Farmax India Ltd

FARMAX INDIA LIMITED

1. We have audited the attached Balance sheet of M/s. FARMAX INDIA LIMITED,Hyderabad as at 31st March 2011 and also the profit and Loss Account for the period endedon that date annexed thereto. These Financial statements are the responsibility of theCompany's Management. Our responsibility is to express an opinion on these financialstatements based on our Audit.

2. We conducted the 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 basis for our opinion.

3. As required by the Companies (Auditor's Report) Order, 2003 issued by the CentralGovernment of India, in terms of section 227(4A) of the Companies Act, 1956 and as amendedfrom time to time, we enclose a statement on the matters specified in Paragraphs 4 and 5of the said Order to the extent applicable.

4. Further to my comments in the Annexure referred to in paragraph (3) above, we reportthat:

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 the Books and proper returns and properreturns adequate for the purposes of our audit have been received from the branches notvisited by us.

i. The Balance Sheet and Profit and Loss Account dealt with by this Report are inAgreement with the Books of account of the Company and with the returns from the Branches.

ii. 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 section211 of the companies Act 1956.

iii. On the basis of written representations received from the Directors as on 31stMarch, 2011, and taken on record by the Board of Directors, we report that none of theDirectors is disqualified as on 31st March 2011 from being appointed as a director interms of Clause (g) of sub-section (1) of the section 274 of the Companies Act, 1956.

iv. In our opinion and to the best of our information and according to the explanationsgiven to

us said accounts read with the notes thereon, give the information required by theCompanies Act,1956, in the manner so required and give a true and fair view in conformitywith the accounting principles generally accepted in India.

a) In the case of the Balance Sheet, of the state of the Company as at March 31, 2011and

b) In the case of the Profit and Loss Account, of the profit for the period ended onthat date.

For K. PRAHLADA RAO & CO

Chartered Accountants

Hyderabad September 21, 2011

Sd/-

K. PRAHLADA RAO

Partner M. No. 018477

ANNEXURE TO AUDITOR'S REPORT:

Referred to in Paragraph 3 of our Report of even date:

1) In respect of Fixed Assets:

a) The Company has maintained proper records showing full particulars includingQuantitative details and situation of fixed assets.

b) As explained to us, the fixed assets have been physically verified by the managementat regular intervals during the year, which in our opinion is reasonable, having regard tothe size of the company and nature of its assets. No material discrepancies were noticedon such physical verification.

c) In our opinion, the Company had not disposed of any substantial part of fixed assetsduring the year.

2) In respect of Inventory:

a) As explained to us, the inventory comprises of Raw - Material and finished goodshave been verified and reconciled during the year by the management. In our opinion, thefrequency of verification is reasonable.

b) In our opinion and according to the information as explanations given to us, theprocedures of verification of inventory comprises of raw material, finished goods andpacking material, followed by the management are reasonable and adequate in relation tothe size of the Company and the nature of its business.

c) The Company has maintained proper records of inventory comprise of raw-material andfinished goods. As explained to us, there were no discrepancies noticed on verification ofsuch securities when compared to the records.

3) In respect of Loans given and taken:

a) According to the information and explanations given to us, the Company has notgranted loans (Secured or unsecured) to the Companies, Firms or other parties listed inthe register maintained under Section 301 of the Companies Act 1956.

b) The company has advanced an amount of Rs. 66,88,08000/- as unsecured loans to itswholly owned subsidiary company M/s. FARMAX INTERNATIONAL (FZE), SAIF ZONE-SHAPJAH, UAE.Rate of interest and other terms and conditions of such loans are not prima-facie notprejudicial to the interest of the company.

c) The Company has kept an amount of Rs.64,11,489/- as Inter Corporate Deposit in M/s.REMIDICHERLA INFRA AND POWER LIMITED in which Mr. Srinavasa Reddy is also the MD.

4) . In our opinion and according to the information and explanations given to us,there are adequate internal, control procedures commensurate with the size of the Companyand the nature of its business for the purchase of inventory, fixed assets and also forthe sale of goods.

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, thetransactions made in pursuance of contracts or arrangements, that needed to be enteredinto in the register maintained under Section 301 of the Companies Act, 1956 have been soentered,

b) In our opinion and according to the information and explanations given to us, thetransactions made in pursuance of contracts or arrangements entered in the registermaintained under section 301 of the Companies Act, 1956 and exceeding the value of rupeesfive Lakhs in respect of any party during the year have been made at prices which arereasonable having regard to prevailing market prices at the relevant time.

6) In our opinion and according to the information and explanations given to us, theCompany has not accepted deposits from the public and therefore the provisions of Section58 A and 58 AA of the Companies Act, 1956 and Rules there under are not applicable to thecompany.

7) In our opinion, and according to the information and explanations given to us, theCompany does not have internal audit system commensurate with its size and nature of itsbusiness. We have been informed by the company that, they are in the process of appointinginternal auditors to commensurate with the size and nature of its business.

8) As per the information and explanation provided to us, the Central Government hasnot prescribed maintenance of Cost Records under section 209(1) (d) of the Companies Act,1956 in respect of activities carried out by the company.

9) In respect of statutory dues:

a) The Company has not provided liability on ESOPS; however management has informedthat the liability does not arise at this juncture. The Company is advised to obtain aproper legal opinion from a legal firm on this subject matter.

b) According to the information and explanation given to us, there are no statutorydues of any nature, which have not been deposited on account of any dispute.

10) The Company does not have accumulated losses at the end of the financial year morethan 50% of its net worth and the Company has not incurred cash loss during the financialyear covered by our Audit and in the financial year immediately preceding the financialyear.

11) Based on our audit procedures and as per the information and explanations given tous by the management. We are of the opinion that the company has not defaulted inrepayment of dues to a financial institution and bank or debenture holders.

12) According to the information and explanations given to us, the company has notgranted any I loans and advances on the basis of security by way of pledge of shares,debentures and other securities,

13) The provisions of any Special statue applicable to Chit Fund, Nidhi or MutualBenefit Fund/ Society are not applicable to the Company.

14) In our opinion and according to the information and explanations given to us, theCompany is not dealing or trading in shares, securities, debentures and other investments.Accordingly Provisions of Paragraph 4(xiv) of the Companies (Auditor's Report) Order, 2003are not applicable to this company.

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

16) According to information and explanations given to us, in my opinion the term loanswere applied for the purpose for which they were obtained.

17) According to information and explanations given to us and on an overall examinationof the Balance sheet of the Company, we report that the no funds raised on short-termbasis have been used for long-term investment. No long-term, funds have been used tofinance short-term assets except permanent working capital.

18) The Company has not made any preferential allotment of shares to parties andcompanies covered in the register maintained under Section 301 of the Companies Act, 1956,during the year.

19) According to the information and explanations given to us the company has notissued any debentures during the period covered by our audit report

20) The Company has not raised money by way of public issue during the year.Accordingly provisions of Paragraph 4(xiv) of the Companies (Auditor's Report) Order, 2003are not applicable to this company.

21) To the best of our knowledge and belief and according to the information andexplanations given to us, no fraud on or by the company has been noticed or reportedduring the year.

For K. P RAH LAD A RAO & CO

Chartered Accountants

Hyderabad September 21,2011

Sd/-

K. PRAHLADARAO

Partner M. No. 018477