Karuturi Global Ltd. இன் முடிவுகள்

Mar 31, 2018

Report on the Financial Statements

We have audited the accompanying Standalone Ind AS financial statements of KARUTURI GLOBAL LIMITED (“the Company”) which comprise the Balance Sheet as at March 31, 2018, the Statement of Profit and Loss, Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information. (herein after referred to as “standalone Ind AS financial statements”).

Management’s Responsibility for the Ind AS Financial Statements

The Company’s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (“the Act”) with respect to the preparation of these (Standalone) Ind AS financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

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

Auditor’s Responsibility

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

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

We have 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 Standalone Ind AS financial statements are free from material misstatement.

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

Basis for Qualified Opinion

- During the year, the Company has made sales amounting to Rs. 865.33 Lakhs and Purchasing amounting to Rs. 808.4 Lakhs, Wherein we observed that, there is a difference sales of 221.22 Lakhs and Purchase difference of 213.68 lakhs compared to VAT & GST returns filed by the Company. The company is not filing GST, VAT and TDS returns on time.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid Standalone Ind AS financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2018, and its Profit/Loss and its Cash Flow for the year ended on that date.

Report on Other Legal and Regulatory Requirements

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

2. As required by section 143 (3) of the Act, we 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 it appears from our examination of those books;

c. The Balance Sheet, the Statement of Profit and Loss (including other comprehensive income )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 Ind AS financial statements comply with the Indian 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 March 31, 2018 taken on record by the Board of Directors, the following directors are disqualified as on March 31, 2018 from being appointed as a director in terms of Section 164 (2) of the Act.

a. Sai Ramakrishna Karuturi

b. Anitha Karuturi

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

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

i. The Company has disclosed the impact of pending litigations on its financial position in its Standalone Ind AS financial statements.

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

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

“Annexure A” to the Independent Auditors’ Report

Referred to in paragraph 1 under the heading ‘Report on Other Legal & Regulatory Requirement’ of our report of even date to the financial statements of the Company for the year ended March 31, 2018:

1) (a) The Company has not maintained proper records showing full particulars, including quantitative details and situation of fixed assets;

(b) As per the explanation given to us, the Fixed Assets have not been physically verified by the management in a phased manner, designed to cover all the items over a period of three years. In our opinion, the system of Fixed Asset Verification adopted is reasonable having regard to the size of the company and nature of its business. Pursuant to the program, a portion of the fixed asset has been physically verified by the management during the year and no material discrepancies between the books records and the physical fixed assets have been noticed.

(c) The title deeds of movable and immovable properties are held in the name of the company, except Land at Doddaballapur and Car are not held in the name of company.

2) As per the information provided by the management , has conducted the physical verification of inventory at reasonable intervals.

3) As per the explanation given to us Company has not granted any loans, secured or unsecured to companies, firms, Limited Liability partnerships or other parties covered in the Register maintained under section 189 of the Act. Accordingly, the provisions of clause 3 (iii) (a) to (C) of the Order are not applicable to the Company and hence not commented upon.

4) In our opinion and according to the information and explanations given to us, the company has complied with the provisions of section 185 and I86 of the Companies Act, 2013 In respect of loans, investments, guarantees, and security.

5) The Company has not accepted any deposits from the public and hence the directives issued by the Reserve Bank of India and the provisions of Sections 73 to 76 or any other relevant provisions of the Act and the Companies (Acceptance of Deposit) Rules, 2015 with regard to the deposits accepted from the public are not applicable.

6) As informed to us, the maintenance of Cost Records has not been specified by the Central Government under sub-section (1) of Section 148 of the Act, in respect of the activities carried on by the company.

7) a) According to information and explanations given to us, the undisputed dues towards TDS, Sales Tax, Wealth Tax, Provident Fund, ESI and service tax have not been regularly deposited.

b) According to the information and explanations given to us, the undisputed dues towards TDS, Sales Tax, Wealth Tax Provident Fund, ESI and service tax which are outstanding for more than 6 months from the date they have become due are as follows:

Name of the statute	Nature of the dues	Amount (inLakhs)	Period to which the amount relates
Income Tax Act 1961	Tax Deducted at Source	214.21	AY 2015-16 and prior
Karnataka VAT Act 2003	Value Added Tax	2.49	AY 2013-14
Karnataka VAT Act 2003	Value Added Tax	1.71	AY 2014-15
Finance Act, 1994	Service Tax	2.27	AY 2010-11
Finance Act, 1994	Service Tax	37.42	AY 2011-12
Finance Act, 1994	Service Tax	0.56	AY 2014-15
Income Tax Act 1961	Tax Deducted at Source	30.33	AY 2016-17
Finance Act, 1994	Service Tax	0.25	AY 2015-16
Karnataka VAT Act, 2003	Value Added Tax	0.52	AY 2015-16
Finance Act,1994	Service Tax	0.16	AY 2016-17
Finance Act,1994	Service Tax	0.17	AY 2016-17

c) According to the information and explanations given to us, the company has defaulted in payment of Tax Deducted at Source on the provision of interest on FCCB during the assessment years 2013-14 to 2014-15 amounts to Rs. 656.62 Lakhs. Company has not provided for interest during the year.

d) According to the information and explanation given to us, and based on the records of the company, the dues outstanding in respect of income tax, sales tax, wealth tax, service tax and other statutory duties on account of any dispute are as follows:

Name of the Statute	Nature of the dues	Amount	Period to Which the Amount relates	Pending before the Authority
Finance Act,1994	Service Tax	172.62	A.Y2006-07	Commissioner/CESTAT(Appeals)
Income Tax Act 1961	Income Tax	863.44	A.Y2005-06	Commissioner(Appeals)Bangalore
Income Tax Act 1961	Income Tax	793.33	A.Y2006-07	High Court of Karnataka
		600.00	A.Y2006-07	Commissioner(Appeals)Bangalore
Income Tax Act 1961	Income Tax	1,850.91	A.Y2007-08	Commissioner(Appeals)Bangalore
Income Tax Act 1961	Income Tax	19,303.07	A.Y2008-09	Income Tax Appellate Tribunal,
		3,254.27	A.Y2009-10	Income Tax Appellate Tribunal,
		4,830.70	A.Y2010-11	Income Tax Appellate Tribunal,
Income Tax Act 1961	Income Tax	5,706.24	A.Y2011-12	Income Tax Appellate Tribunal,
Income Tax Act 1961	Income Tax	5,472.63	A.Y2012-13	Income Tax Appellate Tribunal,
		5,471.86	A.Y2013-14	Commissioner(Appeals)Bangalore
Income Tax Act 1961	Income Tax	1,493.84	A.Y2014-15	Commissioner(Appeals)Bangalore
Karnataka Tax on entry	Entry tax	0.97	A.Y2007-08	Joint Commissioner of Commercial Taxes,
of goods act,1979				Audit-13,VATDVO-1
Karnataka Tax on entry of	Entry tax	3.87	A.Y2008-09	Joint Commissioner of Commercial Taxes,
goods act,1979				Audit-13,VATDVO-1
Karnataka Tax on entry of	Entry tax	1.57		Joint Commissioner of Commercial Taxes,
goods act,1979				Audit-13,VATDVO-1

8) In our opinion and according to the information and explanations given to us, the Company has defaulted in the repayment of dues to banks and the same under dispute. The Company has not taken any loan either from financial institutions or from the government and has not issued any debentures.

9) Based upon the audit procedures performed and the information and explanations given by the management, the company has not raised moneys by way of initial public offer or further public offer including debt instruments and term Loans. Accordingly, the provisions of clause 3 (ix) of the Order are not applicable to the Company and hence not commented upon.

10) Based upon the audit procedures performed and the information and explanations given by the management, we report that no fraud by the Company or on the company by its officers or employees has been noticed or reported during the year.

11) Based upon the audit procedures performed and the information and explanations given by the management, no managerial remuneration has been paid or provided in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Companies Act;

12) In our opinion, the Company is not a Nidhi Company. Therefore, the provisions of clause 4 (xii) of the Order are not applicable to the Company.

13) In our opinion, all transactions with the related parties are in compliance with section 177 and 188 of Companies Act, 2013 and the details have been disclosed in the Standalone Ind AS Financial Statements as required by the applicable accounting standards.

14) Based upon the audit procedures performed and the information and explanations given by the management, the company has not made preferential allotment or private placement of shares. The requirement of Section 42 of Companies Act, 2013 have been complied with and the amount raised has been used for the purpose for which the funds were raised

15)Based upon the audit procedures performed and the information and explanations given by the management, the company has not entered into any non-cash transactions with directors or persons connected with him. Accordingly, the provisions of clause 3 (xv) of the Order are not applicable to the Company and hence not commented upon.

16)In our opinion, the company is not required to be registered under section 45 IA of the Reserve Bank of India Act, 1934 and accordingly, the provisions of clause 3 (xvi) of the Order are not applicable to the Company and hence not commented upon.

“Annexure B” to the Independent Auditor’s Report of even date on the Standalone Ind Financial Statements of KARUTURI GLOBAL LIMITED

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (“the Act”)

We have audited the internal financial controls over financial reporting of KARUTURI GLOBAL LIMITED(“the Company”) as of March 31, 2018 in conjunction with our audit of the standalone Ind AS financial statements of the Company for the year ended on that date.

Management’s Responsibility for Internal Financial Controls

The Company’s management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India”.] These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to company’s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013.

Auditors’ Responsibility

Our responsibility is to express an opinion on the Company’s internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the “Guidance Note”) and the Standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.

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

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

Meaning of Internal Financial Controls Over Financial Reporting

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

Inherent Limitations of Internal Financial Controls Over Financial Reporting

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

Basis for Qualified Opinion

The standard operating procedures and internal controls procedures are not established in the area of Sales, Purchases and Statutory dues transactions as evidenced in the basis of qualified opinion paragraph in audit report and in the annexure A. The default in filing of returns were observed & informed.

Opinion

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

For and on behalf of

H Muralidhar & Co

Chartered Accountants

Firm’s registration number: 011874S

H Muralidhar

Membership number: 220686

Place: Bangalore

Date: 30th May, 2018

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Mar 31, 2016

Independent Auditor''s Report

To

The Members of Karuturi Global Limited

Bangalore

Report on the Financial Statements

We have audited the accompanying financial statements of Karuturi Global Limited (“the Company”), (formerly known as Karuturi Networks Limited) which comprise the balance sheet as at 31 March 2016, the statement of profit and loss and the cash flow statement for the year then ended and a summary of significant accounting policies and other explanatory information.

Management''s Responsibility for the Financial Statements

The Company''s Board of Directors are responsible for the matters in ection134(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 Section133 of the Act, read with Rule7 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 in to account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made the re under.

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

An audit involves performing procedures to obtain audit evidence about the amounts and 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 statements.

Basis for Qualified Opinion

The Company has made turnover of Rs.1424.94 Lakhs of total sales and Purchases of Rs. 1,221.07 Lakhs during the year which comprises of local transaction of flowers, plants, budwoods& rootstocks. Demonstrable controls over the local transactions of sales of Rs. 1292.26 Lakhs and purchases of Rs. 1,180.86 Lakhs needs improvement and as there were no audit procedure for us to satisfy ourself, we are unable to comment the impact on income and expenses position in statement of profit and loss for the year.

Attention is invited to point no 2.29 forming part of the Financial Statement (“Notes”) regarding treatment of accumulated balance of Foreign Currency Monetary Translation Reserve (FCMTR). Wherein during the year, the advance given to its wholly owned subsidiary Karuturi Overseas Limited has been converted to equity and the resulting foreign exchange gain was transferred to statement of profit and loss account to the tune of Rs. 1488.85 Lakh as an income. As per para 15, read with para 31 and para 32 of the Accounting Standards - 11 “The Effect of changes in foreign exchange rates”, the accumulated amount in FCMTR account can be recognized as income only at the time of disposal of net investment in the non-integral foreign operations. In our opinion the said transaction does not tantamount to disposal of net investment and hence the above transaction results in departure from Accounting Standard - 11, as referred in section 133 of the Companies Act, 2013 resulting in overstatement of income to that extent.

Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matters specified in paragraph 1 & 2 of the Basis for Qualified Opinion Paragraph, 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;

I). in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2016;

ii). in the case of the Statement of Profit and Loss, of the profit 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.

Emphasis of Matters

We draw attention to the following matters in the Notes to the financial statements:

(a) Attention drawn to Note 2.3B forming part of Financial Statement (''Notes'') regarding the Company''s Foreign Currency Convertible Bonds (FCCBs) liability, which in carried at Rs. 40,721.04 Lakhs in the Balance sheet as at March 31, 2016. The FCCB loan was due for repayment on 19th October 2012 and the Company has defaulted in repayment of the same. The Company is not in a position to comply the conditions laid by RBI while approving the restructuring proposal during 2013-14 and hence company has discontinued providing interest since 2014-15. The company has not disclosed any strategic plan as to how the above liability will be discharged.

(b) Attention invited to note no 2.12 in notes regarding the Non-Current Investment, which includes investment in subsidiaries total amounting to Rs. 63,532.87 Lakhs, which are stated at cost. However the realizable value of these investments could not be ascertained as audited accounts of these entities are not received.

(c) Attention invited to note no 3.2 regarding outcome of various contingent liabilities and corporate guarantees given by the company and the possible exposure of the same on the Company''s financial statement and regarding the position of the company towards the court proceedings of Sale of its subsidiary Karuturi Telecom Private limited along with seizure of bank account by the Income Tax Department.

(d) The company has failed to appoint CFO & Whole Time Company Secretary as prescribed under the Companies Act, 2013. Company has not disclosed any strategic plan to comply the same.

Our opinion is not modified in respect of these matters.

Report on other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2015 (The Order) issued by the Central Government of India in terms of Section143(11) of the Act, we give annexure, a statement on the matters specified in paragraph 3 and 4 of the order.

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

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

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

c. the Balance Sheet, the 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 afore said financial statements comply with the Accounting Standards specified under Section133 of the Act, read with Rule 7 of the Companies (Accounts)Rules,2014 except to para 2 mentioned in basis of qualified opinion.

e. The going concern matter described in sub-paragraph (b) under the Emphasis of Matters paragraph above, in our opinion, may have an adverse effect on the functioning of the Company.

f. On the basis of written representations received from the directors as on 31March, 2016, taken on record by the Board of Directors, none of the director is disqualified as on 31 March, 2016, from being appointed as a director in terms of Section164(2) of the Act.

g. With respect to the other matters included in the Auditor''s Report and to our best of our information and according to the explanations given to us:

1) The Company has disclosed the impact of pending litigations on its financial position in its financial statements-Refer Note3.2 to the financial statements;

2) The Company did not have any long-term contracts including derivatives contracts for which there were any material fore seeable losses;

3) There has been no delay in transferring amounts, required to be transferred, to the Invest or Education and Protection Fund by the Company;

Annexure to Independent Auditor''s Report

(Referred to in paragraph 1 of our report of even date)

(I). (a) The company has not maintained the complete records showing the full particulars, including quantitative details and situation of fixed assets.

(b) As explained to us, the management has not verified the fixed assets during the year and adopted mechanism to verify the assets once in three years. The system of fixed asset verification program adopted by the management, which in our opinion, is reasonable, having regard to the size of the Company and the nature of assets. The frequency of physical verification is reasonable and no discrepancies observed during verifications have been properly dealt in the books of accounts;

(ii) (a) As explained to us, the inventories have been physically verified by the management on quarterly basis. In our opinion, the frequency of such verification is reasonable. However to strengthen the controls, external verification as a part of Internal audit shall be carried out.

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

(c) The company is maintaining certain records of inventory. In our opinion such records need improvements to ensure controls. As explained to us and certified by the management, there were no material discrepancies noticed on physical verification of inventory carried out at the end of the year as compared to the book records, having regard to size of the operations of the company.

(iii) (a) According to the information and explanation given to us, the company has not granted any loans, secured or unsecured, to companies, firms or other parties covered in the register maintained under section 189 of the Companies Act, 2013.

(b) The terms of repayment stipulates that the unsecured loans are repayable on demand. Interests due annually/quarterly.

(c) The company has not granted any loans covered under section189 of the act during the year.

(iv) In our opinion and according to the information and explanation given to us, the internal controls system is not commensurate with the size of the company and nature of its business with regard to purchase and sale of inventory. During the course of audit, we have observed the following weakness in internal control system of the company;

(a) The supporting documents for purchases and sales such as Purchase orders, Goods receipts notes, sales orders and delivery challans were not available in certain cases which are duly acknowledged by the internal auditors.

(b) The company has annual internal audit system covering the verification of transactions and controls. However, in our opinion, the internal audit system needs improvement in frequency as well as the scope of audit.

(c) The outstanding receivables and payables span across for more than 180 days for an amount of Rs. 990.59 Lakhs in case of receivables and Rs. 299.52 Lakhs in case of payable. Due to lack of reliable internal controls and alternate audit procedures, the impact of the same cannot be ascertained by us.

(v) During the year, company has not accepted any deposit falling under section 73 to 76 of the Act and rules framed there under and the directives of the Reserve bank of India.

(a) The amount of Rs. 360.93 lakhs have been transferred to Flower express FZE, which is the holding company of M/s.

Karuturi Limited, Kenya for meeting the legal and other expenses relating to receivership etc. The said amount has been transferred through Director''s account as the companies bank accounts are seized by income tax authorities.

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

(vii) (a) According to information and explanations given to us, the undisputed dues towards TDS, Sales Tax, Wealth Tax, Provident Fund, ESI and service tax have not been regularly deposited.

(b) According to the information and explanations given to us, the undisputed dues towards TDS, Sales Tax, Wealth Tax, Provident Fund, ESI and service tax which are outstanding for more than 6 months from the date they have become due are as follows:

Name of the statute	Nature of the dues	Amount (in Lakhs)	Period to which the amount relates
Income Tax Act 1961	Tax Deducted at Source	240.13	AY 2015-16 and prior to that
Karnataka VAT Act 2003	Value Added Tax	2.49	AY 2013-14
Karnataka VAT Act 2003	Value Added Tax	1.71	AY 2014-15
Finance Act, 1994	Service Tax	0.21	AY 2010-11
Finance Act, 1994	Service Tax	2.27	AY 2010-11
Finance Act, 1994	Service Tax	37.42	AY 2011-12
Finance Act, 1994	Service Tax	0.09	AY 2011-12
Finance Act, 1994	Service Tax	2.27	AY 2012-13
Finance Act, 1994	Service Tax	1.05	AY 2014-15
Income Tax Act 1961	Tax Deducted at Source	15.06	AY 2016-17
Finance Act, 1994	Service Tax	0.69	AY 2015-16
Karnataka VAT Act, 2003	Value Added Tax	0.63	AY 2015-16
Finance Act,1994	Service Tax	0.50	AY 2016-17

(c) According to the information and explanations given to us, the company has defaulted in payment of Tax Deducted at Source on the provision of interest on FCCB during the assessment years 2013-14 to 2014-15 amounts to Rs. 656.62 Lakhs. Company has not provided for interest during the year.

(d) According to the information and explanation given to us, and based on the records of the company, the dues outstanding in respect of income tax, sales tax, wealth tax, service tax and other statutory duties on account of any dispute are as follows:

Name of the Statute	Nature of the dues	Amount	Period to which the amount relates	Pending before the Authority
Finance Act,1994	Service Tax	172.62	A.Y2006-07	Commissioner/CESTAT(Appeals)
Income Tax Act 1961	Income Tax	863.44	A.Y2005-06	Commissioner(Appeals)Bangalore
Income Tax Act 1961	Income Tax	792.72	A.Y2006-07	Income Tax Appellate Tribunal, Bangalore
Income Tax Act 1961	Income Tax	1,850.91	A.Y2007-08	Commissioner(Appeals)Bangalore
Income Tax Act 1961	Income Tax	19,303.07	A.Y2008-09	Income Tax Appellate Tribunal, Bangalore and Commissioner (Appeals) Bangalore
Income Tax Act 1961	Income Tax	3,254.27	A.Y2009-10	Commissioner(Appeals)Bangalore
Income Tax Act 1961	Income Tax	4,830.70	A.Y2010-11	Commissioner(Appeals)Bangalore
Income Tax Act 1961	Income Tax	3,610.04	A.Y2011-12	Commissioner(Appeals)Bangalore
Karnataka Tax on entry of goods act, 1979	Entry tax	0.97	A.Y2005-06	Joint Commissioner of Commercial Taxes, Audit-13,VATDVO-1
Karnataka Tax on entry of goods act,1979	Entry tax	3.87	A.Y2007-08	Joint Commissioner of Commercial Taxes, Audit-13, VATDVO-1
Karnataka Tax on entry of goods act,1979	Entry tax	1.57	A.Y2008-09	Joint Commissioner of Commercial Taxes, Audit-13, VATDVO-1

(e) According to the information and explanations given to us, the company has not delayed in transfer of the amounts due to Investor Education and Protection Fund.

(viii)In our opinion, as at 31st March 2016, the accumulated losses of the company are not more than fifty percent of its net worth. Further, the company has not incurred cash losses during the financial year ended on that date or in the immediately preceding financial year.

(ix) According to the information and explanations given to us, the company has not defaulted in repayment of dues to the banks and debenture holders except the following :

(a) The company has defaulted in repayment of dues to Foreign Currency Convertible Bonds(FCCB) holders amounting to Rs. 40,721.04 Lakhs which became due for repayment on 19th October 2012.

(x) According to the information and explanations given to us, the terms and conditions on which the company has given guarantees for loans taken by subsidiaries from banks or financial institutions are not prejudicial to the interest of the company.

(xi) According to the information and explanations given to us and on an overall examination of the balance sheet of the company and due to the accounting transactions passed in the books of account, we are not able to comment on whether funds raised on short term basis have been used for long-term investment.

(xii) During the course of our examination of the books and records of the company, carried out in accordance with generally accepted auditing practices in India and according to the information and explanation given to us, we have neither come across any fraud on or by Company noticed or reported during the year, nor have been informed of such case by management.

For S BHAT AND ASSOCIATES Shrinivas Bhat

Chartered Accountants Partner

FRN: 014925S M.No. 228143

Place : Bangalore

Date : 31/05/2016

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Mar 31, 2014

We have audited the accompanying financial statements of Karuturi Global Limited ("the Company"), which comprise the Balance Sheet as at 31st March 2014, the Statement of Profit and Loss and the Cash Flow Statement of the Company 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 and financial performance 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 qualified audit opinion.

Basis for Qualified Opinion

1. During the year the Company has made Rs.1,409.60 lakhs of total sales turnover, which comprises local sales of Plants, Bud-wood and Root-stock amounting to Rs.860.73 lakhs over which there was no internal control on which we could rely for the purpose of our audit. There were no other satisfactory audit procedures that we could adopt to satisfy ourselves that the recorded turnover was free from material misstatement.

2. During the year the Company has made Rs.543.04 lakhs of the purchases, which comprises local purchases of Plants, Bud-wood and Root-stock amounting to Rs.472.13 lakhs over which there was no internal control on which we could rely for the purpose of our audit. There were no other satisfactory audit procedures that we could adopt to satisfy ourselves that the recorded turnover was free from material misstatement.

3. Attention is invited to note no. 2.29 forming part of the Financial Statements (''Notes'') regarding treatment of accumulated balance of Foreign Currency Monetary Translation Reserve (FCMTR). Wherein, during the year, the Company had opted for conversion of its Advance made to Karuturi Overseas Ltd (KOL), Dubai a wholly owned subsidiary to Equity investment, total amounting to Rs.6,798.66 lakhs (USD 125.00 lakhs). Consequently, an amount of Rs.2,037.79 lakhs had been transferred from the accumulated balance of Foreign Currency Monetary Translation Reserve (FCMTR) to Statement of Profit and Loss as exchange gain and treated as income during the year. As per para 15, read with para 31 and para 32 of the Accounting Standards-11 "The effects of changes in foreign exchange rates", the accumulated amount in FCMTR account can be transferred to Statement of Profit and Loss only at the time of disposal of net investments in the non-integral foreign operations and in our opinion, the said transaction of conversion of advance made to a non- integral foreign operation i.e., to a wholly owned subsidiary into an equity investment will not tantamount to disposal of net investment in the said subsidiary and in our opinion,, the said amount of Rs.2,037.79 lakhs should not have been transferred from FCMTR to Statement of Profit and Loss. Hence, the above transaction constitutes a departure from the Accounting Standards-11 "The effects of changes in foreign exchange rates" as referred to in sub-section (3C) of section 211 of the Companies Act, 1956 resulting overstatement of income to that extent.

Qualified Opinion

In our opinion and to the best of our knowledge and according to the information and explanations given to us, except for the effects of the matters described in paragraphs 1 to 3 of the Basis for Qualified Opinion paragraph, the said financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India.

i. in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2014;

ii. in the case of the Statement of Profit and Loss, of the profit 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.

Emphasis of Matters/ Other Matters:

1. Attention is invited to note no. 2.3 B forming part of the Financial Statements (''Notes'') regarding the Company''s Foreign Currency Convertible Bonds (FCCBs) liability, which is carried at Rs.35,990.37 lakhs (USD 606.65 lakhs) in the Balance Sheet as at March 31, 2014. The FCCB Loan was due for repayment on 19th October, 2012 and the Company has defaulted in repayment of the same. During the year the RBI has approved the restructured repayment proposal of the Company, conditionally, and as stated in the said note, the Company in turn is not in a position of meeting certain conditions relating to the all-in-cost as per ECB guidelines as stated in the conditional approval of the RBI. Out of the above liability, Rs.8,911.94 lakhs (USD 148.29 lakhs) has become due for repayment as per the proposed restructure plan also and has been classified under Other Current Liabilities. However, the Company has not disclosed any strategic plan as to how the above liability will be discharged.

2. Attention is invited to note no. 2.12 forming part of the Financial Statements (''Notes'') regarding the Non Current Investments, which includes investment in subsidiaries total amounting to Rs.52,520.89 lakhs, which are stated at cost. However, the realisable value of these investments could not be ascertained as audited accounts of these entities are not received.

3. Attention is invited to note no. 2.16 forming part of the Financial Statements (''Notes'') regarding the Trade Receivables, wherein the overseas trade receivable are disclosed at net of advance received for export sales orders.

4. Attention is invited to note no. 3.2 forming part of the Financial Statements (''Notes'') regarding the outcome of the various contingent liabilities and corporate guarantees given by the Company and the possible exposure of the same on the Company''s financial statement.

5. Attention is invited to note no. 3.2 forming part of the Financial Statements (''Notes'') regarding the seizure of bank accounts by the Income Tax Department.

Our report is not qualified in respect of these matters.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2003 ("the Order") 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, 2014, and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2014, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the 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 referred to in paragraph "Report on Other Legal and Regulatory Requirements" of our report of even date on accounts of Karuturi Global Limited for the year ended 31st March, 2014.

1. In respect of its fixed assets:

a. The Company has not maintained proper records showing full particulars including quantitative detail, situation and description of fixed assets.

b. All the fixed assets have not been physically verified by the management during the year and there is no regular program for verification.

c. The Company has not disposed of substantial part of fixed assets during the year and the going concern status of the Company is not affected.

2. In respect of its inventories:

a. As explained to us, inventories have been physically verified by the management during the year. In our opinion, the frequency of verification needs improvement.

b. In our opinion and according to the information and explanations given to us, the existing procedures of physical verification of inventories followed by the management are not adequate in relation to the size of the Company and the nature of its business and needs improvement.

c. The Company is maintaining certain records of inventory. In our opinion, such records need to be improved to have a proper control on the inventory. As explained to us and certified by the management, there were no material discrepancies noticed on physical verification of inventory carried out at the end of the year as compared to the book records, having regard to the size of the operations of the Company.

3. In respect of register maintained under section 301 of the Companies Act, 1956:

a. According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured, to companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Accordingly, the provisions stated in paragraph 4 (iii) (b), (c) and (d) of the Order are not applicable.

b. During the year, the Company had taken loan from three parties covered in the register maintained under section 301 of the Companies Act, 1956. The Maximum amount involved during the year was Rs. 7,666.62 Lakhs and the year-end balance of all loans taken from all such parties was Rs. 5,511.60 Lakhs.

c. In our opinion, the rate of interest and other terms and conditions for such loans are not, prima facie, prejudicial to the interest of the Company.

d. In respect of the aforesaid loans, the loan is repayable on demand.

4. In our opinion and according the information and explanations given to us, the internal control system is not commensurate with the size of the Company and the nature of its business with regard to purchase of inventory, sale of goods and fixed assets. During the course of audit, we have observed the following weakness in internal control system of the Company;

a) Purchase order and goods receipt notes are not prepared for recording purchase and inventory in certain cases.

b) Sales order and delivery challans are not prepared for recording sale of goods in certain cases.

c) The sales documents such as proof of transportation, proper acknowledgement by the buyer for having the goods received are not made available to us.

d) Purchase of root-stock, bud-wood and plants are paid either in cash or by the barter system basis and the transactions are settled on net basis.

e) Sales of root-stock, bud-wood and plants are received either in cash or by the barter system basis and the transactions are settled on net basis.

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 particulars of contracts or arrangements referred to in section 301 of the Companies Act, 1956 that need to be entered into in the register maintained under Section 301 of the Companies Act, 1956 have been so entered.

b. In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under Section 301 of the Companies Act, 1956 and exceeding the value of rupees five lakhs in respect of any party during the year have been entered into during the financial year at prices which are reasonable having regard to prevailing market prices at the relevant time.

6. In our opinion and according to the information and explanations given to us, the Company has not complied with the provisions of Section 58A/ 58AA, Companies (Acceptances of Deposits) Rules, 1975 and other relevant provisions of the Companies Act, 1956 with regards to the deposits accepted from public. The Company has, in earlier years and during the year, accepted deposits from its directors Mr. Sai Ramakrishna Karuturi and Ms. Anitha Karuturi who are also members of the company and the amount accepted during the year were Rs.201.26 lakhs and Rs.509.20 lakhs respectively and the year-end balances were Rs. 622.82 Lakhs and Rs. 1,861.40 Lakhs respectively, which were transferred to a KMP Related Entity, M/s. Rhea Holding (P) Ltd at the year end. Also, it has accepted a loan from a person of general public amounting to Rs.134 lakhs, at the year-end balance of the same is Rs. NIL. According to the information and explanations given to us, no Order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal on the company in respect of the aforesaid deposits.

7. As per the information and explanations given to us, the company has an internal audit system conducted by external auditors on annual basis. However, no internal audit reports have been furnished for our review. Hence, we are unable to comment on the adequacy of the internal audit system existing in the company.

8. The Central Government has not prescribed maintenance of cost records under clause (d) of sub-section (1) of Section 209 of the Companies Act, 1956 for any of the products of the company.

9. In respect of statutory dues:

a. Undisputed statutory dues including provident fund, investor education and protection fund, employees'' state insurance, income-tax, Income Tax Deducted at source (TDS), sales- tax, wealth-tax, service-tax have not been regularly deposited with the appropriate authorities and there have been considerable delays.

b. According the information and explanations given to us, undisputed dues in respect of provident fund, investor education and protection fund, employees'' state insurance, income- tax, income tax deducted at source (TDS), sales-tax, wealth-tax, service-tax and other statutory dues which were outstanding at the year-end for a period of more than six months from the date they became payable are as follows.

Name of the Statute Nature of the Amount Period to which dues the amount relates

Tax Collected at Income Tax Act, 1961 source 0.01 Lakhs AY 2013-14

Tax Collected at Income Tax Act, 1961 source 0.03 Lakhs AY 2014-15

Income Tax Act, 1961 Income Tax 182.24 Lakhs AY 2012-13

AY 2014-15 & Tax Deducted at Income Tax Act, 1961 source 39.70 Lakhs Prior to AY 2014- 15

Tax Deducted at Income Tax Act, 1961 source 469.34 Lakhs AY 2014-15

Tax Deducted at Income Tax Act, 1961 source 187.29 Lakhs AY 2013-14

Karnataka Value Added Value Added 2.49 Lakhs AY 2013-14 Tax Act, 2003 Tax

Karnataka Value Added Value Added 1.71 Lakhs AY 2014-15 Tax Act, 2003 Tax

Finance Act, 1994 Service Tax 9.66 Lakhs AY 2009-10

Finance Act, 1994 Service Tax 0.21 Lakhs AY 2010-11

Finance Act, 1994 Service Tax 0.21 Lakhs AY 2011-12

Finance Act, 1994 Service Tax 37.42 Lakhs AY 2011-12

Finance Act, 1994 Service Tax 0.09 Lakhs AY 2011-12

Finance Act, 1994 Service Tax 2.27 Lakhs AY 2013-14

Finance Act, 1994 Service Tax 0.51 Lakhs AY 2014-15

c. According to the information and explanation given to us, and based on the records of the company, the dues outstanding in respect of income-tax, sales-tax, wealth-tax, service-tax and other statutory duties on account of any dispute, are as follows:

Name of the Nature of Amount Period to Statute the dues which the amount relates

Finance Act, Service Tax 172.62 AY 2006-07 1994 Lakhs

Income Tax Act Income 863.44 AY 2005-06 1961 Tax Lakhs

Income Tax Act Income 792.72 AY 2006-07 1961 Tax Lakhs

Income Tax Act Income 1,850.91 AY 2007-08 1961 Tax Lakhs

Income Tax Act Income 6,902.34 AY 2008-09 1961 Tax Lakhs

Income Tax Act Income 3,254.27 AY 2009-10 1961 Tax Lakhs

Income Tax Act Income 5,064.47 AY 2010-11 1961 Tax Lakhs

Karnataka Tax Entry Tax 0.97 Lakhs AY 2005-06 on Entry of Goods Act, 1979

Karnataka Tax Entry Tax 3.87 Lakhs AY 2007-08 on Entry of Goods Act, 1979

Karnataka Tax Entry Tax 1.57 Lakhs AY 2008-09 on Entry of Goods Act, 1979



Name of the Statute Pending before the authority

Finance Act, 1994 Commissioner/CEST AT (Appeals)

Income Tax Act 1961 Commissioner (Appeals) Bangalore

Income Tax Act 1961 Income Tax Appellate Tribunal Bangalore

Income Tax Act 1961 Commissioner (Appeals) Bangalore

Income Tax Act 1961 Income Tax Appellate Tribunal Bangalore

Income Tax Act 1961 Commissioner (Appeals) Bangalore

Income Tax Act 1961 Dispute Resolution Panel

Karnataka Tax on Entry of Joint Commissioner of Commercial Taxes, Goods Act 1979 Audit-13, VAT DVO - 1

Karnataka Tax on Entry of Joint Commissioner of Commercial Taxes, Goods Act 1979 Audit-13, VAT DVO - 1

Karnataka Tax on Entry of Joint Commissioner of Commercial Taxes, Goods Act 1979 Audit-13, VAT DVO - 1

10. In our opinion, as at 31st March 2014 the accumulated losses of the company are not more than fifty percent of its net worth. Further, the company has not incurred cash losses during the financial year ended on that date or in the immediately preceding financial year and hence reporting under clause 4(x) does not arise.

11. In our opinion and according to the information and explanations given to us,

The Company had defaulted in repayment of principal dues to Axis Bank, amounting to Rs.2,000 lakhs which became due for repayment on 13th February 2013. However, the company has repaid the same with interest total amounting to Rs.2,101.27 lakhs on 28th June 2013.

The Company has also defaulted in repayment of dues to Foreign Currency Convertible Bond (FCCB) holders amounting to Rs.35,990.37 lakhs (including additional interest payable till 31st March, 2014) which became due for repayment on 19th October, 2012.

12. According to the information and explanations given to us and based on the documents are records produced to us, the company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities and hence reporting under Para 4(xii) of the Order does not arise.

13. The Company is not a chit fund or a nidhi /mutual benefit fund/Society. Hence, the provisions of para 4(xiii) of the Companies (Auditor''s Report) Order, 2003 are not applicable to the company.

14. The Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of para 4(xiv) of the Companies (Auditor''s Report) Order, 2003 are not applicable to the Company.

15. In our opinion and according to the information and explanations given to us, the terms and conditions on which the company has given guarantees for loans taken by others from banks or financial institutions are not prejudicial to the interest of the company.

16. According to the information and explanations given to us, the Company has not obtained any term loans during the financial year covered by our audit report.

17. According to the information and explanations given to us and on an overall examination of the balance sheet of the company and due to the accounting transactions passed in the books of account,

we are not able to comment on whether funds raised on short-term basis have been used for long- term investment.

18. According to the information and explanations given to us, the Company has not made any preferential allotment of shares to parties and companies covered in the Register maintained under Section 301 of the Act during the year under audit and hence reporting under Para 4(xviii) of the Order does not arise.

19. According to the information and explanations given to us, during the period covered by our audit report, the company has not issued debentures. Accordingly, the provisions of para 4(xix) of the Companies (Auditor''s Report) Order, 2003 are not applicable to the Company.

20. According to the information and explanations given to us, during the period covered by our audit report, the company has not raised money by way of public issue. Accordingly, the provisions of para 4(xx) of the Companies (Auditor''s Report) Order, 2003 are not applicable to the Company.

21. During the course of our examination of the books and records of the company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of fraud on or by the company, noticed or reported during the year, nor have we been informed on such case by the management.

Place: Bangalore For YCRJ & Associates Date: 30th May 2014 Chartered Accountants Firm Regn No. 006927S

Yashavanth Khanderi Partner M.No: 029066

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Mar 31, 2012

We have audited the attached Balance Sheet of Karuturi Global Limited, Bangalore as at 31st March 2012 and also the Profit and Loss Account and Cash Flow Statement of the Company for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We have 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 financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In accordance with the provisions of Section 227 of the Companies Act, 1956, we report that:

1. As required by the Companies (Auditor's Report) Order, 2003 as amended by Companies (Auditor's Report) (Amendment) Order, 2004, issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, and on the basis of such checks of the books and records of the Company as we considered appropriate and according to the information and explanations given to us, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

2. 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 purposes of our audit;

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

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

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

e) on the basis of the written representations received from the Directors as on 31st March 2012, and taken on record by the Board of Directors, we report that none of the Director is disqualified from being appointed as a Director of the Company in terms of clause (g) of Sub Section (1) of Section 274 of the Companies Act, 1956 as on 31st March 2012.

In our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with significant accounting policies and the notes appearing thereon, give the information required by the Companies Act, 1956, in the manner so required and gives a true and fair view in conformity with the accounting principles generally accepted in India:

1. In the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2012;

2. In the case of the Profit and Loss Account, of the profit of the Company for the year ended on that date; and

3. 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 paragraph (1) of our report of even date)

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

b) The fixed assets have been physically verified by the management during the year in a phased periodical manner, which in our opinion is reasonable, having regard to the size of the Company and nature of its business. No material discrepancies were noticed on such physical verification.

c) In our opinion, the Company has not disposed off any substantial part of fixed assets so as to affect its going concern status.

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

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

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

III. a) As per the information and explanation given to us, the Company has not granted any loans to Companies ,firms or other parties listed in the register maintained under section 301 of the Companies Act,1956.

b) The Company has in previous years taken unsecured interest free loans from two directors and from a Company listed in the register maintained under section 301 of the Companies Act,1956. maximum amount outstanding during the year is Rs 4658.25 lakhs and year end outstanding is Rs 3965.32Lkahs

c) These loans are interest free in nature and we are of the opinion that the other terms and conditions are prima facie not prejudicial to the interest of the Company.

d) As per the information furnished to us, there are no irregularities in repayment of principle amount

IV. In our opinion and according to the information and explanations provided to us, there are adequate internal control system commensurate with the size of the Company and nature of its business for purchase of inventories, fixed assets and sale of goods and services. During the course of audit, we have neither come across nor have been informed of any continuing failure to correct major weaknesses in the aforesaid internal control system.

V. a) According to the information and explanations given to us, we are of the opinion that the particulars of contracts or arrangements that need to be entered in the Register maintained under Section 301 of the Companies Act, 1956 have been entered.

b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangements entered in the Register maintained under Section 301 of the Companies Act, 1956 in respect of any party during the year have been made at prices which are reasonable having regard to prevailing market prices at the relevant time.

VI. The Company has not accepted any deposits from the public and hence provisions of Section 58A and 58AA of the Companies Act, 1956 and Companies (Acceptance of Deposit) Rules, 1975 are not applicable to the Company for the year under review.

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

VIII. The Central Government has not prescribed maintenance of cost records under clause (d) of sub-section (1) of Section 209 of the Companies Act, 1956 in respect of any of the activities of the Company.

IX. a) The Company has been generally regular in depositing with appropriate authorities undisputed statutory dues including provident fund, investor education and protection fund, employees state insurance, income tax, sales tax, wealth tax, , custom duty, service tax, excise duty, cess and other material statutory dues as applicable to it though there has been a slight delay in few cases.

b) According to information and explanation given to us, no undisputed amount payable in respect of income tax, sales tax, wealth tax, service tax customs duty, excise duty and cess were in arrears as at 31st March 2012 for a period of more than six months from the date they became payable except Service Tax dues of Rs 37.42 Lakhs

c) According to the records of the Company, the dues outstanding of income tax, sales tax, custom duty, wealth tax, service tax ,excise duty and cess that have not been deposited on account of any dispute are as follows:

Name of the Nature of Amount un Period to which From where disputing is Statute dues paid the amounts relates pending

Income Tax Income Tax 7667.99 Assessment Year Commissioner Act,1961 Liability 2007-08 (Appeals) Bangalore

Karnataka Entry Tax 2.50 Financial Year Deputy Commissioner Taxon Entry of 2006-07 & of Commercial Tax Goods Act 2007-08 Audit-13,VAT Division -1

The Finance Act, Service Tax 172.62 Financial Year Commissioner/ 1994 2005-06 CESTAT(Appeals)

X. The Company has no accumulated losses as at 31st March 2012 and it has not incurred cash losses in the financial year ended on that date or in the immediately preceding financial year.

XI. Based on our audit procedures and according to the information and explanation given to us, the Company has not defaulted in repayment of dues to any financial institution or banks.

XII. Based on our examination and 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, during the year.

XIII. The provisions of any special statute applicable to chit fund / nidhi / mutual benefit fund / societies are not applicable to the Company.

XIV. In our opinion and according to the information and explanations given to us, the Company is not a dealer or trader in securities. The investment made by the Company are held in its own name.

XV. According to the information and explanation given to us, the Company has given guarantee for loans taken by its subsidiaries /step down subsidiaries from banks, the terms and conditions whereof in our opinion are not prima-facie prejudicial to the interests of the Company.

XVI. In our opinion and according to the information and explanations given to us, and on overall basis, the term loans taken by the Company have been applied for the purpose for which they were obtained.

XVII. According to the information and explanations given to us, and on overall examination of the Balance Sheet of the Company, we report that funds raised on short term basis have, prima facie, not been used during the year for long term investments.

XVIII. According to the information and explanations given to us, during the year under review, the Company has not made preferential allotment of shares to parties covered in the register maintained under section 301 of the Act .

XIX. The Company did not have any outstanding debentures during the year under review.

XX. The Company has not raised any monies by way of public issue during the year.

XXI. During the course of our examination of the books and records of the Company, carried out with the generally accepted auditing practices in India, and according to the information and explanations given to us by the management, we have neither come across any instances of material fraud on or by the Company, noticed or reported during the year, nor we have been informed of such case by the management.

For Ishwar & Gopal,

Chartered Accountants

K V Gopalakrishnayya

Membership No.: 021748

Firm Registration No.: 001154S

Place: Bangalore

Date : 4th September,2012

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Mar 31, 2011

We have audited the attached Balance Sheet of Karuturi Global Limited, Bangalore as at 31st March 2011 and also the Profit and Loss Account and Cash Flow Statement of the Company for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

We have 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 financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In accordance with the provisions of Section 227 of the Companies Act, 1956, we report that:

1. As required by the Companies (Auditor's Report) Order, 2003 as amended by Companies (Auditor's Report) (Amendment) Order, 2004, issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, and on the basis of such checks of the books and records of the Company as we considered appropriate and according to the information and explanations given to us, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

2. 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 purposes of our audit;

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

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

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

e) on the basis of the written representations received from the directors as on 31st March 2011, and taken on record by the Board of Directors, we report that none of the director is disqualified from being appointed as a Director of the Company in terms of clause (g) of Sub Section (1) of Section 274 of the Companies Act, 1956 as on 31st March 2011.

In our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with significant accounting policies and the notes appearing thereon, give the information required by the Companies Act, 1956, in the manner so required and gives a true and fair view in conformity with the accounting principles generally accepted in India:

1. in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2011;

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

3. 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 paragraph (1) of our report of even date)

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

b) The fixed assets have been physically verified by the management during the year in a phased periodical manner, which in our opinion is reasonable, having regard to the size of the Company and nature of its business. No material discrepancies were noticed on such physical verification.

c) In our opinion, the Company has not disposed off any substantial part of fixed assets so as to affect its going concern status.

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

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

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

III. a) The Company has granted unsecured interest free unsecured loans to four wholly owned subsidiary

Companies listed in the Register maintained under section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs 53,005.17 Lakhs and the year end balance was Rs 52,892.62 Lakhs.

b) These loans are given to wholly owned subsidiaries, and hence we are of the opinion that the non- charging interest is prima facie not prejudicial to the interest of the company.

c) Since the repayment schedule has not been fixed, we cannot comment whether there are any overdue and receipt of the principal amount is regular.

d) The Company has taken unsecured interest free loan from four parties listed in the Register maintained under section 301 of the Companies Act, 1956. Amounting Rs 3,014.87 Lakhs The maximum amount involved during the year was Rs 3,951.02 Lakhs and the year end balance was Rs 3,014.87 Lakhs.

e) These loans are interest free in nature and hence we are of the opinion that they are prima facie not prejudicial to the interest of the company.

f) Since the repayment schedule is not fixed we cannot comment whether repayment of the principal amount is regular.

IV. In our opinion and according to the information and explanations provided to us, there are adequate internal control systems for purchase of inventories, fixed assets and sale of goods and services, commensurate with the size of the Company and the nature of its business. With regard to the purchase of flowers and inventories the existing internal control system needs to be strengthened to make it commensurate with the size of company and the nature of its business. However we have neither come across nor have been informed of any continuing failure to correct major weaknesses in the aforesaid internal control system.

V. a) According to the information and explanations given to us, we are of the opinion that the particulars of contracts or arrangements that need to be entered in the Register maintained under Section 301 of the Companies Act, 1956 have been entered. b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangements entered in the Register maintained under Section 301 of the Companies Act, 1956 in respect of any party during the year have been made at prices which are reasonable having regard to prevailing market prices at the relevant time.

VI. The Company has not accepted any deposits from the public and hence provisions of Section 58A and 58AA of the Companies Act, 1956 and Companies (Acceptance of Deposit) Rules, 1975 are not applicable to the Company for the year under review.

VII. In our opinion, the internal audit system of the Company needs to be strengthened to make it commensurate with the size and nature of its business.

VIII. The Central Government has not prescribed maintenance of cost records under clause (d) of sub- section (1) of Section 209 of the Companies Act, 1956 in respect of any of the activities of the Company.

IX. a) According to the information and explanations given to us and the records of the Company examined by us, in our opinion, the Company is generally regular in depositing with undisputed statutory dues including provident fund, investor education and protection fund, employees state insurance, income tax, sales tax, wealth tax, service tax, custom duty, excise duty, cess and other material statutory dues as applicable with the appropriate authorities. There are no arrears of outstanding statutory dues as at 31st March 2011 for a period of more than six months from the date they became payable. b) According to the records of the company and the information and explanations given to us, there are no dues in respect of Sales tax, Income tax, Custom duty, wealth tax, Excise duty and Cess, Service Tax that have not been deposited on account of any dispute other than as stated here in under:

Name of the Nature of Amount un Period to which From where disputing is pending

Statute dues paid the amounts relates

Rs in lakhs (Assessment Year) Income Tax Act,1961 Income Tax 219.00 2006-07 Commissioner of IncomeTax (Appeals) -IBangalore

Karnataka Tax Entry Tax 2.50 Financial The Deputy Commercial of Commercial Taxes, Audit -13, VAT Division -1 Year on Entry of 2006-07 and 2007-08 Goods Tax Act

Finance Act,1994 Service Tax 172.62 2005-06 Commissioner/ CESTAT (Appeals)

X. The Company has no accumulated losses as at 31st March 2011 and it has not incurred cash losses in the financial year ended on that date or in the immediately preceding financial year.

XI. Based on our audit procedures and according to the information and explanation given to us, the Company has not defaulted in repayment of dues to any financial institution or bank as at the Balance Sheet date.

XII. Based on our examination and 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, during the year.

XIII. The provisions of any special statute applicable to chit fund / nidhi / mutual benefit fund / societies are not applicable to the Company.

XIV. In our opinion and according to the information and explanations given to us, the Company is not a dealer or trader in securities. The Company has not invested in any securities in its own name.

XV. As per the information furnished to us, the corporate guarantee given by the Company for loans taken by an erstwhile 100%subsidiary from a bank is continuing even after the sale of entire holdings by the Company. Further the Company has given guarantees for the loans availed by the wholly owned subsidiaries from banks and financial institutions. In our opinion the terms and conditions of this guarantee are prima facie not prejudicial to the interest of the Company.

XVI. In our opinion and according to the information and explanations given to us, and on overall basis, the term loans taken by the Company have been applied for the purpose for which they were obtained.

XVII. According to the information and explanations given to us, and on overall examination of the Balance Sheet of the Company, we report that funds raised on short term basis have, prima facie, not been used during the year for long term investments.

XVIII. According to the information and explanations given to us, the company has made preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Act. In our opinion, the price at which shares have been issued is not prejudicial to the interest of the Company.

XIX. During the year under review, the Company has not issued any debentures. Hence, this clause is not applicable.

XX. We have verified the end use of money raised by the issue of Global Depository Receipts during the year under review as disclosed in the notes to the financial statements.

XXI. During the course of our examination of the books and records of the Company, carried out with the generally accepted auditing practices in India, and according to the information and explanations given to us by the management, we have neither come across any instances of material fraud on or by the Company, noticed or reported during the year, nor we have been informed of such case by the management..

For Ishwar & Gopal, Chartered Accountants

K V Gopalakrishnayya Membership No.: 021748 Firm Registration No.:001154S

Place: Bangalore

Date : August 12, 2011

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Mar 31, 2010

We have audited the attached Balance Sheet of Karuturi Global Limited, Bangalore as at 31st March 2010 and also the Profit and Loss Account and Cash Flow Statement of the Company for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We have 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 financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In accordance with the provisions of Section 227 of the Companies Act, 1956, we report that:

1. As required by the Companies (Auditors Report) Order, 2003 as amended by Companies (Auditors Report) (Amendment) Order, 2004, 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 of the books and records of the Company as we considered appropriate and according to the information and explanations given to us, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

2. 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 purposes of our audit;

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

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

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

e) On the basis of the written representations received from the directors as on 31st March 2010, and taken on record by the Board of Directors, we report that none of the director is disqualified from being appointed as a Director of the Company in terms of clause (g) of Sub Section (1) of Section 274 of the Companies Act, 1956 as on 31st March 2010.

In our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with significant accounting policies and the notes appearing thereon, give the information required by the Companies Act, 1956, in the manner so required and gives a true and fair view in conformity with the accounting principles generally accepted in India:

1. In the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2010;

2. In the case of the Profit and Loss Account, of the profit of the Company for the year ended on that date; and

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

Annexure To The Auditors Report (Annexure Referred to paragraph (1) of our report of even date) Re: KARTURI GLOBAL LIMITED

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

b) The fixed assets have been physically verified by the management during the year in a phased periodical manner, which in our opinion is reasonable, having regard to the size of the Company and nature of its business. No material discrepancies were noticed on such physical verification.

c) In our opinion, the Company has not disposed off any substantial part of fixed assets so as to affect its going concern status.

II. a) As explained to us, inventories have been physically verified by the management at reasonable

intervals during the year. In our opinion, the frequency of verification is reasonable.

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

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

III. a) The Company has granted interest free unsecured loan amounting to Rs.9872.48 lakhs (Maximum

amount involved during the year is Rs. 18864.09 lakhs) to two subsidiaries which is listed in the Register maintained under Section 301 of the Companies Act, 1956;

b) These loans are given to wholly owned subsidiaries, and hence we are of the opinion that the non charging of interest is prima facie not prejudicial to the interest of the company.

c) Since, the repayment schedule has not been fixed, we cannot comment whether there are any overdues and receipt of the principal amount is regular.

d) The Company has taken unsecured interest free loans from six parties amounting to Rs. 2393.69 lakhs during the year from three directors and three wholly owned subsidiaries. (Maximum amount involved during the year is Rs.1268.17 lakhs). No repayment schedule is fixed for the same.

e) These loans are interest free in nature, and hence we are of the opinion that they are prima facie not prejudicial to the interest of the company.

f) Since, the repayment schedule is not fixed, we cannot comment whether the payment of the principal amount is regular.

IV In our opinion and according to the information and explanations provided to us, there are adequate internal control systems for purchase of fixed assets commensurate with the size of the Company and the nature of its business. With regard to purchase and sale of flowers and inventories, the existing internal control system needs to be strengthened to make it commensurate with the size of the Company and the nature of its business. However, we have neither come across nor have been informed of any continuing failure to correct major weaknesses in the aforesaid internal control system.

V. a) According to the information and explanations given to us, we are of the opinion that the particulars of

contracts or arrangements that need to be entered in the register maintained under Section 301 of the Companies Act, 1956 have been entered.

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

VI. The Company has not accepted any deposits from the public and hence provisions of Section 58A and 58AA of the Companies Act, 1956 and Companies (Acceptance of Deposit) Rules, 1975 are not applicable to the Company for the year under review.

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

VIII. The Central Government has not prescribed maintenance of cost records under clause (d) of subsection (1) of Section 209 of the Companies Act, 1956 in respect of any of the activities of the Company.

IX. a) According to the information and explanations given to us and the records of the Company examined by

us, in our opinion, the Company is generally regular in depositing with undisputed statutory dues

including provident fund, investor education and protection fund, employees state insurance, income tax, sales tax, wealth tax, service tax, custom duty, excise duty, cess and other material statutory dues as applicable with the appropriate authorities. There are no arrears of outstanding statutory dues as at 31st 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 the information and explanations given to us, there are no dues in respect of sales tax, custom duty, wealth tax, excise duty and cess that have not been deposited on account of any dispute. The particulars of income tax which have not been deposited as on 31st March 2010 on account of dispute is as under:

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

Income Tax Rs. 319 lakhs Assessment Commissioner (net of Year 2006-07 of Income

Act, 1961 Rs. 400 lakhs deposited Tax (Appeals) - I, Bengaluru with the authorities)

X. The Company has no accumulated losses as at 31st March 2010 and it has not incurred cash losses in the financial year ended on that date or in the immediately preceding financial year.

XI. Based on our audit procedures and according to the information and explanation given to us, the Company has not defaulted in repayment of dues to any financial institution or bank as at the Balance Sheet date.

XII. Based on our examination and 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, during the year.

XIII. The provisions of any special statute applicable to chit fund / nidhi / mutual benefit fund / societies are not applicable to the Company.

XIV. In our opinion and according to the information and explanations given to us, the Company is not a dealer or trader in securities. The Company has invested in mutual funds in its own name, for which proper records have been maintained of the transactions and timely entries have been made.

XV. The terms and conditions of guarantees given by the Company for loans availed by its wholly owned subsidiaries from banks or financial institutions are not prejudicial to the interest of the Company.

XVI. In our opinion and according to the information and explanations given to us, on an overall basis, the term loans taken by the company have been applied for the purpose for which they were obtained.

XVII. According to the information and explanations given to us, and on overall examination of the Balance Sheet of the Company, we report that funds raised on short term basis have, prima facie, not been used during the year for long term investments.

XVIII. During the year under review, the Company has made preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Companies Act, 1956 and the price at which shares have been issued is not prejudicial to the interest of the company;

XIX. During the year under review, the Company has not issued any debentures. Hence, this clause is not applicable.

XX. The Company has not raised any money by public issues during the year.

XXI. During the course of our examination of the books and records of the Company, carried out with the generally accepted auditing practices in India, and according to the information and explanations given to us by the management, we have neither come across any instances of material fraud on or by the Company, noticed or reported during the year, nor we have been informed of such case by the management..

For Ishwar & Gopal, Chartered Accountants

K.V.Gopalakrishnayya Partner

Membership No.: 021748 Firm Registration No.: 001154S Place : Bengaluru Date : August 18, 2010