregating to Rs.2,214.55 lacs as long term and non provision of erosion in values, though the net worth of all subsidiaries have been fully eroded.

b) Note 19.3 relating to investment in Subsidiary S. R Investments Limited, Mauritius, whereof the accounts are unaudited which is not in accordance with Accounting Standard 21 and consideration of loan of Rs.845.07 lacs as doubtful. The company has provided Rs.815.04 lacs as bad debts as per the general permission given by RBI.

c) Note 19.4 relating to investment in overseas Joint Venture M/s Super Industries DMCC, Dubai and conversion of stake into loans on jointly controlled JV basis and consideration of entire loan of Rs.4,027.02 lacs (USD 4.96 million plus service charge) as good of recovery even though no recovery neither confirmation is available.

d) Note 19.6 relating to advance payment for acquisition of machineries of Rs.1,534.00 lacs to Crystal Lace (India) Ltd. out of Foreign Currency Convertible Bonds (FCCB) funds and conversion of same into loan and investment, which is deemed non-compliance under FCCB utilization rules and non –provision of interest income of Rs.883.33 lacs, otherwise loss would have been lower by that extent.

e) Note 31 treatment of FCCB Liabilities as non-monetary liabilities otherwise loss would have been higher by Rs.3,465.17 lacs on account of non provision for premium / interest on outstanding FCCB of USD 11 million and Rs.1,483.52 lacs for foreign exchange losses on account of non revaluation at year end outstanding.

f) Note 37(f) relating to non assessment of effect on waiver of principal & interest as the Company has defaulted in repayment to Banks & Financial Institutions under CDR scheme.

g) Note 13.2, 19.4, 33 & 40 relating to non confirmation of balances, the effect of which is not known.Our opinion is not qualified in respect of these matters.

Report on Other Legal and Regulatory Requirements

9. As required by ''the Companies (Auditor''s Report) Order, 2003'', as amended by ''the Companies (Auditor''s Report) (Amendment) Order, 2004'', issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Act (hereinafter referred to as the “Order"), and on the basis of such checks of the books and records of the Company as we considered appropriate and according to the information and explanations given to us, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

10. 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) Except for the effects of the matter described in paragraph 6, 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 Act;

e) On the basis of written representations received from the directors as on March 31, 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 Auditors'' Report

Referred to in paragraph 9 of the Auditors'' Report of even date to the members of Pioneer Embroideries Limited on the financial statements for the year ended March 31, 2013.

I. a. The fixed assets register of the Company is under preparation for the current year updation. It has generally maintained records showing full particulars including quantitative details and situation of fixed assets.

b. As explained to us, fixed assets, according to the practice of the Company, are physically verified by the management in accordance with the phased verification programme, which, in our opinion, is reasonable having regards to the size of the Company and the nature of its fixed assets. No material discrepancies have been noticed on such verification.

c. The Company has not disposed off any substantial part of its fixed assets so as to affect its status of going concern.

ii. a. As explained to us the inventories have been physically verified during the year by the management at reasonable intervals and in case of stock lying with outside parties, they have substantially confirmed the same.

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 inventory and there were no material discrepancies noticed on physical verification.

iii. a. As per the information and explanation given to us and the records produced to us for our verification, the Company has granted loans secured or unsecured, to seven such company, firm or other parties covered in the register maintained under Section 301 of the Companies Act, 1956 (Act). The maximum balance outstanding during the year is Rs.9,656.17 lacs and the closing balance as on year ending was Rs.8,510.68 lacs.

b. Except the Interest free loan and advances, granted by the Company secured or unsecured loans, the terms and conditions of the loans granted are not prejudicial to the interest of the Company.

c. As explained to us, payment of principal amount and interest, if any, are on demand basis and there is no repayment schedule.

d. There is no overdue amount more than Rs.1 lac as loans and advances are on demand basis.

e. As per the information and explanation given to us and the records produced to us for our verification, the Company has not taken any loans and advances, secured or unsecured, from such companies, firms and other parties covered in the register maintained under Section 301 of the Companies Act, 1956.

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 for the sale of goods. Further, on the basis of our examination of the books and records of the Company, and according to the information and explanations given to us, we have neither come across nor have been informed of, any continuing failure to correct major weaknesses in the aforesaid internal control system.

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 explanations given to us, the transactions made in pursuance of such contracts or arrangements and exceeding the value of Rupees Five lacs in respect of any party during the year have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

vi. In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits from the public within the meaning of Sections 58A and 58AA of the Act and rules framed there under.

vii. In our opinion, the Company has an internal audit system commensurate with its size and the nature of its business, but needs further strengthening.

viii. We have broadly reviewed the books of account maintained by the Company in respect of products where, pursuant to Rules made by the Central Government of India, the maintenance of cost records has been prescribed under clause (d) of sub-section (1) of section 209 of the Act, and are of the opinion that, prime 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.

ix. a. According to the information and explanations given to us, the Company is generally not regular in depositing with appropriate authorities undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income-tax, Wealth-tax, Service-tax, Custom Duty, Excise Duty, Cess and other statutory dues applicable to it.

b. According to the information and explanations given to us, no undisputed amounts payable in respect of Wealth-tax, Service- tax, Custom Duty, Excise Duty and Cess were in arrears, as at 31st March, 2013 for a period of more than six months from the date they became payable except Income tax of Rs.60.31 lacs for A.Y 2007-08 and Fringe benefit tax of Rs.5.73 lacs for the A.Y. 2007-08, of Rs.4.66 lacs for the A.Y. 2008-09, of Rs.9.89 lacs for the A.Y. 2009-10.

c. According to the information and explanations given to us, details of dues of Sales Tax, Income Tax, Customs Duty, Wealth Tax, Service Tax, Excise Duty and Cess, which have not been deposited as on 31st March, 2013 on account of any dispute are given below:

x. The Company has accumulated losses as at the end of the financial year and has incurred cash losses in the financial year ended on that date. There was no cash loss in the immediately preceding financial year.

xi. In our opinion and according to the information and explanations given to us, the Company has defaulted in repayment of dues to financial institutions and banks as at the balance sheet date. The Company had entered in to Corporate Debts Restructuring agreement and also has entered in to agreement with other unsecured lenders including FCCB holders.

xii. According to the information and explanations given to us, the Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities. Therefore, provisions of Clause 4(xii) of the Order are not applicable to the Company.

xiii. In our opinion, the Company is not a chit fund or a nidhi / mutual benefit fund / society.

xiv. In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. The Company has maintained proper records of the transactions and all the investments have been held by the Company in its own name.

xv. In our opinion and according to the information and explanations given to us, the terms and conditions on which the Company has given guarantees for loans taken by its subsidiary from banks are not prima facie prejudicial to the interest of the Company, except that in view of substantial losses in the subsidiary Hakoba Lifestyle Ltd., the Company might be asked to honor guarantee.

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 explanation given to us and on an overall examination of the Balance Sheet of the Company, we report that no funds raised on short term basis have been used for long term investment.

xviii.The Company has made preferential allotment of shares to companies covered in the register maintained under Section 301 of the Act during the year and in our opinion the price at which the shares have been issued are as per SEBI guidelines and is not prejudicial to the interest of the Company.

xix. The Company has not issued any debentures during the year.

xx. The Company has not raised any money by public issue during the year.

xxi. According to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the course of our audit. For M B A H & CO

Chartered Accountants

(Firm Registration Number: 121426W)

MAHESH BHAGERIA

Place: Mumbai Partner

Date: June 4, 2013 Membership Number: 034499

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Mar 31, 2010

We have audited the attached Balance Sheet of Pioneer Embroideries Limited as at 31st March, 2010, the Profit a Loss Account and the Cash Flow Statement for the period ended on that date both 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.

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

2. As required by the Companies (Auditors Report) Order, 2003 and the Companies (Auditors Report) (Amendment) Order, 2004 issued by the Central Government of India in terms of Section 227 (4A) of the Companies Act, 1956, we annex hereto a statement on the matters specified in Paragraphs 4 a 5 of the said Order to the extent applicable.

3. Further to our comments in the annexure referred to above, we report that:

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

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

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

iv. In our opinion, the Balance Sheet, the Profit a Loss Account and the Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in Section 211 (3C) of the Companies Act, 1956; subject to non compliance of Accounting Standard -11 for the effect of change in Foreign Exchange difference, as per Accounting Policy Note No. 11, Accounting Standard - 15 for employees benefit as per Accounting Policy Note No. 9a a 9c, Accounting Standard -21 for consolidated financial statements as per Note No. 9 of notes to Accounts, the impact of the above is not quantifiable;

v. Based on the representations and declarations made by the directors as on 31 st March, 2010 and taken on record by the Board of Directors of the Company and the information and explanation given to us, none of the Directors is, as at 31 st March, 2010, prima facie disqualified from being appointed asadirectorin terms of Section 274(1 )(g) of the CompaniesAct, 1956;

vi. In our opinion and to the best of our information and according to the explanations given to us, the said accounts, read with the notes to accounts and subject to following

Note No. as per Accounting Policy (AP) and Notes to

Accounts (NA) Matter

NA 5(a) ft 5(b) Advance payment for acquisition of machineries of Rs. 1,534 lacs to Crystal Lace (India) Ltd. out of

FCCB funds and conversion of same into loan, whictlis deemed non-compliance under FCCB utilization rules.

NA5(c) Non provision of interest income of Rs.237.03 lacs of loan given to Crystal Lace (India) Limited and the income is understated to that extent.

NA 6(a),6(b) St 6(c) Treatment of investments in subsidiaries aggregating to Rs.2122.60 lacs as Long term ft non provision

of erosion in values, though values have substantially gone down in view of losses in all the

subsidiaries and also erosion of net worth of Hakoba Lifestyle Limited fully.

NA 9(a) ft 9(b) Investment in Subsidiary S.R Investments Limited, Mauritius, whereof the accounts are unaudited not

in accordance with AS-21 and consideration of loan of Rs.993.08 lacs (USD 2.20 M plus service

charges) is considered as good of recovery even though Subsidiary net worth is depleted and no

amounts are received either for Service Charges or for Principal.

NA 10(a) ft 10(b) Investment in overseas Joint Venture Mis Super Industries DMCC, Dubai and conversion of stake into

loans on jointly controlled JV basis and consideration of entire loan of Rs.2737.68 lacs as good of recovery even though no recovery neither confirmation is available.

NA 11(b) Based on legal opinion, treatment of gain of Rs.1506.65 lacs (USD 3.75 million) as non-monetary

transaction by Credit to Capital reserve on account of waiver of principal amount on settlement of

FCCB Liabilities. NA11(d),11(e),& 11(f) Treatment of FCCB Liabilities as non-monetary liabilities and had it not been so, loss would have been 1 higher by Rs. 1256.81 lacs on account of no provision made for premium/interest on outstanding FCCB of USD 11 million and Rs. 1129.80 lacs on account of foreign exchange losses on account of repayment

of FCCB loan, write back to capital reserve and revaluation as on period end outstanding respectively. NA 12 Charging of Foreign Currency Convertible Bond (FCCB) issue expenses against Securities Premium Account during the earlier period deeming FCCB at par with issue of securities, which is not in accordancewithAS-26.

NA 13(a) Based on legal opinion, treatment of gain of Rs.450 lacs as Non- monetary transaction by credit to Capital Reserve on waiver of principal amount on account of settlement of loan of Barclays Bank.

NA 13(b) ft 13(d) Non Confirmation of Bank Balances, Overdraft Balances, unsecured loan balances, secured loan balances.

AP11/NA14 Accounting of Exchange difference arising in relation to fixed assets in the carrying cost of assets, which is not in compliance with AS-11.

NA 15(a) Appropriation of FCCB funds by bank towards working capital loan during earlier period, which is not a permissible end use as per ECB guidelines.

NA 15(b) Pending refund on account of cancellation of acquisition of yarn unit at Surat.

NA23 Non provision of export debtors which in the opinion of management are fully recoverable even with slow recovery.

AP9/NA 25 Non provision of gratuity and leave salary as per actuarial valuation as per AS-15.

NA 28 Non confirmation of Balances, the effect of which is not known.

NA 35(b) St 35(c) Non compilation of quantitative details in respect of Embroidery business as required under Schedule VI Part II Para 3 of the Companies Act, 1956.

the effect of all the above, except where stated, on accounts is not ascertainable, give the information required by the Companies Act, 1956, in the manner so required present 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 a Loss Account of the profit for the period ended on that date; and

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

ANNEXURE REFERRED TO IN PARAGRAPH 2 OF AUDITORS REPORT OF EVEN DATE ON THE ACCOUNTS FORTHE PERIOD ENDED31st March, 2010OF PIONEER EMBROIDERIES LIMITED

On the basis of such checks as we considered appropriate and in terms of the information and explanation given to us, we state that: -

1. a. The fixed assets register of the Company is under preparation for the current period updation. It has generally maintained records showing full particulars including quantitative details and situation of fixed assets, however, the same needs to be fully reconciled pending updation of records.

b. As explained to us, fixed assets, according to the practice of the Company, are physically verified by the management in accordance with the phased verification programme, which, in our opinion, is reasonable having regards to the size of the Company and the nature of its fixed assets. To the best of our knowledge, the material discrepancies, if any, on such verification cannot be ascertained in view of pending reconciliation.

c. The Company has not disposed off any substantial part of its fixed assets so as to affect its status of goingconcern.

2. a. As explained to us the inventories have been physically verified during the period by the management at reasonable intervals and in case of

stock lying with outside parties, they have substantially confirmed the same.

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 inventory and there were no material discrepancies noticed on physical verification except discrepancies which could arise on account of non tally of quantitative details as referred in Note no.35 of Notes to Accounts.

3. a. As per the information and explanation given to us and the records produced to us for our verification, the Company has granted loans

secured or unsecured, to company, firm or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. The number of such parties are 5. The maximum balance outstanding during the period is Rs.5933.93 lacs and the closing balance as on period ending was Rs.5929.88 lacs.

b. Except the Interest free loan and advances, granted by the Company secured or unsecured loans, the terms and conditions of the loans granted are not prejudicial to the interest of the Company.

c. As explained to us, payment of principal amount and interest, if any, are on demand basis and there is no repayment schedule.

d. There is no overdue amount more than Rs. 1 lac as loans and advances are on demand basis.

e. As per the information and explanation given to us and the records produced to us for our verification, the Company has taken loans and advances, secured or unsecured, from companies, firms and other parties covered in the register maintained under Section 301 of the Companies Act, 1956. The number of such parties is one. The maximum balance outstanding during the period is Rs.65.43 lacs and the closing balance as on the period end is Rs.Nil.

f. The loans taken are interest free and other terms a conditions are not prejudicial to the interest of the Company.

g. This clause is not applicable since the loans taken are repaid during the period.

4. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business 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 to correct major weaknesses in internal controls.

5. a. According to the information and explanations given to us, we are of the opinion that the transactions that need to be entered into the

register maintained under section 301 of the Companies Act, 1956 have been so entered.

b. As explained to us, transaction made in pursuance of such contracts or arrangements have been made at prices which are reasonable having regards to the prevailing market prices at the relevant time.

6. In our opinion and according to the information and explanations given to us, the Company has not accepted any deposit from public within the meaning of Sections 58Aand 58Mor any other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975.

7. In our opinion, the Company has an internal audit system commensurate with the size and the nature of its business, but needs further strengthening.

8. The Central Government has prescribed maintenance of the Cost records u/s 209 (1) (d) of the Companies Act, 1956 in respect to Dope Dyed Yarn division. We have broadly reviewed the books of accounts and records maintained by the Company in respect of Dope Dyed Polyester Yarn division 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 records with a view to determining whether they are accurate or complete. In respect of other activities carried out by the Company, as explained to us by the management and as per the information provided, cost records prescribed under the section 209(1) (d) of the Companies Act are not applicable for the other activities.

9. a. According to the information and explanations given to us, the Company is generally not regular in depositing with appropriate authorities

undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income-tax, Wealth-tax, Service-tax, Custom Duty, Excise Duty, Cess and other statutory dues applicable to it.

b. According to the information and explanations given to us, no undisputed amounts payable in respect of Wealth-tax, Service-tax, Custom Duty, Excise Duty and Cess were in arrears, as at 31 st March, 2010 for a period of more than six months from the date they became payable except Income tax of Rs.60.31 lacs for A.Y. 2007-08 and Fringe benefit tax of Rs.5.73 lacs for the A.Y. 2007-08, of Rs.4.66 lacs for the A.Y. 2008-09, ofRs.9.89 lacsfortheA.Y. 2009-10

c. According to the information and explanations given to us, details of dues of Sales Tax, Income Tax, Customs Duty, Wealth Tax, Service Tax, Excise Duty and Cess, which have not been deposited as on 31 st March, 2010 on account of any dispute are given below:

Particulars Year to which the matter pertains Forum where matter is pending Amount (Rs. in lacs)

Custom Duty F.Y. 1997 -98 Hble Supreme Court 4690

Excise Duty F.Y. 2001 -02 Commissioner Appeal 94.73

Income Tax Block A.Y 1999 -00 to 2004-05 CIT (Appeals) 47.87

Income Tax A.Y 2002-03 CIT (Appeals) 13.33

10. The Company does have accumulated losses as at the end of the period, however has not incurred cash loss during the period covered by our audit. There was cash loss in the immediately preceding financial year.

11. In our opinion and according to the information and explanations given to us, the Company had entered in to Corporate Debts Restructuring agreement and also has entered in to agreement with other unsecured lenders including FCCB holders and we have been informed that the repayment has been done as per the terms and conditions agreed upon to these financial institutions and banks.

12. According to the information and explanations given to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities and adequate documents and records have been maintained for the same.

13. In our opinion, the Company is not a chit fund or a nidhi / mutual benefit fund / society.

14. In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. The Company has maintained proper records of the transactions and all the investments have been held by the Company in its own name.

15. In our opinion and according to the information and explanations given to us, the terms and conditions on which the Company has given guarantees for loans taken by its subsidiary and associate company from banks are not prima facie prejudicial to the interest of the Company, except that in view of substantial losses in one of the subsidiary Hakoba Lifestyle Ltd., the Company might be asked to honour guarantees.

16. In our opinion, the term loans have been applied for the purpose for which loans were obtained. No Term Loan is received during the period.

17. According to the information and explanations given to us and on an overall examination of the Balance Sheet and Cash Flow of the Company, except the funds raised and advances received for sale of assets were used for working capital/repayment of unsecured lenders, no funds were raised on short term basis and therefore question of using the same for long term investments does not arise.

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, but has received share application money.

19. The Company has not issued any debentures during the period.

20. The Company has not raised any money by public issue during the period.

21. According to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the course of our audit.



ForMBAH&CO ForR. KABRA&CO.

Chartered Accountants Chartered Accountants

(Firm Regn No.121426W) (Firm Regn No.104502W)

MAHESHBHAGERIA R. L. KABRA

Partner Partner

Membership No. 34499 Membership No. 16216

Place: Mumbai

Date :27th August, 2010

---

Sep 30, 2009

We have audited the attached Balance Sheet of Pioneer Embroideries Limited as at 30* September, 2009, the Profit a Loss Account and the Cash Flow Statement for the year ended on that date both 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.

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

2. As required by the Companies (Auditors Report) Order, 2003 and the Companies (Auditors Report) (Amendment) Order, 2004 issued by the Central Government of India in terms of Section 227 (4A) of the Companies Act, 1956, we annex hereto a statement on the matters specified in Paragraphs 4 & 5 of the said Order to the extent applicable.

3. Further to our comments in the annexure referred to above, we report that:

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

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

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

IV. In our opinion, the Balance Sheet, the Profit a Loss Account and the Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in Section 211 (3C) of the Companies Act, 1956; subject to non compliance of Accounting Standard -11 for the effect of change in Foreign Exchange difference, as per Accounting Policy Note No. 11, Accounting Standard - 15 for employees benefit as per Accounting Policy Note No. 9a & 9c, Accounting Standard - 21 for consolidated financial statements as per Note No. 10 of notes to Accounts, The impact of the above is not quantifiable;

V. Based on the representations and declarations made by the directors as on 30th September, 2009 and taken on record by the Board of Directors of the Company and the information and explanation given to us, none of the Directors is, as at 30th September, 2009, prima facie disqualified from being appointed as a director in terms of Section 274(1 )(g) 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, read with the notes to accounts and subject to following

Note No. as per Accounting Policy (AP) and Notes to Matter Accounts (NA)

NA 6(i)& 6(H) Advance payment for acquisition of machineries of Rs. 1,534 lacs to Crystal Lace (India) Ltd. out of FCCB funds and conversion of same into loan, which is deemed non -compliance under FCCB utilization rules.

NA 6(iii) Non provision of interest income of Rs. 122.30 lacs of loan given to Crystal Lace (India) Limited and the income is understated to that extent.

NA 7(a),7(b) & 7(c) Treatment of investments in subsidiaries aggregating to Rs. 2122.60 lacs as Long term & non provision of erosion in values, though values have substantially gone down in view of losses in all the subsidiaries and also erosion of net worth of Hakoba Lifestyle Limited fully.

NA 10(i) & 10 (ii) Investment in Subsidiary S.R Investments Limited, Mauritius, whereof the accounts are unaudited not in accordance with AS-21 and consideration of loan of Rs. 1247.01 lacs (USD 2.20 M)+ service charge is considered as good of recovery even though Subsidiary net worth is depleted and no amounts are received either for Service Charges or for Principal

NA 11 (i) 611 (ii) Investment in overseas Joint Venture Mis Super Industries DMCC, Dubai and conversion of stake into loans on jointly controlled JV basis and consideration of entire loan of Rs. 2806.63 lacs as good of recovery even though no recovery neither confirmation is available.

NA 13 Charging of Foreign Currency Convertible Bond (FCCB) issue expenses against Securities Premium Account during the previous period deeming FCCB at par with issue of securities, which is not in accordance with AS-26.

NA 14 (a) & 14(b) Non Confirmation of Bank Balances, Overdraft Balances, unsecured loan balances, secured loan balances.

AP 11/NA15 I Accounting of Exchan$e difference arising in relation to fixed assets in the carrying cost of assets, which is not in compliance withAS-11.

NA 16(a), 16(b) & 16(c) Treatment of FCCB Liabilities as non -monetary liabilities and had it not been so, loss would - have been higher by Rs.2750.93 lacs on account of premium/interest on yield to maturity and by Rs. 1951.30 lacs on account of exchange difference..

NA 17(a) Appropriation of FCCB funds by bank towards working capital loan, which is not a permissible end use as per ECB guidelines.

NA 17(b) Pending refund on account of cancellation of acquisition of yarn unit at Surat.

AP 9/NA 26 Non provision of gratuity and leave salary as per actuarial valuation as per AS-15.

NA 31 Non confirmation of Balances, the effect of which is not known.

NA 38(b) &38(c) Non compilation of quantitative details in respect of Embroidery business as required under Schedule VI Part II Para 3 of the Companies Act, 1956.

the effect of all the above, except where stated, on accounts is not ascertainable, give the information required by the Companies Act, 1956, in the manner so required present 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 30th September, 2009.

b) in the case of the Profit fit Loss Account of the loss for the year ended on that date; and

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

ANNEXURE REFERRED TO IN PARAGRAPH 2 OF AUDITORS REPORT OF EVEN DATE ON THE ACCOUNTS FOR THE YEAR ENDED

30th SEPTEMBER, 2009 OF PIONEER EMBROIDERIES LIMITED On the basis of such checks as we considered appropriate and in terms of the information and explanation given to us, we state that :-

1. a. The fixed assets register of the Company is under preparation for the current year updation. It has generally maintained records showing full particulars including quantitative details and situation of fixed assets, however, the same needs to be fully reconciled pending updation of records.

b. As explained to us, fixed assets, according to the practice of the Company, are physically verified by the management in accordance with the phased verification programme, which, in our opinion, is reasonable having regards to the size of the Company and the nature of its fixed assets. To the best of our knowledge, the material discrepancies, if any, on such verification cannot be ascertained in view of pending reconciliation.

c. The Company has not disposed off any substantial part of its fixed assets so as to affect its status of going concern.

2. a. As explained to us the inventories have been physically verified during the year by the management at reasonable intervals and in case of stock lying with outside parties, they have substantially confirmed the same.

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 reasbnable 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 and there were no material discrepancies noticed on physical verification except discrepancies which could arise on account of non tally of quantitative details as referred in Note no.38 of Notes to Accounts.

3. a. As per the information and explanation given to us and the records produced tous for our verification, the company has granted loans secured or unsecured, to company, firm or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. The number of such parties are 5. The maximum balance outstanding during the year is Rs. 5957.57 lacs and the closing balance as on year ending isRs. 5914.19lacs

b. Except the Interest free loan and advances, granted by the company secured or unsecured loans, the terms and conditions of the loans granted are not prejudicial to-the interest of the company.

• c. As explained to us, payment of principal amount and interest, if any, are on demand basis and therefore question of regularity does not arise.

d. Therels no overdue amount more than Rs. 1 lacs as loans and advances are on demand basis.

e. As per the information and explanation given to us and the records produced to us for our verification, the company has taken loans and advances, secured or unsecured, from companies, firms and other parties covered in the register maintained under Section 301 of the Companies Act, 1956. The number of such parties is one. The maximum balance outstanding during the year is Rs.65.43 lacs and the closing balance as on the year end is Rs.65.43 lacs.

f. The loans taken are interest free and other terms 8t conditions are not prejudicial to the interest of the company.

g. The loans taken are payable on demand basis and therefore the question of irregularity does not arise.

4. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business 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 to correct major weaknesses in internal controls.

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

b. As explained to us, transaction made in pursuance of such contracts or arrangements have been made at prices which are reasonable having regards to the prevailing market prices at the relevant time

6. In our opinion and according to the information and explanations given to us, the Company has not accepted any deposit from public within the meaning of Sections 58A and 58AA or any other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975.

7. In our opinion, the Company has an internal audit system commensurate with the size and the nature of its business, which needs further strengthening.

8. The Central Government has prescribed maintenance of the Cost records u/s 209 (1) (d) of the Companies Act, 1956 in respect to Dope Dyed

Polyester Yarn division. We have broadly reviewed the books of accounts and records maintained by the company in respect of Dope Dyed Polyester Yarn division 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 records with a view to determining whether they are accurate or complete. In respect of other activities carried out by the company, as explained to us by the management and as per the information provided, cost records prescribed under the section 209(1) (d) of the Companies Act are not applicable for the other activities.

9. a. According to the information and explanations given to us, the Company is generally regular in depositing with appropriate authorities undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income-tax, Wealth-tax, Service-tax, Custom Duty, Excise Duty, Cess and other statutory dues applicable to it.

b. According to the information and explanations given to us, no undisputed amounts payable in respect of Wealth-tax, Service-tax, Custom Duty, Excise Duty and Cess were in arrears, as at 30th September, 2009 for a period of more than six months from the date they became payable except Income tax ofRs.60.31 lacs for A. Y. 2007-08 and Fringe benefit tax of Rs.5.73 lacs for the A. Y. 2007-08, ofRs.4.66 lacs for the A.Y. 2008-09, ofRs.9.89lacs fortheA.Y. 2009-10.

c. According to the information and explanations given to us.details of dues of Sales Tax, Income Tax, Customs Duty, Wealth Tax, Service Tax, Excise Duty and Cess, which have not been deposited as on 30th September, 2009 on account of any dispute are given below:

Particulars Year to which the matter Forum where matter is pending Amount pertains (Rs. in lacs)

Custom Duty F.Y. 1997-98 Hble Supreme Court 46.90

Excise Duty F.Y. 2001-02 Commissioner Appeal 94.73

Income Tax A.Y. 2002-03 CIT (Appeals) 13.33

10. The Company does have accumulated losses as at the end of the year and has incurred cash losses during the year covered by our audit, and also in the immediately preceding financial year.

11. In our opinion and according to the information and explanations given to us, the Company had defaulted in repayment of dues to some financial institution and banks. However, it had applied for restructuring of loans and interest to Corporate Debts Restructuring (CDR) Cell of Reserve Bank of India which though have been approved but yet under implementation and execution.

12. According to the information and explanations given to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities so the question of maintaining adequate documents and records does not arise.

13. In our opinion, the Company is not a chit fund or a nidhi / mutual benefit fund / society.

14. in our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. The Company has maintained proper records of the transactions and all the investments have been held by the company in its own name.

15. In our opinion and according to the information and explanations given to us, the terms and conditions on which the Company has given guarantees for loans taken by its subsidiary and associate company from banks are not prima facie prejudicial to the interest of the Company, except that in view of substantial losses in one of the subsidiary Hakoba Lifestyle Ltd., the company might be asked to honor guarantees.

16. Inouropinion, the term loans have been applied for the purpose for which loans were obtained. No Term Loan is received during the year.

17. According to the information and explanations given to us and on an overall examination of the Balance Sheet and Cash Flow of the Company, the funds raised on short term basis have been used for working capital/ repayment of unsecured lenders from banks in view of cash crunch during the period.

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 any debentures during the year.

20. The Company has not raised any money by public issue during the year.

21. According to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the course of our audit.

For BHAGERIA NAREDI & ASSOCIATES For R. KABRA a CO. Chartered Accountants Chartered Accountants

MAHESH BHAGERIA R. L. KABRA Partner Partner

Membership No. 34499 Membership No. 16216

Place: Mumbai Date : 30th November 2009