Phaarmasia Ltd

M/s PHAARMASIA LIMITED

We have audited the attached Balance Sheet of M/s. PHAARMASIA LIMITED, as at31st March 2012 and also the Statement of Profit and Loss and also the Cash Flow statementof the Company for the year ended on that date annexed thereto. These financial statementsare the responsibility of the Company's management. Our responsibility is to express anopinion 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 obtain reasonable assuranceabout whether the financial statements are free of material misstatements. An auditincludes examining, on a test basis evidence supporting the amounts and disclosures in thefinancial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financialstatements presentation. We believe that our audit provides a reasonable basis for ouropinion.

1. As required by the Companies (Auditor's Report) Order, 2003 as amended by Companies(Auditor's Report) (Amendment) Order 2004, issued by the Central Government in termsSection 227 (4A) of the Companies Act, 1956, we enclose in the annexure a statement on thematters specified in paragraph 4 and 5 of the said order.

2. Further to our comments in the annexure referred in paragraph (1) above, we reportthat:

i) We have obtained all the information and explanations which to the best of ourknowledge and belief were necessary for the purpose 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 such books.

iii) The Balance Sheet and Profit and Loss Account and 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 and Cash FlowStatement comply with the accounting standards referred to in sub section (3C) of Section211 of the Companies Act, 1956.

v) On the basis of written representation received from Directors as on 31st March 2012and taken on record by the Board of Directors, we report that none of the Directors isdisqualified as on 31st March 2012 from being appointed as a Director in terms 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 explanationgiven 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:

a. In the case of the Balance Sheet, of the state of the affairs of the company as at31st March 2012;

b. In the case of the Profit & Loss Account, of the profit for the year ended onthat date; and

c. In the case of the Cash Flow Statement, of the cash flow for the year ended on thatdate.

(Referred to the 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 situations of Fixed Assets.

b. As per the information and explanation given to us, the Fixed Assets of the companyhave been physically verified by the management according to the phased programme, whichis designed to cover all the Fixed Assets, at reasonable intervals and the said programmeis considered reasonable, and no material discrepancies were noticed on such verification.

c. As per the information and explanations given to us, during the year that nosubstantial part of Fixed Assets of the Company are disposed off, and the going concernstatus of the Company is not effected.

II. In respect of its Inventories:

a. As explained to us, inventories have been physically verified by the management atregular intervals during the year.

b. In our opinion and according to the information and explanation given to us, theprocedures of physical verification of inventories followed by the management arereasonable and adequate in relation to the size of the company and the nature of itsbusiness.

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

III. The Company has not granted / taken any loan, secured or unsecured to/ fromcompanies/ firms or other parties covered in the register maintained under section 301 ofthe Companies Act 1956. Hence Sub-clause (b), (c), (d), (e), (f) and (g) of clause (iii)of the Companies (Auditor's Report) Order 2003 are not applicable.

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 its business with regard to purchase of inventory and fixed assets and for thesale of goods. During the course of our audit, we have not observed any continuing failureto correct major weaknesses in internal controls.

V. a. According to the information and explanations given to us and as confirmed by us,we are of the opinion that the transactions that need to be entered into the registermaintained under section 301 of the Companies Act, 1956 have been so entered.

b. The transactions in pursuance of such contracts or arrangements have been made atprices reasonable having regard to the prevailing market prices at the relevant time.

VI. According to the information and explanations given to us, the company has notaccepted any deposits during the year from the public, covered by the directions issued bythe Reserve Bank of India and provisions of Section 58A and 58AA of the Companies Act,1956 and rules framed there under where applicable and issuance of order by the CompanyLaw Boards in this regard does not arise.

VII. As per the information and explanations given to us by the management, the Companyhas an internal audit system commensurate with the size of the company and the nature ofits business.

VIII. We have broadly reviewed the Books of account relating to materials, labour andother items of cost maintained by Company pursuant to the Rules made by the CentralGovernment for the maintenance of Cost Records under Sec. 209(1) (d) of the companies Act,1956 and we are of the Opinion that prima facie the prescribed accounts and records havebeen made and maintained. And, the Central government has directed the company to haveCost audit for the company and the Company has appointed Cost auditors for the periodunder audit.

ix. a. According to the information and explanation given to us and the recordsexamined by us, the company is not regular in depositing with appropriate authoritiesundisputed statutory dues including Provident Fund, Investor Education and ProtectionFund, Employees' State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, CustomsDuty, Excise Duty, Cess and other statutory dues applicable to it. However according tothe Information and explanations given to us, no undisputed arrears of statutory dues wereOutstanding as at 31st March, 2012 for a period of more than six months from the date theybecame payable.

b. According to the records of the company, there are no dues of Sale Tax, Income Tax,Customs, Wealth Tax, Service Tax Excise Duty and Cess which have not been deposited onaccounts of any dispute.

x. The company had no accumulated losses at the end of the year under report and it didnot incur cash losses during the said year or in the immediately preceding financial year.(The accumulated losses are wiped out in earlier years, by a scheme of arrangementapproved by High Court of Andhra Pradesh)

xi. According to the information and explanations given by the management, we are ofthe opinion that the company has not defaulted in repayment of any dues to the bank

xii. Based on our examination of the records and the information and explanation givento us, the company has not granted any loans and/or advances on the basis of security byway of pledge of shares, debentures and other securities.

xiii. In our opinion, as the company is not a chit fund or a Nidhi or Mutual benefitfund or society, the provisions of clause 4(xiii) of the Companies (Audit Report) Order2003 are not applicable to the company for this year.

xiv. According to the records of the company, there are no investments made in thenature of shares in other companies and maintenance of records of transactions andcontracts in respect of shares does not applicable.

xv. According to the information and explanation given to us, the terms and conditionsof guarantees given by the company for loans taken by others from bank or financialinstitutions are, in our opinion, prima facie, not prejudicial to the interest of thecompany. However, there are no guarantees outstanding as on 31st March 2012.

xvi. According to the records of the company and information and explanation given tous the company has not raised terms loans during the year.

xvii. As per the information and explanations given to us and on overall examination ofthe balance sheet and cash flow statement of the company, we report that no funds raisedon short term basis have been used for long term investment and vice versa.

xviii. According to the information and explanations furnished to us, the company hasnot made any preferential allotment of shares during the year to parties and companiescovered in the register maintained under section 301 of the Act.

xix. The company has not issued any debentures during the year, which requires thecreation of security.

xx. During the year the company has not made any public issues for which the managementhas to disclose the end use of money raised through that public issue.

xxi. As per the representation given by the company and relied on by us, no fraud on orby the company has been noticed or reported during the year.