Microsec Financial Services Ltd

To

The Members of Microsec Financial Services Limited

1. We have audited the attached Balance Sheet of Microsec Financial Services Limited('the Company') as at March 31, 2012 and also the Statement of Profit and Loss and theCash Flow Statement for the year ended on that date annexed thereto. These financialstatements are the responsibility of the Company's management. Our responsibility is toexpress an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with the auditing standards generally acceptedin India. 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 the 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 (as amended) issued bythe Central Government of India in terms of sub-section (4A) of Section 227 of theCompanies Act, 1956, we enclose in the Annexure a statement on the matters specified inparagraphs 4 and 5 of the said Order.

4. Further to our 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 those books;

iii. The balance sheet, statement of profit and loss and cash flow statement dealt withby this report are in agreement with the books of account;

iv. In our opinion, the balance sheet, statement of profit and loss and cash flowstatement dealt with by this report comply with the accounting standards referred to insub-section (3C) of Section 211 of the Companies Act, 1956;

v. On the basis of the written representations received from the directors, as on March31, 2012, and taken on record by the Board of Directors, we report that none of thedirectors is disqualified as on March 31, 2012 from being appointed as a director in termsof 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 give the information required by the Companies Act, 1956,in the manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India :

a) in the case of the balance sheet, of the state of affairs of the Company as at March31, 2012;

b) in the case of the statement of profit and loss, of the profit for the year ended onthat date; and

c) in the case of cash flow statement, of the cash flows for the year ended on thatdate.

ANNEXURE TO THE AUDITORS' REPORT (REFERRED TO IN OUR REPORT OF EVEN DATE TO THE MEMBERSOF MICROSEC FINANCIAL SERVICES LIMITED AS AT AND FOR THE YEAR ENDED MARCH 31, 2012)

(i) (a) The Company has maintained proper records showing full particulars, includingquantitative details and situation of fixed assets.

(b) Fixed Assets have been physically verified by the management during the year and nomaterial discrepancies were identified on such verification.

(c) There was no substantial disposal of fixed assets during the year.

(ii) The Company does not have any inventory and hence clauses (ii) (a) to (c) of theCompanies (Auditor's Report) Order, 2003 (as amended), are not applicable.

(iii) (a) The Company has granted loans to four companies covered in the registermaintained under Section 301 of theCompanies Act, 1956. The maximum amount involved duringthe year was Rs. 52,10,86,017 and the year-end balance of loans granted to such partieswas Rs. 1,29,25,805.

(b) In our opinion and according to the information and explanations given to us, therate of interest and other terms and conditions for such loans are not prima facieprejudicial to the interest of the Company.

(c) The loans granted are re-payable on demand. As informed, the Company has receivedrepayment of loans during the year to the extent demanded and thus, there has been nodefault on the part of the parties to whom money has been lent. The payment of interesthas been regular.

(d) There is no overdue amount of loans granted to companies, firms or other partieslisted in the register maintained under section 301 of the Companies Act, 1956.

(e) According to information and explanations given to us, the Company has not takenany loans, secured or unsecured, from companies, firms or other parties covered in theregister maintained under Section 301 of the Companies Act, 1956. Accordingly, theprovisions of clause 4(iii)(e) to (g) of the Order are not applicable.

(iv) In our opinion and according to the information and explanations given to us,there is an adequate internal control system commensurate with the size of the Company andthe nature of its business, for the purchase of fixed assets and for the sale of services.During the course of our audit, we have not observed any major weakness or continuingfailure to correct any major weakness in the internal control system of the Company inrespect of these areas. The Company has not made any purchase of inventory or sale ofgoods during the year and hence, this clause is not applicable with respect to the same.

(v) (a) According to the information and explanations provided by the management, weare of the opinion that the particulars of contracts or arrangements referred to inSection 301 of the Act that need to be entered into the register maintained under theabove section, have been so entered.

(b) In our opinion and according to the information and explanations given to us, thetransactions made in pursuance of such contracts or arrangements exceeding the value ofRupees five lakhs have been entered into during the financial year at prices which arereasonable having regard to the prevailing market prices at the relevant time.

(vi) The Company has not accepted any deposits from the public within the purview ofSection 58A and 58AA of the Companies Act, 1956 and the Rules framed there under.

(vii) In our opinion, the Company has an internal audit system commensurate with thesize of the Company and nature of its business.

(viii) To the best of our knowledge and as explained, the Company is not in thebusiness of sale of any goods. Therefore, in our opinion, the provisions of clause 4(viii)of the Order are not applicable to the Company.

(ix) (a) The Company has generally been regular in depositing undisputed statutory duesincluding provident fund, investor education and protection fund, employees' stateinsurance, income-tax, wealth tax, service tax, cess and other material statutory dueswith the appropriate authorities though there has been slight delays in few cases. Theprovisions relating to customs duty, sales tax and excise duty are not applicable to theCompany.

(b) According to the information and explanations given to us, no undisputed amountspayable in respect of provident fund, investor education and protection fund, employees'state insurance, income tax, wealth tax, service tax, cess and other statutory materialdues were outstanding, as on the Balance Sheet date, for a period of more than six monthsfrom the date they became payable. The provisions relating to customs duty, sales tax andexcise duty are not applicable to the Company.

(c) According to the records of the Company, the dues outstanding of income tax, salestax, wealth tax, service tax, customs duty, excise duty and cess on account of any disputeare as follows :-

(x) The Company has no accumulated losses at the end of the financial year and it hasnot incurred cash losses in the current and immediately preceding financial year.

(xi) The Company has not taken any loan from financial institution or bank nor therehas been any outstanding debentures during the year. Therefore, the provisions of clause4(xi) of the Order, are not applicable.

(xii) Based on our examination of the documents and records, we are of the opinion thatthe Company has maintained adequate records in respect of loans and advances granted onthe basis of security by way of pledge of shares. As informed, no loans and advances havebeen granted by the Company on the basis of security by way of pledge of debentures andother securities.

(xiii) In our opinion, the Company is not a chit fund or a nidhi/mutual benefitfund/society. Therefore, the provisions of clause 4(xiii) of the Order, are notapplicable.

(xiv) In our opinion, the Company is not dealing or trading in shares, securities,debentures and other investments. Accordingly, the provisions of clause 4(xiv) of theOrder are not applicable.

(xv) According to the information and explanations given to us, the Company has givenguarantee for loans taken by its wholly owned subsidiaries from banks or financialinstitutions, the terms and conditions whereof, in our opinion, are not prima-facieprejudicial to the interest of the Company.

(xvi) The Company did not have any term loans outstanding during the year.

(xvii) According to the information and explanations given to us and on an overallexamination of the balance sheet of the Company, we report that no funds raised onshort-term basis have been used for long-term investment.

(xviii) The Company has not made any preferential allotment of shares during the yearto parties or companies covered in the register maintained under Section 301 of theCompanies Act, 1956.

(xix) The Company did not have any outstanding debentures during the year.

(xx) We have verified that the end use of money raised by public issue is as disclosedin the notes to the financial statements.

(xxi) Based upon the audit procedures performed for the purpose of reporting the trueand fair view of the financial statements and as per the information and explanationsgiven by the management, we report that no fraud on or by the Company has been noticed orreported during the course of our audit.