Indian Terrain Fashions Ltd

To the Members of,

INDIAN TERRAIN FASHIONS LIMITED

1. We have audited the attached Balance Sheet of M/S INDIAN TERRAIN FASHIONS LIMITEDas at March 31, 2012, the Statement of Profit and Loss and the Cash Flow Statement for theyear ended on that date, annexed thereto. These financial statements are theresponsibility of the Company's management. Our responsibility is to express an opinion onthese 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 preparation. We believe that our audit provides a reasonable basis forour opinion.

3. 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 ofthe Companies Act, 1956, we enclose in the Annexure, a statement on the matters specifiedin paragraphs 4 & 5 of the said 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 and proper returns adequatefor the purposes of our audit have been received from the branches not visited by us;

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

d. In our opinion the Balance Sheet, Statement of Profit and Loss and Cash FlowStatement dealt with by this report are in compliance with the Accounting Standardsreferred in sub-section (3C) of Section 211 of the Companies Act, 1956.

e. On the basis of written representations received from the Directors as on 31st March2012 and taken on record by the Board of Directors, we report that none of the directorsis prima facie disqualified as on 31st March 2012 from being appointed as a director interms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

f. In our opinion and to the best of our information and according to the explanationsgiven to us, the said accounts read together with the Significant Accounting Policies andNotes thereon, give the information required by the Companies Act, 1956 in the manner sorequired and give a true and fair view in conformity with the accounting principlesgenerally accepted in India:

i) in the case of the Balance Sheet, of the state of affairs of the Company as at 31stMarch 2012:

ii) in the case of the Statement of Profit and Loss, of the profit of the Company forthe year ended on that date; and

iii) In the case of the Cash Flow Statement, of the cash flows of the Company for theyear ended on that date.

ANNEXURE TO THE AUDITOR'S REPORT

Referred to in paragraph 3 of our report of even date

1. In respect of its Fixed Assets:

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

b. As explained to us, the fixed assets of the Company have been physically verified bythe Management during the year in a phased periodical manner, which in our opinion isreasonable, having regard to the size of the Company and nature of its assets. Inaccordance with the phased programme of verification, certain fixed assets were verifiedduring the year and no material discrepancies were noticed on such verification.

c. The fixed assets disposed of during the year do not constitute a substantial part ofthe fixed assets of the Company and such disposal in our opinion has not affected thegoing concern status of the Company.

2. In respect of it's inventories :

a. The inventories have been physically verified during the year by the management. Inour opinion the frequency of verification is reasonable.

b. In our opinion and according to the information and explanations given to us, thephysical certification of inventories followed by the management are reasonable andadequate in relation to the size of the Company and the nature of it's business.

c. The Company has maintained proper records of inventories. As explained to us, therewere no material discrepancies noticed on physical verification of inventories as comparedto the book records.

3. 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 not granted any loans, secured or unsecured, to companies, firms orother parties listed in the Register maintained under Section 301 of the Act.

b. The Company has not taken any loans, secured or unsecured, from companies, firms orother parties listed in the Register maintained under Section 301 of the Act.

4. In our opinion and according to the information and explanations given to us, thereis an adequate internal control system commensurate with the size of the Company and thenature of its business for the purchase of fixed assets, inventory and for the sale ofgoods. During the course of our audit, we have not observed any continuing failure tocorrect major weaknesses in the internal control system.

5. In respect of contracts or arrangements referred to in section 301 of 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 need to be entered in theregister 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, thetransactions made in pursuance of contracts or arrangements entered in the registermaintained under Section 301 of the Companies Act, 1956 and exceeding the value ofRs.500,000/- in respect of each party during the year have been made at prices whichappear reasonable having regard to the prevailing market prices at the relevant time, asper information available with the Company.

6. According to the information and explanations given to us the Company has notaccepted any deposits from the public. Therefore the provisions of Clause (vi) ofparagraph 4 of the Order (as amended) are not applicable to the Company.

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

8. We have broadly reviewed the cost records maintained by the Company pursuant to theCompanies (Cost Accounting Records) Rules 2011 prescribed by the Central Government undersection 209(1) (d) of the Companies Act, 1956 and are of the opinion that prima facie theprescribed cost records have been maintained. We have however not made a detailedexamination of the cost records with a view to determine whether they are accurate orcomplete.

9. In respect of statutory dues:

a. According to the information and explanations given to us, and on the basis of ourexamination of the records of the Company, amounts deducted/accrued in the books ofaccount in respect of undisputed statutory dues, including Provident Fund, Employees StateInsurance Scheme, Income Tax, Excise Duty, Service Tax, Value Added Tax and other materialstatutory dues, as applicable have been regularly deposited during the year by the Companywith the appropriate authorities.

Further since the Central Government has till date not prescribed the amount of cesspayable under section 441A of the Companies Act, 1956, we are not in a position to commentupon the regularity or otherwise of the Company in depositing the same.

b. According to the information and explanations given to us, no undisputed amountspayable in respect of Provident Fund, Employees State Insurance Scheme, Income Tax,Service Tax, Value Added Tax and other material statutory dues were in arrears as at March31, 2012 for a period of more than six months from the date they became payable.

c. According to the information and explanations given to us, the disputed statutorydues aggregating to Rs.71.18 Lacs that has not been deposited on account of matterspending before the appropriate authority are as under:-

* As per the directions of the Supreme Court the Company has remitted a sum of Rs.35.59 Lacs against this demand.

10. 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.

11. Based on our audit procedures and according to the information and explanationsgiven to us, we are of the opinion that the Company has not defaulted in repayment of duesto financial institutions and banks. The Company did not have any debentures outstandingduring the year.

12. According to the information and explanations given to us, and based on the recordsand documents produced before us, The Company has not granted loans and advances on thebasis of security by way of pledge of share, debentures and other securities.

13. In our opinion and to the best of our information and according to the explanationsprovided by the management, the Company is not a Chit Fund or a Nidhi / MutualBenefit Fund / Society. Therefore the provisions of Clause 4(xiii) of the Companies(Auditors Report) Order 2003 (as amended) do not apply to the Company.

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

15. 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.

16. According to the information and explanations given to us, the term loans have beenapplied for the purposes for which they were obtained.

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

18. 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.

19. The Company did not have any outstanding debentures during the period.

20. The Company has not raised any money by way of public issue during the period.Hence in our opinion Clause 4(xx) of the Companies (Auditors Report) Order 2003 (asamended) is not applicable to the Company.

21. Based upon the audit procedures performed for the purpose of reporting the true andfair view of the financial statements, and as per the information and explanations givento us by the management, we report that no fraud on or by the Company has been noticed orreported during the course of our audit.