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Auditor Report of Rainbow Denim Ltd.

Mar 31, 2015

Report on the Financial Statements

We have audited the accompanying financial statements of Rainbow Denim Ltd 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 significant accounting policies and other explanatory information.

Management's Responsibility for the Financial Statements

The Management is responsible for the maters in Section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes the maintenance of adequate accounting records in accordance with the provision of the Act for safeguarding of the assets of the Company and for preventing and detecting the 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 internal financial control, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

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

We have taken into account the provision of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provision 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 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 true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by Company's Directors, as well as evaluating the overall presentation of the financial statements.

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

Opinion

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

(a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2015;

(b) in the case of the Statement of Profit & 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

We draw attention to Note 33 of the accompanying financial statements in respect of Company's ability to continue as a going concern. Our opinion is not qualified in respect of this matter.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order, 2015 issued by the Central Government of India in terms of section 143 (11) of the Companies Act, 2013, we give in the Annexure a statement on the matters specified in the said order.

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

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

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

c. the Balance Sheet, Statement of Profit & 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 written representations received from the directors as on 31st March, 2015 taken on record by the Board of Directors, we report that 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. To our best of information and according to the explanations given to us:

i) The Company did not have any long term contracts including derivatives contract for which there were any material foreseeable losses.

ii) The Company did not have any pending litigations which would have impact its financial position in its financial statements.

iii) There were no amounts which were required to be transferred to Investor Education & Protection Fund by the Company.

ANNEXURE TO THE INDEPENDENT AUDITORS REPORT

The annexure referred to our Report of even date to the members of Rainbow Denim Ltd on the financial statements for the year ended 31st March 2015. We report that:

1. In respect of its Fixed assets:

a) The Company has maintained proper records showing full particulars including quantitative details and situations of fixed assets on the basis of available information;

b) Management has certified that they have carried out physical verification of fixed assets and no material discrepancy was noticed on such verification.

2. In respect of its inventories:

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

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

c) The company is maintaining proper records of inventory. No material discrepancies have been noticed on physical verification of stocks as compared to book records in so far as it appears from our examination of the books.

3. According to the information and explanations given to us, the company has not granted any loans, secured or unsecured to any companies, firms or other parties covered in the register maintained under section 189 of the Companies Act, 2013. Accordingly sub clause (a) and (b) are not applicable.

4. In our opinion and according to the information and explanations given to us, there are adequate internal control systems commensurate with the size of the Company and nature of its business with regard to purchase of inventory, fixed assets and for sale of goods and services. During the course of our audit, no major weakness has been noticed in the internal controls.

5. According to the information and explanation given to us, the company has not accepted any deposits u/s 73 to 76 or any other relevant provisions of the Companies Act, 2013 during the year.

6. We have broadly reviewed the books of accounts maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under section 148 (1) of the Companies Act, 2013 in respect of the Company's Products to which the said rules are made applicable, and are of the opinion that prima facie, the prescribed accounts have been made and maintained. We have, however not made a detailed examination of the records with a view to determine whether they are accurate.

7. a) According to the records of the Company, there were no undisputed amounts payable in respect of Provident Fund, Investor Education and Protection Fund, Employee's State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, value added tax, Cess and any other statutory dues with appropriate authorities outstanding as on 31st March, 2015, for a period of more than six months from the date they became payable.

b) According to the records of the Company and information and explanations given to us there are no dues of sales tax, income tax, wealth tax, service tax, custom duty, excise duty, value added tax, cess on account of any disputes.

c) There was no amount required to be transferred to investor education and protection fund in accordance with the relevant provisions of the Companies Act, 1956 (1 of 1956) and rules made thereunder.

8. In our opinion, the accumulated losses of the company are more than fifty percent of its net worth. During the year company has incurred cash loss of Rs. 84,016,930/- and in the immediately preceding financial year it has incurred cash loss of Rs. 192,223,318/-.

9. On the basis of our examination of the books and according to the information and explanation given to us, we are of the opinion that the company has defaulted in repayment of dues including interest &LC devolvement, amounting to Rs. 24,47,86,116/- (P.Y. Rs.22,39,29,953/-), to financial institutions and banks as below:

Name of lender Principal Interest

Amount Due Since Amount Due Since

IDBI Bank Limited 7,59,62,178 October, 2012 7,83,22,234 January, 2013

Dena Bank 2,10,20,472 April, 2013 2,98,56,741 February, 2013

Dena Bank - Devolved LCs 3,96,24,491 January, 2013

Total 13,66,07,141 10,81,78,975

10. According to the information and explanations given to us, and the representations made by the management, the Company has not given any guarantee for loans taken by others from any bank or financial institution.

11. In our opinion and on the basis of information and explanations given to us, term loans availed by the Company were, prima facie, applied by the Company for the purpose for which the loans were obtained.

12. According to the information and explanations given to us, and to the best of our knowledge and belief no fraud on or by the Company has been noticed or reported during the year.

For Dayal and Lohia

Chartered Accountants

(Firm Registration No.102200W)

(S.V. Thomas)

Place : Mumbai. Partner

Date : 29th May, 2015 Membership No.125944


Mar 31, 2014

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

Management''s Responsibility for the Financial Statements

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

Auditor''s Responsibility

Our responsibility is to express an opinion on these fi nancial 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 fi nancial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company''s preparation and fair presentation of the fi nancial 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 fi nancial statements. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the fi nancial 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, subject to :

(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 fl ows for the year ended on that date.

Report on Other Legal and Regulatory Requirements

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

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

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

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

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

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

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 disqualifi ed as on March 31, 2014, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

ANNEXURE TO THE AUDITOR''S REPORT

(Referred to in our Report of even date to the members of Rainbow Denim Limited on the fi nancial statements for the year ended 31st March 2014.)

1. In respect of its Fixed assets:

a) The Company has maintained proper records showing full particulars including quantitative details and situations of fi xed assets on the basis of available information;

b) Management has certifi ed that they have carried out physical verifi cation of fi xed assets and no material discrepancy noticed on such verifi cation.

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

2. In respect of its inventories:

a) The inventories have been physically verifi ed by the management during the year. In our opinion, the frequency of verifi cation is reasonable.

b) In our opinion, the procedures of physical verifi cation of stocks followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

c) No material discrepancies have been noticed on physical verifi cation of stocks as compared to book records in so far as it appears from our examination of the books.

3. a) According to the information and explanations given to us, the company has not granted any loans, secured or unsecured to the companies, fi rms or other parties covered in the register maintained under section 301 of the Companies Act, 1956.

Accordingly sub clause (b), (c) and (d) are not applicable.

e) According to the information and explanations given to us, during the year, the company has not taken any loans from the companies, fi rms or other parties covered in the register maintained under section 301 of the Companies Act, 1956 during the year. During the year, it has repaid previous interest free loan of Rs. 3,81,00,000/- to one party.

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

g) Terms of re-payments of Principal amount are not stipulated.

4. In our opinion and according to the information and explanations given to us, there are adequate internal control systems commensurate with the size of the Company and nature of its business with regard to purchase of inventory, fi xed assets and for sale of goods and services. During the course of our audit, no major weakness has been noticed in the internal controls.

5. In respect of transactions covered under section 301 of the Companies Act, 1956, according to information and explanation given to us, we are of the opinion that there are no contracts or arrangements that need to be entered into the register maintained under section 301 of the Companies Act, 1956. Therefore, the provision of sub-clause (b) of clause 4 (v) of the order is not applicable to the Company.

6. According to the information and explanation given to us, the company has not accepted any deposits u/s 58A, 58AA or any other relevant provisions of the Companies Act, 1956, during the year.

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

8. We have broadly reviewed the books of account maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under section 209(1)(d) of the Companies Act, 1956 in respect of the Company''s Products to which the said rules are made applicable, and are of the opinion that prima facie, the prescribed accounts have been made and maintained. We have, however not made a detailed examination of the records with a view to determine whether they are accurate.

9. a) According to the records of the Company, there were no undisputed amounts payable in respect of Provident Fund, Investor Education and Protection Fund, Employee''s State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, Cess and any other statutory dues outstanding as on 31st March, 2014, for a period of more than six months from the date they became payable.

b) According to the records of the Company and information and explanations given to us there are no dues of sales tax, income tax, wealth tax, service tax, custom duty, excise duty on account of any disputes.

10. In our opinion, the accumulated losses of the company are more than fi fty percent of its net worth. During the year company has incurred cash loss of Rs. 19,22,23,318/- and in the immediately preceding fi nancial year it has incurred cash loss of Rs. 1,38,95,602/-.

11. On the basis of our examination of the books and according to the information and explanation given to us, we are of the opinion that the company has defaulted in repayment of dues including interest, amounting to Rs. 22,39,29,953/-, to fi nancial institutions and banks.

12. 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 or any other securities.

13. In our opinion, the Company is not a Chit Fund, Nidhi or Mutual Fund/Society and therefore the provisions of clause 4 (xiii) of the order are not applicable.

14. The Company is not dealing or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the order are not applicable. All the investments are held by the company in its own name.

15. According to the information and explanations given to us, and the representations made by the management, the Company has not given any guarantee for loans taken by others from any bank or fi nancial institution.

16. In our opinion and on the basis of information and explanations given to us, term loans availed by the Company were, prima facie, applied by the Company for the purpose for which the loans were obtained.

17. According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we report that as on the date of Balance Sheet short term funds to the extent of Rs. 47,71,47,154/- have gone into funding the accumulated losses of the Company.

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 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, and to the best of our knowledge and belief no fraud on or by the Company, has been noticed or reported during the year.



For Dayal and Lohia Chartered Accountants (Firm Registration No.102200W)

(S.L. Khandelwal) Place : Mumbai Partner Date : May 28, 2014. M.No.: 101388


Mar 31, 2013

Report on the Financial Statements

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

Management''s Responsibility for the Financial Statements

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

Auditor''s Responsibility

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

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

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

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

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

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

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

Report on Other Legal and Regulatory Requirements

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

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

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

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

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

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

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 Companies Act, 1956.

f) Since the Central Government has not issued any notification as to the rate at which the cess is to be paid under section 441A of the Companies Act, 1956 nor has it issued any Rules under the said section, prescribing the manner in which such cess is to be paid, no cess is due and payable by the Company

ANNEXURE TO THE INDEPENDENT AUDITOR''S REPORT

(Referred to in paragraph 2 of our Report of even date on the accounts of Rainbow Denim Limited for the year ended 31st March 2013.)

1. In respect of its Fixed assets:

a) The Company has maintained proper records showing full particulars including quantitative details and situations of fixed assets on the basis of available information;

b) Management has certified that they have carried out physical verification of fixed assets and no material discrepancy noticed on such verification.

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

2. In respect if its inventories:

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

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

c) No material discrepancies have been noticed on physical verification of stocks as compared to book records in so far as it appears from our examination of the books.

3. a) According to the information and explanations given to us, the company has not granted any loans, secured or unsecured to the companies, firms or other parties covered in the register maintained under section 301 of the

Companies Act, 1956.

Accordingly sub clause (b), (c) and (d) are not applicable. e) According to the information and explanations given to us, during the year, the company has taken an interest free advance from one party covered under the register maintained under section 301 of the Companies Act, 1956, amounting to Rs. 3,81,00,000/- f) In our opinion and according to the information and explanation given to us, the rate of interest and other terms and conditions are prima facie not prejudicial to the interest of the Company. g) Terms of re-payments of Principal amount are not stipulated.

4. In our opinion and according to the information and explanations given to us, there are adequate internal control systems commensurate with the size of the Company and nature of its business with regard to purchase of inventory, fixed assets and for sale of goods and services. During the course of our audit, no major weakness has been noticed in the internal controls.

5. In respect of transactions covered under section 301 of the Companies Act, 1956, according to information and explanation given to us, we are of the opinion that there are no contracts or arrangements that need to be entered into the register maintained under section 301 of the Companies Act, 1956. Therefore, the provision of sub-clause (b) of clause 4 (v) of the order is not applicable to the Company.

6. According to the information and explanation given to us, the company has not accepted any deposits u/s 58A, 58AA or any other relevant provisions of the Companies Act, 1956, during the year.

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

8. We have broadly reviewed the books of account maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under section 209(1)(d) of the Companies Act, 1956 in respect of the Company''s Products to which the said rules are made applicable, and are of the opinion that prima facie, the prescribed accounts have been made and maintained. We have, however not made a detailed examination of the records with a view to determine whether they are accurate.

9. a) According to the records of the Company, there were no undisputed amounts payable in respect of Provident Fund, Investor Education and Protection Fund, Employee''s State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, Cess and any other statutory dues outstanding as on 31st March, 2013, for a period of more than six months from the date they became payable. b) According to the records of the Company and information and explanations given to us there are no dues of sales tax, income tax, wealth tax, service tax, custom duty, excise duty on account of any disputes.

10. In our opinion, the accumulated losses of the company are more than fifty percent of its net worth. During the year company has incurred cash loss of Rs. 1,38,95,602/- and in the immediately preceding financial year it has incurred cash loss of Rs. 10,14,19,727/-.

11. On the basis of our examination of the books and according to the information and explanation given to us, the company has defaulted in repayment of dues including interest, amounting to Rs. 14,28,96,778/-, to financial institution and banks.

12. 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 or any other securities.

13. In our opinion, the Company is not a Chit Fund, Nidhi or Mutual Fund/Society and therefore the provisions of clause 4 (xiii) of the order are not applicable.

14. In Company is not dealing or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the order are not applicable. All the investments are held by the company in its own name.

15. According to the information and explanations given to us, and the representations made by the management, the Company has not given any guarantee for loans taken by others from any bank or financial institution.

16. In our opinion and on the basis of information and explanations given to us, term loans availed by the Company were, prima facie, applied by the Company for the purpose for which the loans were obtained.

17. According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, as on the date of Balance sheet Rs. 23,45,05,770/- raised on short term basis have been used for long term investment by the company.

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 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, and to the best of our knowledge and belief no fraud on or by the Company, has been noticed or reported during the year.

for DAYAL & LOHIA

Chartered Accountants

Firm Regn. No. 102200W

(S. L. Khandelwal )

Place : Mumbai Partner

Date : 30th May, 2013. M No: 101388


Mar 31, 2012

We have audited the attached Balance Sheet of Rainbow Denim Limited as at 31st March, 2012 and the statement of Profit and Loss for the year ended on that date, and also the cash flow statement for the year ended on that date. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

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

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

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

b) In bur opinion, proper books of accounts as required by law have been kept by the Company so far as it appears from our examination of the books. c) The Balance Sheet, 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 statement of Profit and Loss, Balance Sheet and Cash Flow statement comply with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956;

e) In our opinion, and based on the information and explanation given to us, none of the directors are disqualified as on 31 st March, 2012 from being appointed as directors in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956;

f) In our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with the notes thereon give the information required by the Companies Act, 1956, in the manner so required and subject to note 4.2 in Current Liabilities - regarding non-disclosure of amounts overdue to micro, small and medium enterprise, give a true and fair view

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

ii. in the case of the statement of Profit and Loss, of the loss of the Company for the year ended on that date; and

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

(Referred to in paragraph 2 of our Report of even date on the accounts of Rainbow Denim Limited for the year ended

31st March 2012.)

1. In respect of its Fixed assets:

a) The Company has maintained proper records showing particulars, including quantitative details and situations of fixed assets;

b) The fixed assets have been physically verified by the management during the year and no material discrepancies have been noticed on such verification.

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

2. In respect if its inventories:

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

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

c) No material discrepancies have been noticed on physical verification of stocks as compared to book records in so far as it appears from our examination of the books.

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

a) According to the information and explanation given to us, the Company has not granted any loan, secured or unsecured to companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956. Accordingly sub clause (b), (c) and (d) Are not applicable;

b) According to the information and explanation given to us, the Company has not taken any loan, secured or unsecured, from companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956. Accordingly sub clause (f) and (g) are not applicable;

4. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and nature of its business with regard to purchase of inventory, fixed assets and for sale of goods. During the course of our audit, no major weakness has been noticed in the internal control. .

5. In respect of transactions covered under Section 301 of the Companies Act, 1956, according to the information and explanations given to us, we are of the opinion that there are no contracts or arrangements that need to be entered into the register maintained under section 301 of the Companies Act, 1956. Therefore, the provision of sub-clause (b) of clause 4 (v) of the Order is not applicable to the Company.

6. According to the information and explanations given to us, the company has not accepted the deposit uls. 58A,

58AA or any other relevant provisions of the Companies Act, 1956 during the year. -

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

8. We have broadly reviewed the books of account maintained by the Company pursuant to the rules made by the central Government for the maintenance of cost records under section 209(l)(d) of the Companies Act, 1956 in respect of the Company's products to which the said rules are made applicable, and are of the opinion that prima facie, the prescribed accounts have been maintained. We have, however not made a detailed examination of the records with a view to determine whether they are accurate.

9. a) According to the records of the Company, there were no undisputed amounts payable in respect of Provident Fund, Investor Education and Protection Fund, Employee's State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Custom Duly. Excise Duty, Cess and any other statutory dues outstanding as on 31st March, 2012, for a period of more than six months from the date they became payable.

b) According to the records of the Company and information and explanations given to us there are no dues of sales tax, income tax, wealth tax, service tax, custom duty, excise duty on account of any disputes.

10. In our opinion, the accumulated losses of the Company are more than fifty percent of its net worth. During the year company has incurred cash loss of Rs. 10.14 Crores and in the immediately preceding financial year it has not incurred any cash loss.

11. On the basis of our examination of the books and according to the information and explanations given to us, we are of the opinion that the company has not defaulted in repayment of dues including interest, to financial institution and banks.

12. 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 or any other securities.

13. In our opinion, the Company is not a Chit Fund, Nidhi or Mutual Fund/Society.

14. In our opinion, the Company is maintaining proper record of the transactions and contracts of dealing in shares and securities and timely entries have been made in the records. Ail the investments are held by the Company in its own name.

15. According to the information and explanations given to us, and the representations made by the management, the Company has not given any guarantee for loans taken by others from any bank or financial institution.

16. In our opinion and on the basis of information and explanations given to us, term loans availed by the Company were, prima facie, applied by the Company during the year for the purpose for which the loans were obtained.

17. According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, during the year Rs. 1,582.76 Lacs raised on short term basis have been used for long-term investment by the Company.

18. The Company has not made preferential allotment of shares to Company covered in the register maintained under section 301 of the Companies Act, 1956.

19. The Company has not issued 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, and to the best of our knowledge and belief no fraud on or by the Company, has been noticed or reported during the year.

for DAYAL & LOHIA

Chartered Accountants

Firm Regn. No. 102200W

(S. L. Khandelwal) Place : Mumbai Partner

Date : 30th May, 2012 M No: 101388


Mar 31, 2010

We have audited the attached Balance Sheet of Rainbow Denim Limited as at 31st March, 2010 and the Profit and Loss Account for the year ended on that date, and also the cash flow statement for the year ended on that date. 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. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test check basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

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

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

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

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

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

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

e) In our opinion and based on the information and explanations given to us, none of the directors are disqualified as on 31st March, 2010 from being appointed as directors in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956;

f) In our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with the notes thereon give the information required by the Companies Act, 1956, in the manner so required and subject to i) note B-6 in Schedule 16 regarding recoverability of certain advance and ii) the balances of Secured Loans and Contingent Liabilities in respect of Letters of credit not being confirmed by the banks and financial institutions, give a true a,nd fair view

i. in the case of the Balance Sheet, of the state of affairs of the Company as at 31 * March 2010; and

ii. in the case of the Profit and Loss Account, of the loss of the Company for the year ended on that date; and

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

ANNEXURE TO THE AUDITORS REPORT

(Referred to in paragraph 2 of our Report of even date on the accounts of Rainbow Denim Limited for the year ended 31sMarch 2010.)

1. In respect of its Fixed assets:

a) The Company has maintained proper records showing particulars, including quantitative details and situations of fixed assets;

b) The fixed assets have been physically verified by the management during the year and no material discrepancies have been noticed on such verification.

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

2. In respect if its inventories:

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

"b) In our opinion, the procedures of physical verification of stocks followed by the management are reasonable and adequate in relation to the size of thcCompany and the nature of its business.

c) No material discrepancies have been noticed on physical verification of stocks as compared to book records in so far as it appears from our examination of the books.

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

a) According to the information and explanation given to us, the Company has not granted any loan, secured or unsecured to companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956;

b) According to the information and explanation given to us, the.Company has not taken any loan, secured or unsecured, from companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956;

4. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and nature of its business with regard to purchase of inventory, fixed assets and for sale of goods. During the course of our audit, no major weakness has been noticed in the internal control.

5. In respect of transactions covered under Section 301 of the Companies Act, 1956:

a) According to the information and explanations given to us, we are of the opinion that there are no contracts or arrangements that need to be entered into the register maintained under section 301 of the Companies Act, 1956. Therefore, the provision of sub-clause (b) of clause 4 (v) of the Order is not applicable to the Company.

6. According to the information and explanations given to us, the company has not accepted the deposit u/s. 58A, 58AA or any other relevant provisions of the Companies Act, 1956 during the year.

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

8. We have broadly reviewed the books of account maintained by the Company pursuant to the rules made by the central Government for the maintenance of cost records under section 209(1 )(d) of the Companies Act, 1956 in respect of the Companys products to which the said rules are made applicable, and are of the opinion that prima facie, the prescribed accounts have been maintained. We have, however not made a detailed examination of the records with a view to determine whether they are accurate.

9. a) According to the records of the Company, there were no undisputed amounts payable in respect of Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, Cess and any other statutory dues outstanding as on 31 * March, 2010, for a period of more than six months from the date they became payable.

b) According to the records of the Company and information and explanations given to us there are no dues of sales tax, income tax, wealth tax, service tax, custom duty, excise duty on account of any disputes.

10. In our opinion, the accumulated losses of the Company are more than fifty percent of its net worth. During the year company has incurred cash loss of Rs. 751.18 lacs and in the immediately preceding financial year, it has incurred cash loss of Rs. 726.71 lacs.

11. On the basis of our examination of the books and according to the information and explanations given to us, the Company has defaulted in repayment of dues, including interest, to financial institution or banksaggregating to Rs 5,632.84 Lacs for the repayments as on 31st March 2010 subject to adjustment of rate of interest/waivers/ funding of interest, if any, as per the Corporate Debt Restructuring package sanctioned to the company by the Corporate Debt Restructuring Group constituted by the Reserve Bank of India.

12. 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 or any other securities.

13. In our opinion, the Company is not a Cnit Fund, Nidhi or Mutual Fund/Society.

14. In.our opinion, the Company is maintaining proper record of the transactions and contracts of dealing in shares and securities and timely entries have been made in the records. All the investments are held by the Company in its own name.

15. According to the information and explanations given to us, and the representations made by the management, the Company has not given any guarantee for loans taken by others from any bank or financial institution.

16. In our opinion and on the basis of information and explanations given to us, term loans availed by the Company were, prima facie, applied by the Company during the year for the purpose for which the loans were obtained.

17. According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, during the year Rs. 573.01 lacs raised on short-term basis have been used for long-term investment by the Company.

18. The Company has not made preferential allotment of shares to Company covered in the register maintained under section 301 of the Companies Act, 1956.

19. The Company has not issued 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, and to the best of our knowledge and belief no fraud on or by the Company, has been noticed or reported during the year.

for DAYAL & LOHIA

Chartered Accountants FirmRegn. No. 102200W

(ANIL LOHIA) Place : Mumbai Partner Date : 28,h May 2010 M No: 31626

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