Allied Digital Services Ltd

TO THE MEMBERS OF ALLIED DIGITAL SERVICES LIMITED

We have audited the attached Balance Sheet of ALLIED DIGITAL SERVICES LIMITED("the Company"), as at 31st March, 2010, and also the Profit and Loss Accountand the Cash Flow Statement for the year ended on that date annexed thereto. Thesefinancial statements are the responsibility of the Company’s management. Ourresponsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted inIndia. Those Standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement. Anaudit includes examining, on a test basis, evidence supporting the amounts and disclosuresin the financial statements. An audit also includes assessing the accounting principlesused and significant estimates made by management, as well as evaluating the overallfinancial statement presentation. We believe that our audit provides a reasonable basisfor our opinion.

As required by the Companies (Auditor’s Report) Order, 2003 issued by theDepartment of Company Affairs, Government of India, in terms of Section 227(4A) of theCompanies Act, 1956, we enclose in the Annexure a statement on the matters specified inparagraphs 4 and 5 of the said Order on the basis of such checks as we consideredappropriate and according to the information and explanations given to us.

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

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

ii. In our opinion, proper books of account as required by law have been kept by theCompany so far as appears from our examination of those books;

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

iv. In our opinion, the Balance Sheet and Profit and Loss Account dealt with by thisreport comply with the accounting standards referred to in sub-section (3C) of section 211of the Companies Act, 1956;

v. On the basis of written representations received from the directors, as on 31stMarch, 2010, and taken on record by the Board of Directors, we report that none of thedirectors is disqualified as on 31st March 2010 from being appointed as a director interms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956;

vi. In our opinion and to the best of our information and according to the explanationsgiven to us the said accounts, read with the Notes of Accounts thereon, give theinformation required by the Companies Act, 1956 in the manner so required and give a trueand fair view in conformity with the accounting principles generally accepted in India:

a. in the case of the Balance Sheet, of the state of affairs of the Company as at 31stMarch, 2010;

b. in the case of Profit and Loss Account, of the Profit for the year ended on thatdate; and

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

ANNEXURE REFERRED TO IN PARAGRAPH 1 OF OUR REPORT OF EVEN DATE TO THE SHAREHOLDERS OFALLIED DIGITAL SERVICES LIMITED

As required by the Companies (Auditors Report) Order, 2003 issued by the department ofCompany Affairs, Government of India in terms of Section 227(4A) of the Companies Act 1956and on the basis of such checks of Books and records of the Company as we consideredappropriate and according to the information and explanations given to us during thecourse of audit, we further state that:

I (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of Fixed Assets.

(b) We are informed that most of the Fixed Assets have been verified once during theyear, which in our opinion is reasonable having regard to the size of the Company and thenature of its assets. No material discrepancies were noticed by the management as comparedwith the records maintained by the Company.

(c) The Company has not disposed off any fixed assets during the year so as to affectits going concern status.

II (a) The Stock of Goods have been physically verified by the management during theyear at reasonable intervals.

(b) The procedure of physical verification of stocks followed by the management arereasonable and adequate in relation to the size of the Company and the nature of itsbusiness.

(c) The Company is maintaining reasonable records of inventory. The discrepanciesnoticed on verification between the physical stock and book records were not material.

III In respect of loans, secured or unsecured, granted or taken by the Company to/fromCompanies, firms or other parties covered in the register maintained under section 301 ofthe companies Act, 1956;

(a) The Company has granted loans secured / unsecured to the companies, firms or otherparties listed in the register maintained under section 301 of the Companies Act, 1956.The balance amount due to be received from these parties as on 31^st March, 2010is Rs. 1,606.61 lacs. The maximum amount due from such loans during the year was Rs.1,656.61 lacs.

(b) The Company has not taken interest free / interest bearing loans, secured /unsecured loans during the year under review from any party and the balance outstanding ason 31^st March, 2010 is Rs. Nil. The maximum amount involved during the year wasRs. Nil.

(c) The registers required to be maintained u/s 301 of the Companies Act 1956 have beenmaintained in the prescribed format by the Company.

(d) In our opinion and according to the information and explanation given to us, therate of interest in case of loan taken, wherever applicable and other terms and conditionsare not prima- facie prejudicial to the interest of the Company.

(e) In respect of the loans taken by the Company, the principal as well as interest isregularly paid by the Company.

(f) There is no over due amount in respect of the loans taken by the Company.

IV In our opinion and according to the information and explanation given to us, thereare adequate internal control procedures commensurate with the size of the Company and thenature of the business, for the purchase of the inventory and fixed assets and for thesale of goods.

V (a) The registers required to be maintained u/s 301 of the Companies Act 1956 havebeen maintained in the prescribed format by the Company.

(b) In our opinion and according to the information given to us all the transactionsentered into by the Company with related parties in pursuance to Section 301 of theCompanies Act have been done with fair amount of reasonability vis--vis the prevailingmarket prices at the relevant time.

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

VII The Company has in-house Internal Audit system which is commensurate with its sizeand nature of its business.

VIII No Cost Records have been prescribed by the Central Govt. under Clause (d) of SubSection (1) of Section 209 of the Companies Act, 1956.

IX (a) According to the records of the Company, the Company has generally been regularin depositing with appropriate authorities the undisputed statutory dues such as ProvidentFund, Employees State Insurance, VAT, CST, Custom Duty, Excise Duty, Cess and otherstatutory dues applicable to it. However some delays have been noticed in payment of someof the above liabilities.

(b) According to the information and explanation given to us, details of Income Taxwhich has not been deposited on account of dispute is as follows:

X The Company does not have accumulated losses as at the end of the year and theCompany has not incurred any cash losses in the current and immediately precedingfinancial year.

XI As per the explanation and information given to us, the Company has not defaulted inrepayment of any dues to any Financial Institution or Banks. There is no issue of anyDebentures by the Company in the year under review or any of the preceding years.

XII The Company has not granted loans and advances on the basis of security by way ofpledge of Shares, debentures or other securities.

XIII In our opinion, the Company is not a chit fund or a nidhi / mutual benefit fund /society. Therefore, the provision of clause 4 (xiii) of said order are not applicable tothe Company.

XIV In our opinion, the Company is not dealing in or trading in shares, securities,debentures and other investments.

Therefore the provision of clause (xiv) of the Companies (Auditor’s Report) Order,2003 are not applicable to the Company.

XV According to the information and explanation given to us, the Company has givenguarantee for the loans taken by others from Banks and Financial Institutions. The detailsof the Guarantee are as follows:

XVI According to the information and explanations given to us by the Company, termloans taken have been applied for the purpose for which they were obtained.

XVII In our opinion and according to the information and explanations given to us andon an overall examination of the balance sheet of the Company, we report that funds raisedon short term basis have not been used for long term investment.

XVIII During the year, the Company has not made any preferential allotment of shares tothe parties and the Company covered in the register maintained under section 301 of theAct.

XIX In our opinion and according to the information and explanation given to us, theCompany has not issued any debentures during the period covered by our report.Accordingly, clause 4 (xix) of the said order is not applicable.

XX During the period covered by our report, the Company has not raised any money by wayof public issue.

However during the year under review the company has raised Rs. 23,142.21 Lacs by wayof Qualified Institutional Placements (QIP).

XXI According to the information and explanation given to us, no fraud on or by theCompany has been noticed or reported during the course of our audit.