Deccan Chronicle Holdings Ltd

TO

THE MEMBERS OF DECCAN CHRONICLE HOLDINGS LIMITED

1 We have audited the attached balance sheet of Deccan Chronicle Holdings Limited("the Company") as at 31 March 2010, the profit and loss account and the cashflow statement for the year ended on that date, annexed thereto. These financialstatements are the responsibility of the Company’s management. Our responsibility isto express an opinion on these financial statements based on our audit.

2 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.

3 As required by the Companies (Auditor’s Report) Order, 2003 ("theOrder"), as amended, issued by the Central Government of India in terms ofsub-section (4A) of section 227 of the Companies Act, 1956 ("the Act"), weenclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of thesaid Order.

4 Further to our comments in the Annexure referred to in paragraph 3 above, we reportthat:

(a) we have obtained all the information and explanations, which to the best of ourknowledge 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 theCompany so far as appears from our examination of those books;

(c) the balance sheet, profit and loss account and cash flow statement dealt with bythis report are in agreement with the books of account;

(d) in our opinion, the balance sheet, profit and loss account and cash flow statementdealt with by this report comply with the accounting standards referred to in sub-section(3C) of section 211 of the Act, to the extent applicable;

(e) on the basis of written representations received from the directors, as on 31 March2010, and taken on record by the Board of Directors, we report that none of the directorsare disqualified as on 31 March 2010 from being appointed as a director in terms of clause(g) of sub-section (1) of section 274 of the Act;

(f) in our opinion and to the best of our information and according to the explanationsgiven to us, the said accounts give the information required by the Companies Act, 1956 inthe manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India:

(i) in the case of the balance sheet, of the state of affairs of the Company as at 31March 2010;

(ii) in the case of the profit and loss account, of the profit of the Company for theyear ended on that date; and

(iii) in the case of cash flow statement, of the cash flows of the Company for the yearended on that date.

Annexure to the Auditors’ Report

Annexure referred to in paragraph 3 of our report of even date to the members of DeccanChronicle Holdings Limited. We report that:

1. The Company has maintained proper records showing full particulars, includingquantitative details and situation of fixed assets.

2. The Company has a regular program of physical verification of its fixed assets bywhich all fixed assets are verified in a phased manner. Accordingly, certain assets wereverified by Management during the year. No material discrepancies were noticed on suchverification. In our opinion, this periodicity of physical verification is reasonablehaving regard to the size of the Company and the nature of its assets.

3. Fixed assets disposed of during the year were not substantial, and therefore, do notaffect the going concern assumption.

4. Inventory, have been physically verified by the management as at the balance sheetdate. In our opinion, the frequency of verification is reasonable.

5. The procedures for the physical verification of inventories followed by themanagement are reasonable and adequate in relation to the size of the Company and thenature of its business.

6. The Company is maintaining proper records of inventory. The discrepancies noticed onverification between the physical stocks and the book records were not material.

7. The Company has neither granted nor taken any loans, secured or unsecured, to orfrom companies, firms or other parties covered in the register maintained under section301 of the Companies Act, 1956.

8. In our opinion and according to the information and explanations given to us andhaving regard to the explanation that purchase of certain items of inventories and fixedassets are for the Company’s specialized requirements and suitable alternativesources are not available to obtain comparable quotations, there is an adequate internalcontrol system commensurate with the size of the Company and the nature of its businesswith regard to purchase of inventories and fixed assets and with regard to the sale ofadvertisement space. The activities of the Company do not involve the sale of services. Wehave not observed any major weakness in the internal control system during the course ofour audit.

9. In our opinion and according to the information and explanations given to us, theparticulars of contracts or arrangements referred to in section 301 of the Companies Act,1956 have been entered in the register required to be maintained under that section.

10. In our opinion and according to the information and explanations given to us, thetransactions made in pursuance of contracts and arrangements entered in the registermaintained under section 301 of the Companies Act, 1956 and exceeding the value of rupeesfive lakhs with any party during the year have been made at prices which are reasonablehaving regard to the prevailing market prices at the relevant time.

11. The Company has not accepted any deposits from the public.

12. In our opinion, the Company has an internal audit system commensurate with the sizeand nature of its business.

13. The Central Government has not prescribed the maintenance of cost records undersection 209(1)(d) of the Companies Act, 1956 for any of the products manufactured/servicesrendered by the Company.

14. According to the information and explanations given to us and on the basis of ourexamination of the records of the Company, the Company has been generally regular indepositing with the appropriate authorities amounts deducted / accrued in the books ofaccount in respect of undisputed statutory dues including Provident Fund, Employees’State Insurance, Income-tax, Sales-tax, Wealth tax, Customs duty, Cess and other materialstatutory dues. As explained to us, the Company did not have any dues on account ofInvestor Education and Protection Fund, excise duty and service tax.

Further, since the Central Government has till date not prescribed the amount of cesspayable under Section 441A of the Act, we are not in a position to comment upon theregularity or otherwise of Company in depositing the same.

According to the information and explanations given to us, no undisputed amountspayable in respect of Provident Fund, Employees’ State Insurance, Income tax, Salestax, Wealth tax, Customs duty, Cess and other material statutory dues were in arrears asat 31 March 2010 for a period of more than six months from the date they became payable.As explained to us, the Company did not have any dues on account of Investor Education andProtection Fund, excise duty and service tax.

15. According to the information and explanations given to us, there are no dues ofIncome tax, Sales tax, Wealth tax, Customs duty and Cess which have not been depositedwith the appropriate authorities on account of any dispute. As explained to us, theCompany did not have any dues on account of excise duty and service tax.

16. The Company does not have any accumulated losses at the end of the financial yearand has not incurred cash losses in the financial year and in the immediately precedingfinancial year.

17. In our opinion and according to the information and explanations given to us, theCompany has not defaulted in repayment of dues to its bankers or to any financialinstitutions or to debenture holders.

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

19. In our opinion, and according to the information and explanations given to us, theCompany is not a chit fund or a nidhi/ mutual benefit fund/ society.

20. According to the information and explanations given to us, the Company is notdealing or trading in shares, securities, debentures and other investments.

21. According to the information and explanations given to us, the Company has notgiven any guarantee for loans taken by others from banks or financial institutions.

22. In our opinion and according to the information and explanations given to us, theterm loans taken by the Company have been applied for the purpose for which they wereraised.

23. According to the information and explanations given to us and on an overallexamination of the balance sheet of the Company, we are of the opinion that the fundsraised on short-term basis have not been used for long-term investment.

24. The Company has not made any preferential allotment of shares tocompanies/firms/parties covered in the register maintained under Section 301 of theCompanies Act, 1956.

25. According to the information and explanations given to us, the Company has createdsecurity or charge in respect of debentures issued during the year.

26. As informed to us, the Company has not raised any money during the year by publicissues.

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