Bafna Pharmaceuticals Ltd Auditors Report.

INDEPENDENT AUDITORS REPORT TO THE MEMBERS OF BAFNA PHARMACEUTICALS LIMITED

Report on the Audit of the Standalone Financial Statements Opinion

We have audited the accompanying standalone financial statements of Bafna Pharmaceuticals Limited ("the Company"), whichcomprise the Balance Sheet as at March 31, 2019, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Changes in Equity and the Statement of Cash Flows for the year ended on that date, notes to financial statements and the significant accounting policies and other explanatory information (hereinafter referred toas"the standalone financialstatements").

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Companies Act, 2013 ("the Act") in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, ("IndAS") and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2019, the profit and total comprehensive income, changes in equity and its cash flows for the year ended on thatdate.

Basis for Opinion

We conducted our audit of the standalone financial statements in accordance with the Standards on Auditing specified under section 143(10) of the CompaniesAct, 2013.Our responsibilities under those Standards are further described in the

Auditors Responsibilities for the Audit of the Standalone Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants ofIndia(ICAI) together with the independence requirements that are relevant to our audit of the standalone financial statements under the provisions of the Act and the Rules made thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAIs Code of Ethics. We believe that the audit evidencewe have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone financialstatements.

Managements Responsibility for the Standalone FinancialStatements

The Companys Board of Directors is responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance, total comprehensive income, changes in equity and cash flows of the Company in accordance with the IndAS and other accounting principles generally accepted in India. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone financial statements that give a true and fair view and are free from material misstatement, whether due to fraud orerror.

In preparing the standalone financial statements, management is responsible for assessing the Companys ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to doso.

The Board of Directors are responsible for overseeing the Companys financial reporting process.

Auditors Responsibilities for the Audit of the Standalone Financial Statements

Our objectives are to obtain reasonable assurance about whether the standalone financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions ofusers taken on the basis of these standalone financialstatements.

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the standalone financialstatements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that issufficienand appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internalcontrol.

• Obtain an understanding of internal financial controls relevant to the audit inorder to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls system in place and the operating effectiveness of suchcontrols.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made bymanagement.

• Conclude on the appropriateness of managements use of the going concern basis of accounting and, based on theaudit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Companys ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors report to the related disclosures in the standalone financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors report. However, future events or conditions may causethe Company to cease to continue as a goingconcern.

• Evaluate the overall presentation, structure and content of the standalone financial statements, including the disclosures, and whether the standalone financial statements represent the underlying transactions and events in a manner that achieves fairpresentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significantaudit findings, including any significant deficiencies in internal control that we identify during ouraudit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, relatedsafeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the standalone financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of suchcommunication.

Key Audit Matter

Key Audit Matter Auditors Response
Compliance with IND AS 36 and IND AS 113: With a view to resolve the Insolvency and Bankruptcy proceedings initiated on the Company, the Promoter had submitted Resolution plan which was approved by NCLT, Chennai bench. The Resolution plan had proposed restructuring and restating of all assets liabilities which would have resulted in write offs as well as write backs in the books of accounts. However, due to appeal by an aggrieved party, NCLAT has stayed the handing over of the Corporate Debtor to the Resolution applicant and has also instructed that the status of the corporate debtor be maintained as a Going concern. We have given a modified opinion in our "Independent Auditors report on the standalone financial results pursu- ant to clause 33 of SEBI (Listing obligations and disclosure requirements) Regulations 2015 as follows: a. Major Components of Current Assets – Receivables outstanding for over one year, Long outstanding Advances to suppliers besides Stock of spares and Stores, which have all not been tested for recovery/ impairment as per IND AS 36, consequently not restated at fair values in accordance IND AS 113 and not provisioned in the accounts.
In view of the above, the Company did not test the assets for recovery/impairment as per principles of IND AS 36 nor restated them at fair values as per IND AS 113. Similar is the case of non-restatement at fair values in the case of current liabilities. b. Major Components of Current Liabilities – Sundry creditors whose balances are yet to be confirmed, hence not restated at fair values in accordance with IND AS 113.
The Company has deferred the above to be carried out in the ensuing financial year (Ref: Foot note no. 5 of Audited Financial results as well as Note No.3 of IND AS notes to Financial Statements)

Report on Other Legal and Regulatory Requirements

As required by the Companies (Auditors Report) Order, 2016 ("the Order"), issued by the Central Government of India in terms of sub-section (11) of section 143 of the Companies Act, 2013, we give in the Annexure a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.

1. As required by Section 143(3) of the Act, based on our audit we reportthat: a) We have sought and obtained all the information and explanations which to thebestofourknowledgeand belief were necessary for the purposes of ouraudit. b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of thosebooks. c) The Balance Sheet, the Statement of Profit and Loss including Other Comprehensive Income, Statement of Changes in Equity and the Statement of Cash Flow dealt with by this Report are in agreement with the relevant books ofaccount. d) In our opinion, the aforesaid standalone financial statements comply with the IndAS specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules,2014, except for the modified opinion expressed under Key Audit matter: c. Major Components of Current Assets – Receivables outstanding for over one year, Long outstanding Advances to suppliers besides Stock of spares and Stores, which have all not been tested for recovery/impairment as per IND AS 36, consequently not restated at fair values in accordance IND AS 113 and not provisioned in the accounts. d. Major Components of Current Liabilities – Sundry creditors whose balances are yet to be confirmed, hence not restated at fair values in accordance with IND AS 113.

e) On the basis of the written representations received from the directors as on March 31, 2019 taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2019 from being appointed as a director in terms of Section 164 (2) of theAct. f) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in "Annexure A". g) With respect to the other matters to be included in the Auditors Report in accordance with the requirements of section 197(16) of the Act, asamended: In our opinion and to the best of our information and according to the explanations given to us, the remuneration paid by the Company to its directors during the year is in accordance with the provisions of section 197 ofthe Act. h) With respect to the other matters to be included in the Auditors Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, as amended in our opinion and to the best of our information and according to the explanations given tous: i. The Company has disclosed the impact of pending litigations on its financial position in its standalone financialstatements. ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts. iii. There has been no delay in transferring amounts, required to be transferred, to the InvestorEducation and Protection Fund by theCompany.

2. As required by the Companies (Auditors Report) Order, 2016 ("the Order") issued by the Central Government in terms of Section 143(11) of the Act, we give in "Annexure B" a statement on the matters specified in paragraphs 3 and 4 of the Order.

For R.SATHYANARAYANAN & CO
Chartered Accountants
(Firms Registration No.003656S)
Sd/-
R. SATHYANARAYAN
Place : Chennai Partner
Date : 27.05.2019 (Membership No.028377)

ANNEXURE "A" to the Independent Auditors Reporton the IND AS Financial Statements of BAFNA PHARMACEUTICALS LIMITED

Report on the Internal Financial Controls Over Financial Reporting under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 ("the Act")

We have audited the internal financial controls over financial reporting of BAFNA PHARMACEUTICALS LIMITED ("the Company") as of March 31, 2019 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date.

Managements Responsibility for Internal Financial Controls

The Board of Directors of the Company is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India. These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to respective companys policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act,2013.

Auditors Responsibility

Our responsibility is to express an opinion on the internal financial controls over financial reporting of the Company based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the "Guidance Note") issued by the Institute of Chartered Accountants of India and the Standards on Auditing prescribed under Section 143(10) of the Companies Act,2013,to the extent applicable to an audit of internal financial controls.Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all materialrespects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.The procedures selected depend on the auditors judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud orerror.

We believe that the audit evidence we have obtained, is sufficient and appropriate to provide a basis for our audit opinion on the internal financial controls system over financial reporting of the Company.

Meaning of Internal Financial Controls Over Financial Reporting

A companys internal financial control over financial reporting is a process designed to provide reasonable assurance regardingthe reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorisation of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the companys assets that could have a material effect on the financialstatements.

Limitations of Internal Financial Controls OverFinancialReporting

Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting of future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

Inouropinion,tothebestofourinformationandaccordingtotheexplanationsgiventous, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31, 2019, except for the following areas: a. Certain Balances of Debtors, Creditors and Deposits with Corporate bodies are subject to confirmation. b. Balances pertaining to Advances given to suppliers for supply of materials and others remain unconfirmed.

However the company has an established set of "internal control over financial reporting criteria" duly taking into consideration the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants ofIndia.

For R.SATHYANARAYANAN & CO
Chartered Accountants
(Firms Registration No.003656S)
Sd/-
R. SATHYANARAYAN
Place : Chennai Partner
Date : 27.05.2019 (Membership No.028377)

ANNEXURE ‘B TO the Independent Auditors Reporton the IND AS Financial Statements of BAFNA PHARMACEUTICALS LIMITED

On the basis of such checks as we considered appropriate and according to information and explanations given to us during the course of audit, we report that: i. In respect of the Companys fixedassets: (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixedassets.

(b) As explained to us, fixed assets have been physically verified by the management at reasonable intervals; no material discrepancies were noticed on such verification. In our opinion the frequency of verification is reasonable (c) According to the information and explanations given to us, the records examined by us, we report that, the title deeds, comprising all theimmovablepropertiesoflandand buildingsare held in the name of the Company as at the balance sheet date.

ii. a) As explained to us, inventories have been physically verified during the year by the management at reasonable intervals.

(b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the company and the nature of its business. The Company is generally maintaining proper records of its inventories. No material discrepancy was noticed on physical verification of stocks by the management as compared to book records.

The maintenance of Stocks of Stores and spares requires to be assessed in respect of usefulness and value carried in the books of accounts.

iii. According the information and explanations given to us, the Company had granted unsecured loans to its subsidiary listed in the Register maintained under section 189 of the companies act, 2013. Since the subsidiary did not have any operations for the past few years, and has not been a going concern, the loan has been written off during the year with the approval of the Board.

iv. In our opinion and according to the information and explanations given to us, the Company has complied with the provisions of Sections 185 and 186 of the Act in respect of grant of loans, making investments and providing guarantees and securities, asapplicable.

v. The Company has not accepted deposits during the year and does not have any unclaimed deposits as at March 31, 2019 and therefore, the provisions of the clause 3 (v) of the Order are not applicable to the Company.

vi. We have broadly reviewed the cost records maintained by the Company pursuant to the Rules prescribed by the Central Government under Section 148(1) of the Companies Act, 2013 and are of the opinion that prima facie, the prescribed cost records have been made and maintained. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

vii. According to the information and explanations given to us, in respect of statutorydues:

(a) According to the information and explanations given to us and the records of the Company examined by us, in our opinion, the Company has not been regular in depositing the undisputed statutory dues, including Provident Fund, Employees State Insurance, Income Tax, TDS and Service Tax.However,the Company has has been regular in remittance of Goods & Service Tax, Custom Duty, Excise Duty, Value Added Tax, cess and other material statutory dues, as applicable, with the appropriate authorities. During the course of our audit, we observed certain instances of non-deduction of TDS on eligible payments made during the year.

(b) According to the information and explanations given to us and the records of the Company examined by us, the particulars of dues f income tax, sales tax, service tax, duty of customs and duty of excise duty, value added tax as at 31st March 2019 which have not been deposited, are as follows:

Name of the statue Nature of dues Amount (Rs.in Lakhs) Payment to which the amount relates Due date Date of payment
EPF & MP PF Contribution 233.14 Jan 2016 to 15th Day of the Not paid
Act 1952 March 2019 following month
ESI Act ESI 40.43 June 2016 to 21st Day of the Not paid
1948 Contribution March 2019 following month
Service Tax Service Tax 19.02 June 2016 to 05th Day of the Not paid
March 2019 following month
Income Tax TDS 14.83 April 2017 to 07th Day of the Not paid
Act 1961 March 2019 following month
Income Tax Income Tax 892.80 AY 2015-16 31st March 2015 Not paid
Act 1961 Dues

viii. According to the records of the Company examined by us and the information and explanation given to us, the Company has defaulted in repayment of loans or borrowings to State Bank of India, and was classified as Non-performing asset as of March 31, 2017 itself, and the same position continues as at the date of Balance sheet under audit. The Company has also availed facilities from other banks namely, IDBI Bank Ltd and Development Credit Bank, Bank of Ceylon and DBS Bank Limited for working capital purposes. The Company has not taken loans or borrowing from Government and has not issued debentures during the year. ix. During the year, an Operational Creditor filed under Section 9 of The Insolvency and Bankruptcy Code 2016 a Petition with The National Company Law Tribunal (NCLT), Single Bench, Chennai which was admitted as CP/682/IB/2017 against the Company. The Honble NCLT, Single Bench, Chennai passed an order on 16thJuly 2018 for initiation of Corporate Insolvency Resolution Process (CIRP) against the Company. Committee of Creditors (COC) approved Resolution plan was submitted by the promoter was in turn approved by the Honble NCLT, Chennai on 1st February 2019. However, an aggrieved shareholder filed an appeal with Honble NCLAT (National Company Law Appellate Tribunal), and the handing over of corporate debtor to the resolution applicant was stayed by them on 28th February 2019. Post several hearing proceedings, which were held between the financial year end and the date of this report, the final judgement is reserved to be passed by theHonble NCLAT, New Delhi. x. The Company has not raised moneys by way of initial public offer or further public offer (including debt instruments) or term loans and hence reporting under clause 3 (ix) of the Order is not applicable to the Company. xi. To the best of our knowledge and according tothe information and explanations given to us, no fraud by the Company or no material fraud on the Company by its officers or employees has been noticed or reported during theyear. xii. In our opinion and according to the information and explanations given tous,the Companyhas paid/provided managerial remuneration in accordance with the requisite approvalsmandatedbythe provisions of section 197 read with Schedule V to theAct.

xiii. The Company is not a Nidhi Company and hence reporting under clause 3 (xii) of the Order is not applicable to theCompany.

xiv. In our opinion and according to the information and explanations given to us, the Company is in compliance with Section 177 and 188 of the Companies Act, 2013 where applicable, for all transactions with the related parties and the details of related party transactions have been disclosed in the standalone financial statements as required by the applicable accountingstandards.

xv. As per the provisions of clause 3 (xiv) of the order and according to the information and explanations given to us, the Company had made preferential allotment of 50,00,000 equity shares or private placement of shares during the previous year and all the requirements of section 42 of Companies Act, 2013 were complied with and amount raised has been used for the purpose for which funds were raised. . The Company had already obtained in principle approval and during the year, have obtained final approval of 50,00,000 equity shares which were allotted on preferential basis from both BSE Ltd and National Stock Exchange of India Limited.

xvi. In our opinion and according to the information and explanations given to us, duringthe year the Company has not entered into any non-cash transactions with its Directors or persons connected to its directors and henceprovisions of section 192 of the Companies Act, 2013 are not applicable to theCompany.

xvii. The Company is not required to be registered under section 45-IA of the Reserve Bank of India Act,1934. Accordingly, the provisions of clause 3(xvi) of the Order is not applicable to the Company.

For R.SATHYANARAYANAN & CO
Chartered Accountants
(Firms Registration No.003656S)
Sd/-
R. SATHYANARAYAN
Place : Chennai Partner
Date : 27.05.2019 (Membership No.028377)