Auditor Report of Vadilal Dairy International Ltd.

Mar 31, 2014

We have audited the accompanying financial statements of Vadilal Dairy International Limited (the Company), which comprise the Balance Sheet as at March 31, 2014, 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

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 notified under the Companies Act, 1956 (the Act) read with the General Circular 15/2013 dated 13th September, 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013 and in accordance with the accounting principles generally accepted in India. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

AUDITORS'' RESPONSIBILITY

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

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial 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, but not for the purpose of expressing an opinion on the effectiveness of the Company''s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OPINION

In our opinion and to the best of our information and according to the explanations given to us, the 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, 2014;

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

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

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

1. As required by the Companies (Auditor''s Report) Order, 2003 (the Order) issued by the Central Government of

India in terms of Section 227(4A) of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the 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, 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 Balance Sheet, the Statement of Profit and Loss, and the Cash Flow Statement comply with Accounting Standards notified under the Act read with the General Circular 15/2013 dated 13th September, 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013.

e. On the basis of the written representations received from the directors as on March 31, 2014, 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 Section 274(1) (g) of the Act.

Referred to in paragraph 1 of "Report on Other Legal and Regulatory Requirements" of Our Report of even date.

On the basis of such checks as we considered appropriate and according to the information and explanation given to us during the course of our audit, we report that:

1. In respect of its fixed assets:

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

b. As explained to us, fixed assets have been physically verified by the management at reasonable intervals; no material discrepancies were noticed on such verification.

c. In our opinion and according to the information and explanations given to us, no substantial fixed asset has been disposed off during the year and therefore does not affect the going concern assumption.

2. In respect of its inventories:

a. As explained to us, inventories have been physically verified during the year by the management at reasonable intervals.

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 on the basis of our examination of the records, the Company is generally maintaining proper records of its inventories. As explained to us, the discrepancies noticed in physical verification of the stock as compared to book records were not material and the same have been properly dealt with in the books of accounts.

3. In respect of loans covered under Section 301 of the Companies Act, 1956.

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

b. The Company has taken unsecured loan from parties covered in the register maintained under section 301 of the Companies Act, 1956 whose terms are not prejudicial to the interest of the company.

4. In our opinion and according to the information and explanations given to us, there is generally an adequate internal control procedure commensurate with the size of the company and the nature of its business with regard to the purchases of inventories, fixed assets and with regard to sale of goods. As per the information given to us, no major weaknesses in the internal controls have been identified by the management or the internal audit department of the company during the year. During the course of our audit, nothing had come to our notice that may suggest a major weakness in the internal control systems of the company.

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

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

b. As per information & explanations given to us and in our opinion, transactions exceeding value of Rs. 5,00,000/- have been entered into during the financial year are reasonable and for price justification, reliance is placed on the information and explanation given by the management.

6. The Company has not accepted any deposits from the public covered under section 58A and 58AA of the Companies Act, 1956.

7. As per information & explanations given by the management, the Company has an internal audit system commensurate with its size and the nature of its business.

8. We have broadly reviewed the cost records maintained by the Company pursuant to the Rules made by the Central Government for maintenance of Cost Records under Section 209 (1)(d) of the Companies Act, 1956.

9. In respect of statutory dues:

a. According to the information and explanations given to us, undisputed statutory dues including Provident Fund, E.S.I.C., Profession Tax, Investor Education and Protection Fund, Income Tax, TDS, Wealth Tax, Custom Duty, Cess and other material statutory dues applicable to it have been regularly deposited with the appropriate authorities except in few cases.

b. According to the information and explanation given to us, undisputed amounts payable in respect of income tax, wealth tax, customs duty, excise duty and cess and various other authorities were in arrears as at 31.03.2014 for a period of more than six months from the date they became payable is as follows :

Sr. Name of the Statute Name of the Dues Amount No (in Lakhs)

1 Central Sales Tax Act and Sales Tax Act of various states MVAT 426.35

2 Income Tax Act 1961 Fringe Benefit Tax 1.81

3 Central Excise Act, 1944 Excise Duty 4.24

Sr. Name of the Statute Period to which the No amounts relates

1 Central Sales Tax Act and Sales Tax Act of various states 2007-12

2 Income Tax Act 1961 2008-09

3 Central Excise Act, 1944 March 99 - June 99

c. According to the information and explanation given to us, following are the various disputed liabilities against which appeals are pending with various statutory authorities:

Sr. Name of the Statute Nature of Amount of Period to which No dues Dispute the amounts (Net) relates (In Lakhs)

1 Central Sales Tax Act Sales Tax 43.05 1992-93 and Sales Tax Act of

12.60 1993-94

103.50 1994-95

25.88 1995-96

1.50 1999-00

0.29 2000-01

0.10 2001-02

MVAT & CST 140.28 2005-06 including interest 172.86 2006-07

8.60 2008-09

315.27 2007-12

17.52 2009-10

2 Central Excise Excise Duty 101.35 1-4-98 to Act 1944 Feb''99

Sr. Name of the Statute Nature of Forum where No dues dispute is pending 1 Central Sales Tax Act Sales Tax Maharashtra Sales various and Sales Tax Act of states Tax Tribunal and Bombay High Court.

MVAT & CST Joint Commissioner of including Sales Tax (Appeals) interest Board for Industrial Financial Reconstruction (BIFR) - Refer Note 1

Interest on MVAT Dues

2 Central Excise Excise Duty Refer Note 2 Act 1944

Note 1: The BIFR has granted various reliefs and concessions in its order necessary for rehabilitation of our Company. One of such concessions was granted in the form of exemption from payment of Sales Tax/ VAT for a period of 5 years from cut-off date of the scheme i.e. 31.03.2007 during rehabilitation period. This concession was denied by the Sales Tax Authority of the State Government of Maharashtra during the financial year 2011-12. Against this denial the Company has filed appeal with the BIFR praying to direct the Sales Tax Authorities to grant relief to Our Company. The Final Judgment is yet to be ordered by the BIFR.

Note 2: The Tribunal Appeal has been allowed in favour of the company. However the excise department may file appeal to the higher authorities

10. In our opinion, the accumulated losses are more than fifty per cent of its net worth. The company has not incurred cash losses during the financial year covered by the audit but the company has however incurred cash losses in the immediately preceding financial years.

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

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.

13. The Company is not a chit fund or a nidhi /mutual benefit fund/society. Therefore, the provision of this clause of the Companies (Auditor''s Report) Order, 2003 (as amended) are not applicable to the Company.

14. According to information and explanations given to us, the Company has not made any investments in shares during the year.

15. According to the information and explanations given to us, the Company has not given any guarantees for loan taken by others from a bank or financial institution.

16. Based on our audit procedures and on the information given by the management, we report that the company has not raised any term loans during the year.

17. Based on the information and explanations given to us and on an overall examination of the Balance Sheet of the Company as at 31st March, 2014, we report that no funds raised on short-term basis have been used for long-term investment similarly no funds raised on long term basis have been used for short term investment. During the year, the company has invested the funds in modernisation of plant which were raised through Unsecured loans.

18. The Company has not issued any shares.

19. The Company has not issued any debenture.

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

21. Based on the audit procedures performed and the information and explanations given to us, we report that no fraud on or by the Company has been noticed or reported during the year, nor have we been informed of such case by the management.

For Vinod K. Mehta & Co. Chartered Accountants Firm Registration No. : 111508W

Sd/- Vinod K. Mehta Place: Mumbai (Partner) Date: 28th June, 2014 M.No.: 006647

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Mar 31, 2013

Report on the Financial Statements

We have audited the accompanying financial statements of VADILAL DAIRY INTERNATIONAL 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.

Auditors'' Responsibility

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

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial 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.

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 Profit and 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.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2003 ("theOrder") 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.

Referred to in paragraph 1 of "Report on Other Legal and Regulatory Requirements" of Our Report of even date.

On the basis of such checks as we considered appropriate and according to the information and explanation given to us during the course of our audit, we report that:

1. In respect of its fixed assets:

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

b. As explained to us, fixed assets have been physically verified by the management at reasonable intervals; no material discrepancies were noticed on such verification.

c. In our opinion and according to the information and explanations given to us, no substantial fixed asset has been disposed off during the year and therefore does not affect the going concern assumption.

2. In respect of its inventories:

a. As explained to us, inventories have been physically verified during the year by the management at reasonable intervals.

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 on the basis of our examination of the records, the Company is generally maintaining proper records of its inventories. As explained to us, the discrepancies noticed in physical verification of the stock as compared to book records were not material and the same have been properly dealt with in the books of accounts.

3. In respect of loans covered under Section 301 of the Companies Act, 1956.

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

b. The Company has taken unsecured loan from parties covered in the register maintained under section 301 of the Companies Act, 1956 whose terms are not prejudicial to the interest of the company.

4. In our opinion and according to the information and explanations given to us, there is generally an adequate internal control procedure commensurate with the size of the company and the nature of its business with regard to the purchases of inventories, fixed assets and with regard to sale of goods. As per the information given to us, no major weaknesses in the internal controls have been identified by the management or the internal audit department of the company during the year. During the course of our audit, nothing had come to our notice that may suggest a major weakness in the internal control systems of the company.

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

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

b. As per information & explanations given to us and in our opinion, transactions exceeding value of Rs. 5,00,000/- have been entered into during the financial year are reasonable and for price justification, reliance is placed on the information and explanation given by the management.

6. The Company has not accepted any deposits from the public covered under section 58A and 58AA of the Companies Act, 1956.

7. As per information & explanations given by the management, the Company has an internal audit system commensurate with its size and the nature of its business.

8. We have broadly reviewed the cost records maintained by the Company pursuant to the Rules made by the Central Government for maintenance of Cost Records under Section 209 (1)(d) of the Companies Act, 1956.

9. In respect of statutory dues:

a. According to the information and explanations given to us, undisputed statutory dues including Provident Fund, E.S.I.C., Profession Tax, Investor Education and Protection Fund, Income Tax, TDS, Wealth Tax, Custom Duty, Cess and other material statutory dues applicable to it have been regularly deposited with the appropriate authorities except in few cases.

b. According to the information and explanation given to us, undisputed amounts payable in respect of income tax, wealth tax, customs duty, excise duty and cess and various other authorities were in arrears as at 31.03.2013 for a period of more than six months from the date they became payable is as follows :

Sr. No Name of the Statute Name of the Dues Amount (in Lakhs) Period to which the amounts relates

1 Central Sales Tax Act Sales Tax 29.79 2003-04 and Sales Tax Act of various states 12.56 2004-05

MVAT 496.34 2007-12

2 Professional Tax Professional Tax 1.30 2010-11

1.54 2011-12

0.13 2012-13

3 Income Tax Act 1961 Fringe Benefit Tax 1.81 2008-09

4 Central Excise Act, 1944 Excise Duty 6.36 March 99 - June 99

c. According to the information and explanation given to us, following are the various disputed liabilities against which appeals are pending with various statutory authorities:

Sr. No. Name of the Statute Nature of dues Amount of Dispute (Net) (In Lakhs)

1 Central Sales Tax Act and Sales Tax 43.05

Sales Tax Act of various states

12.60 103.50

25.88

Interest on 1.50

MVAT Dues

0.29

0.10

233.18

2 Central Excise Act 1944 Excise Duty 101.35

Name Period to which Forum where the amounts dispute is relates pending

Central Sales Tax Act 1992-93 Maharashtra

Sales Tax 1993-94

Tribunal and

1994-95 Bombay High Court. 1995-96

1999-00 Board for

Industrial 2000-01 Financial

2001-02 Reconstruction

(BIFR) 2007-12

Central Excise Act 1944 1-4-98 to Refer Note 1 Feb. 99

10. In our opinion, the accumulated losses are more than fifty percent of its net worth. The company has incurred cash losses during the financial year covered in the audit and also in the immediately preceding financial year.

11. 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.

12. The Company is not a chit fund or a nidhi /mutual benefit fund/society. Therefore, the provision of this clause of the Companies (Auditor''s Report) Order, 2003 (as amended) are not applicable to the Company.

13. According to information and explanations given to us, the Company has not made any investments in shares during the year.

14. According to the information and explanations given to us, the Company has not given any guarantees for loan taken by others from a bank or financial institution.

15. Based on our audit procedures and on the information given by the management, we report that the company has not raised any term loans during the year.

16. Based on the information and explanations given to us and on an overall examination of the Balance Sheet of the Company as at 31st March, 2013, we report that no funds raised on short-term basis have been used for long-term investment similarly no funds raised on long term basis have been used for short term investment. During the year, the company has invested the funds in modernisation of plant which were raised through Unsecured loans.

17. The Company has issued 25 Lacs Equity Shares of face value of Rs. 10/- each at par to the promoters of the company on preferential basis as per the BIFR Order.

18. The Company has not issued any debenture.

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

20. Based on the audit procedures performed and the information and explanations given to us, we report that no fraud on or by the Company has been noticed or reported during the year, nor have we been informed of such case by the management.

For B.V. Shah & Associates

Chartered Accountants

Firm Registration No. 109511W

Sd/-

Bharat V. Shah

Place: Mumbai Proprietor

Date :02/09/2013 M No. 040210

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Mar 31, 2012

We have audited the Balance Sheet of VADILAL DAIRY INTERNATIONAL LIMITED as at 31st March 2012 and also the annexed Profit and Loss Account and the Cash Flow Statement of the Company 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 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 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 issued by the Central Government of India in terms of sub section (4A) of section 227 of the Companies Act, 1956 and on the basis of such checks as we considered appropriate, and according to the information and explanation given to us, we enclose in the Annexure hereto a statement on the matters specified in paragraphs 4 and 5 of the said order to the extent applicable to the Company.

3. Further to our comments in the Annexure referred to in paragraph 2 above, we report that:

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

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

c) The Balance Sheet and Profit and Loss Account and Cash Flow Statement dealt with by this Report are in agreement with the books of accounts.

d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in compliance with the accounting standards referred to in sub section (3c) of Section 211 of the Companies Act, 1956.

4. We further report that -

a) The Accounts have been prepared on 'going concern' basis.

b) We are of the opinion, that to the best of our information and according to the explanation given to us the accounts read together with the accounting policies and the notes thereon, give information required by the Companies Act, 1956 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India.

c) In the case of Balance Sheet of the State of affairs of the Company as at 31.3.2012 and

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

e) In so far as it relates to the Cash Flow Statement of the Cash Flow for the year ended on that date.

ANNEXURE REFFERED TO IN PARAGRAPH 4 OF AUDITORS' REPORT OF EVEN DATE TO THE MEMBERS OF VADILAL DAIRY INTERNATIONAL LIMITED ON THE ACCOUNTS FOR THE YEAR ENDED 31st MARCH 2012.

1. In respect of its fixed assets:

a. The company has maintained proper records showing full particulars including quantitative details and situation of fixed assets on the basis of information available.

b. According to the information and explanations given to us, the fixed assets have been physically verified by the management during the year in a phased periodic manner, which in our opinion is reasonable, having regard to the size of the Company and nature of the assets. No material discrepancies were noticed on such verification.

2. In respect of its inventories:

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

b. The procedure of physical verification of inventories followed by the management is reasonable and adequate in relation to the size of the company and the nature of its business.

c. The company has maintained proper records of inventory. As explained to us, the discrepancies noticed in physical verification of the stock as compared to book records were not material and the same have been properly dealt with in the books of accounts.

3. In respect of loans covered under Section 301 of the Companies Act, 1956.

a. As per the information and explanation given to us and the records produced to us for our verification, the company had not granted loans, secured or unsecured, to any Company, Firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956, except security deposits for the use of trademark "Vadilal".

b. The Company has taken unsecured loan from parties covered in the register maintained under section 301 of the Companies Act, 1956, whose terms are not prejudicial to the interest of the company.

4. In our opinion and according to the information and explanations given to us, there exists an internal control system commensurate with the size of the Company and the nature of its business with regard to the purchases of inventories, fixed assets and with regard to sale of goods. As per the information given to us, no major weaknesses in the internal controls have been identified by the management or the internal audit department of the company during the year. During the course of our audit, nothing had come to our notice that may suggest a major weakness in the internal control systems of the company.

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

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

b. In our opinion and according to the information and explanations given to us, transactions exceeding value of Rs. 500,000/- have been entered into during the financial year are reasonable and for price justification, reliance is placed on the information and explanation given by the management.

6. During the year the Company has not accepted any deposits under the provisions of Section 58A, 58AA of the Companies Act, 1956 and the Rules framed there under.

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

8. We have broadly reviewed the cost records maintained by the Company pursuant to the Rules made by the Central Government for maintenance of Cost Records under Section 209 (1)(d) of the Companies Act, 1956.

9. In respect of statutory dues:

a. According to the information and explanations given to us, undisputed statutory dues including provident fund, investor education and protection fund, income tax, wealth tax, Custom duty, excise duty, cess and other material statutory dues applicable to it have been regularly deposited with the appropriate authorities except in few cases.

b. According to the information and explanation given to us, undisputed amounts payable in respect of sales tax, income tax, wealth tax, customs duty, excise duty and cess were in arrears as at 31.03.2012 for a period of more than six months from the date they became payable is as follows :

Sr. Name of the Statute Name of the Dues Amount (in Lakhs) Period to which the No. amounts relates

1 Central Sales Tax Act Sales Tax 7.01 2002-03 and Sales Tax Act of various states 65.78 2003-04

12.16 2004-05

0.93 CST

MVAT 676.34 2007-12

2 Professional Tax Professional Tax 2.53 2004-05

2.30 2005-06

2.23 2006-07

2.32 2007-08

1.87 2008-09

1.42 2009-10

1.30 2010-11

1.54 2011-12

3 Income Tax Act 1961 TDS on Salaries 0.59 2006-07

4 Income Tax Act 1961 Fringe Benefit Tax 2.16 2008-09

5 Central Excise Act, 1944 Excise Duty 8.48 March 99 - June 99

c. According to the information and explanation given to us, following are the various disputed liabilities against which appeals are pending with various statutory authorities:

Sr. No. Name of the Statute Nature of dues Amount of Dispute (Net) (In Lakhs)

1 Central Sales Tax Act and Sales Tax 43.05 Sales Tax Act of various states 12.60

103.50

25.88

1.50

0.29

0.10

Interest on 233.18 MVAT Dues

2 Central Excise Act 1944 Excise Duty 101.35

Name of the Statute Period to which Forum where the amounts dispute is relates pending

Central Sales Tax Act and Sales Tax Act of Various States 1992-93 Maharashtra

1993-94 Sales Tax

1994-95 Tribunal and

1995-96 Bombay High

1999-00 Court.

2000-01

2001-02

2007-12 Board for Industrial Financial Reconstruction (BIFR)

Central Excise Act 1944 1-4-98 to Feb'99 Refer Note 1

Note 1. The Tribunal Appeal has been allowed in favour of the company. However the excise department may file appeal to the higher authorities.

10. In our opinion, the accumulated losses are more than fifty percent of its net worth. The company has incurred cash losses during the financial year covered in the audit and not in the immediately preceding financial year.

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

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

13. The Company has made investments in Shares during the year. Proper records have been maintained of the transactions and contracts and timely entries have been made therein. All the investments have been held in the name of the company.

14. As per the information and explanation given to us the Company has not given guarantees for loan taken by others from banks or financial institutions.

15. The Company has raised a loan of Rs.1,00,90,000/- during the year against security of fixed deposits of the company.

16. According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, we are of the opinion that no funds raised on long term basis have been used for short term investment and funds raised on short term basis have been used for long term purposes except to the extent of funds invested in modernisation of plant for which loans were raised against fixed deposits with banks.

17. According to the information and explanations given to us, the Company has not made preferential allotment of equity and preference shares to companies covered in the register maintained under Section 301 of the Companies Act 1956.

18. During the year the Company has not issued any debenture.

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

20. As per the information and explanations given to us and on the basis of examination of records, no material fraud on or by the company was noticed or reported during the year.

For B. V. Shah & Associates

Chartered Accountants

Sd/-

Bharat V. Shah

Proprietor

M No. 040210

Place : Mumbai

Date : 01/09/2012

---

Mar 31, 2010

We have audited the Balance Sheet of VADILAL DAIRY INTERNATIONAL LIMITED as at 31st March 2010 and also the annexed Profit and Loss Account and the Cash Flow Statement of the Company 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 required that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes, examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall 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 issued by the Central Government of India in terms of sub section (4A) of section 227 of the Companies Act, 1956 and on the basis of such checks as we considered appropriate, and according to the information and explanation given to us, we enclose in the Annexure hereto a statement on the matters specified in paragraphs 4 and 5 of the said order to the extent applicable to the Company.

3. Further to our comments in the Annexure referred to in paragraph 2 above, we report that:

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

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

c) The Balance Sheet and Profit and Loss Account and Cash Flow Statement dealt with by this Report are in agreement with the books of accounts.

d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are incompliance with the accounting standards referred to in sub section (3c) of Section 211 of the Companies Act, 1956.

4. We further report that-

a) The Accounts have been prepared on going concern basis.

b) We are of the opinion, that to the best of our information and according to the explanation given to us the accounts read together with the accounting policies and the notes thereon, give information required by the Companies Act, 1956 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India.

c) In the case of Balance Sheet of the State of affairs of the Company as at 31.3.2010 and

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

e) I n so far as it relates to the Cash Flow Statement of the Cash Flow for the year ended on that date.

ANNEXURE REFFERED TO IN PARAGRAPH 4 OF AUDITORS REPORT OF EVEN DATE TO THE MEMBERS OF VADILAL DAIRY INTERNATIONAL LIMITED ON THE ACCOUNTS FOR THE YEAR ENDED 31st MARCH 2010.

1. In respect of its fixed assets:

a. The company has maintained proper records showing full particulars including quantitative details and situation of fixed assets on the basis of information available.

b. According to the information and explanations given to us, the fixed assets have been physically verified by the management during the year in a phased periodic manner, which in our opinion is reasonable, having regard to the size of the Company and nature of the assets. No material discrepancies were noticed on such verification.

2. In respect of its inventories:

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

b. The procedure of physical verification of inventories followed by the management is reasonable and adequate in relation to the size of the company and the nature of its business.

c. The company has maintained proper records of inventory. As explained to us, the discrepancies noticed in physical verification of the stock as compared to book records were not material and the same have been properly dealt with in the books of accounts.

3. In respect of loans covered under Section 301 of the Companies Act, 1956.

a. As per the information and explanation given to us and the records produced to us for our verification, the company had not granted loans, secured or unsecured, to any Company, Firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956.

b. The Company has taken unsecured loan from parties whose terms are not prejudicial to the interest of the company covered 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 exists an internal control system commensurate with the size of the Company and the nature of its business with regard to the purchases of inventories, fixed assets and with regard to sale o goods. As per the information given to us, no major weaknesses in the internal controls have been identified by the management or the internal audit department of the company during the year. During the course of our audit, nothing had come to our notice that may suggest a major weakness in the internal control systems of the company.

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

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

b. In our opinion and according to the information and explanations given to us, transactions exceeding value of Rs.500,000/- have been entered into during the financial year are reasonable and for price justification, reliance is placed on the information and explanation given by the management.

6. During the year the Company has not accepted any deposits under the provisions of Section 58A, 58AAof the Companies Act, 1956 and the Rules framed there under.

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

8. As per the explanation given to us, the company has not prepared the Cost records pursuant to the Rules made by the Central Government for maintenance of cost records under Section 209( 1 )(d) of the Companies Act, 1956 for the year 2009-2010

9. In respectof statutory dues:

a. According to the information and explanations given to us, undisputed statutory dues including provident fund, investor education and protection fund, income tax, wealth tax, Custom duty, excise duty, cess and other material statutory dues applicable to it have not been regularly deposited with the appropriate authorities though the delays in deposit have not been serious.

b. According to the information and explanation given to us, undisputed amounts payable in respect of sales tax, income tax, wealth tax, customs duty, excise duty and cess were in arrears as at 31.03.2010 for a period of more than six months from the date they became payable is as follows:

Sr. No. Name of the Statute Name of the Dues Amount Period to which the (in Lakhs) amounts relates

1 Central Excise Excise Duty 2.32 1990-91 to 1997-98 Act 1944

2 Central Sales Tax Act and Sales Tax Act of various states Sales Tax 47.60 2001-02

45.41 2002-03

65.78 2003-04

12.16 2004-05

0.93 CST

3 Maharashtra Industrial Development Corporation Water charges 3.68 Old Dues

4 Professional Tax Professional Tax 2.53 2004-05

2.30 2005-06

2.23 2006-07

2.32 2007-08 1.87 2008-09 1.42 2009-10

5 Service Tax Service Tax 4.04 2009-10

6 Income Tax Act 1961 TDS on Salaries 1.67 2004-05

1.06 2005-06

1.33 2006-07 1.23 2009-10

7 Income Tax Act 1961 TDS on Contractor 1.59 2009-10

8 Income Tax Act 1961 TDS on Prof. Fees 1.76 2009-10

9 Income Tax Act 1961 TDS on Royalty 1.36 2009-10

10 Income Tax Act 1961 Fringe Benefit Tax 2.16 2008-09

c. According to the information and explanation given to us, following are the various disputed liabilities against which appeals are pending with various statutory authorities:

Sr. No. Name of the Statute Nature of Amount of Dispute dues (Net) (In Lakhs)

1 Central Sales Tax Act Sales Tax 43.05 and Sales Tax Act of 12.60 various states 103.50

25.88 1.50 0.29 0.10

2 Central Excise Act 1944 Excise Duty 101.35

10.70



Name of the Statue Period to which Forum where the amounts relates dispute is pending

Central Sales Tax Act and Sales Tax Act of various states 1992-93 Deputy 1993-94 Commissioner

1994-95 of Sales Tax

1995-96

1999-00

2000-01

2001-02

Central Excise Act 1944 1-4-98 to Feb99 Custom, Excise & March 99 to June 99 Service Ta Appellate Tribunal

10. In our opinion, the accumulated losses are more than fifty percent of its net worth. The company has not incurred any cash losses during the financial year covered in the audit and also in the immediately preceding financial year.

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

12. In our opinion, the company is not a chit fund / nidhi / mutual benefit fund / society therefore the provision of clause 4 (xiii) of the Companies (Auditors Report) Order, 2003 are not applicable to the company.

13. The Company has dealt in Mutual Fund & Gold coin investments during the year.

14. As per the information and explanation given to us the Company has not given guarantees for loan taken by others from banks or financial institutions.

15. The Company has raised a term loan of Rs.20,00,000/- during the year.

16. According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, we are of the opinion that no funds raised on long term basis have been used for short term investment and funds raised on short term basis have been used for long term purposes except to the extent of accumulated losses.

17. According to the information and explanations given to us, the Company has not made preferential allotment of equity and preference shares to companies covered in the register maintained under Section 301 of the Companies Act 1956.

18. During the year the Company has not issued any debenture.

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

20. As per the information and explanations given to us and on the basis of examination of records, no material fraud on or by the company was noticed or reported during the year.

For B.V. Shah & Associates

Chartered Accountants

Bharat V.Shah

Proprietor MNo.040210

Place: Mumbai Date: 21/08/2010

---

Mar 31, 2009

We have audited the Balance Sheet of VADILAL DAIRY INTERNATIONAL LIMITED as at 31st March 2009 and also the annexed Profit and Loss Account and the Cash Flow Statement of the Company 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 required that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes, examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall 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 issued by the Central Government of India in terms of sub section (4A) of section 227 of the Companies Act, 1956 and on the basis of such checks as we considered appropriate, and -^ according to the information and explanation given to us, we enclose in the Annexure hereto a statement on the matters specified in paragraphs 4 and 5 of the said order to the extent applicable to the Company.

3. Further to our comments in the Annexure referred to in paragraph 2 above, we report that:

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

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

c) The Balance Sheet and Profit and Loss Account and Cash Flow Statement dealt with by this Report are in agreement with the books of accounts.

d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in compliance with the accounting standards referred to in sub section (3c) of Section 211 of the Companies Act, 1956.

4. We further report that-

a) The Accounts have been prepared on going concern basis as explained in the Note no. 1 of schedule 19.

b) Subject to Para (a) above, we are of the opinion, that to the best of our information and according to the explanation given to us the accounts read together with the accounting policies and the notes thereon, give information required by the Companies Act, 1956 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India.

c) In the case of Balance Sheet of the State of affairs of the Company as at 31.3.2009 and

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

e) In so far as it relates to the Cash Flow Statement of the Cash Flow for the year ended on that date.

ANNEXURE REFFERED TO IN PARAGRAPH 4 OF AUDITORS REPORT OF EVEN DATE TO THE MEMBERS OF VADILAL DAIRY INTERNATIONAL LIMITED ON THE ACCOUNTS FOR THE YEAR ENDED 31stMARCH 2009.

1. In respect of its fixed assets:

a. The company has maintained proper records showing full particulars including quantitative details and situation of fixed assets on the basis of information available.

b. According to the information and explanations given to us, the fixed assets have been physically verified by the management during the year in a phased periodic manner, which in our opinion is reasonable, having regard to the size of the Company and nature of the assets. No material discrepancies were noticed on such verification.

2. In respect of its inventories:

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

b. The procedure of physical verification of inventories followed by the management is reasonable and adequate in relation to the size of the company and the nature of its business.

c. The company has maintained proper records of inventory. As explained to us, the discrepancies noticed in physical verification of the stock as compared to book records were not material and the same have been properly dealt with in the books of accounts.

3. In respect of loans covered under Section 301 of the Companies Act, 1956.

a. As per the information and explanation given to us and the records produced to us for our verification, the company had not granted loans, secured or unsecured, to any Company, Firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956.

b. The Company has taken unsecured loan from parties whose terms are not prejudicial to the interest of the company covered 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 exists an internal control system commensurate with the size of the Company and the nature of its business with regard to the purchases of inventories, fixed assets and with regard to sale of goods. As per the information given to us, no major weaknesses in the internal controls have been identified by the management or the internal audit department of the company during the year. During the course of our audit, nothing had come to our notice that may suggest a major weakness in the internal control systems of the company.

5. In respect of transactions covered under Section 301 oftheCompaniesAct, 1956.

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

b. In our opinion and according to the information and explanations given to us, transactions exceeding value of Rs.500,000/- have been entered into during the financial year are reasonable and for price justification, reliance is placed on the information and explanation given by the management.

6. During the year the Company has not accepted any deposits under the provisions of Section 58A, 58AAof the Companies Act, 1956 and the Rules framed there under.

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

8. As per the explanation given to us, the company has not prepared the Cost records pursuant to the Rules made by the Central Government for maintenance of cost records under Section 209(1 )(d) of the Companies Act, 1956 for the year 2008-2009

9. In respectof statutory dues:

a. According to the information and explanations given to us, undisputed statutory dues including provident fund, investor education and protection fund, income tax, wealth tax, Custom duty, excise duty, cess and other material statutory dues applicable to it have not been regularly deposited with the appropriate authorities though the delays in deposit have not been serious, except in case of undisputed sales tax there are serious delays in large number of cases.

b. According to the information and explanation given to us, undisputed amounts payable in respect of sales tax, income tax, wealth tax, customs duty, excise duty and cess were in arrears as at 31.03.2009 for a period of more than six months from the date they became payable is as follows:

Sr.No. Name of the Statute Name of the Amount Dues (Rs. in Lakhs)

1. Central Excise Act 1944 Excise Duty 2.32

2. Central Sales Tax Act Sales Tax 34.84 and Sales Tax Act of Dept. 65.76 Various States 45.41 65.78 12.16 0.26

3.Maharashtra Industrial Water Charges 1.23 Development Corporation 1.09 0.86

4.Professional Tax Prof. Tax 2.53 2.30 2.23 2.32

1.87

5.Income Tax Act 1961 TDS on Salaries 1.67 1.13 1.33

.43

6.Income Tax Act 1961 TDS on contractor .45

7.Income Tax Act 1961 Fringe Benefit Tax 2.16



Name of the statue Period to which the amount relates

Central Excise Act 1944 1990-91 to 1997-98

Central Sales Tax Act and Sales Tax Act of 2000-01 Various States 2001-02 2002-03 2003-04 2004-05 Old Dues

Maharashtra Industrial Development Corporation Old Dues 2005-06 2006-07

Professional Tax 2004-05 2005-06 2006-07 2007-08 2008-09 Income Tax Act 1961 2004-05 2005-06 2006-07 2007-08

Income Tax Act 1961 2008-09

Income Tax Act 1961 2008-09

In addition to the above, a sum of Rs146.84 lacs (P.Y. Rs. 16.26 lacs) being VAT liability for the year 2008-09 has not been paid as per the Sanctioned Scheme of BIFR Para No.8.3 (A) (3).

c. According to the information and explanation given to us, following are the various disputed liabilities against which appeals are pending with various statutory authorities:

Sr.No. Name of the Nature of Amount of Statute Dues Dispute (Net) (Rs. in Lakhs)

1 Central Sales Tax Act Sales Tax 43.05 and Sales Tax Act 12.60 of various states 103.50 25.88 1.50 0.29 0.10

2 Central Excise Act Excise Duty 101.35 1944 10.70





Name of the Period to which Forum where Statue the amount relates dispute is pending

Central Sales Tax Act and Sales Tax Act of various states 1992-93 Dy. Commiss- 1993-94 ioner of Sales 1994-95 Tax 1995-96 1999-2000 2000-01 2001-002 Central Excise Act 1944 1-4-1998 to CESTAT Feb. 1999 before Mar. 1999 to Appelate June 1999 Tribunal

10. In our opinion, the accumulated losses are more than fifty percent of its net worth. The company has not incurred any cash losses during the financial year covered in the audit and also in the immediately preceding financial year.

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

12. In our opinion, the company is not a chit fund / nidhi / mutual benefit fund / society therefore the provision of clause 4 (xiii) of the Companies (Auditors Report) Order, 2003 are not applicable to the company.

13. The Company has not dealt or traded in shares, securities, debentures or other investments during the year.

14. As per the information and explanation given to us the Company has not given guarantees for loan taken by others from banks or financial institutions.

15. The Company has not raised any new term loan during the year.

16. According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, we are of the opinion that no funds raised on long term basis have been used for short term investment and funds raised on short term basis have been used for short term purposes except to the extent of accumulated losses.

17. According to the information and explanations given to us, the Company has not made preferential allotment of equity and preference shares to companies covered in the register maintained under Section 301 of the Companies Act 1956.

18. During the year the Company has not issued any debenture, in respect of debentures issued earlier the Company has created the security in favour of debenture holders.

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

20. As per the information and explanations given to us and on the basis of examination of records, no material fraud on or by the company was noticed or reported during the year.

For B. V. Shah & Associates Chartered Accountants BharatV. Shah Proprietor M No. 040210 Place: Mumbai Date: 21.08.09