Cranes Software International Ltd Auditors Report.

To the members of CRANES SOFTWARE INTERNATIONAL LIMITED

1. We have audited the accompanying standalone financial statements of Cranes Software International Limited ("the Company"), which comprise the Balance Sheet as at 31stMarch, 2017, the Statement of Profit and Loss, the Cash Flow Statement for the year then ended, and a summary of the significant accounting policies and other explanatory information.

2. The Companys Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation and presentation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. 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 financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

3. Our responsibility is to express an opinion on these standalone financial statements based on our audit. We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under.

4. We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act and other applicable authoritative pronouncements issued by the Institute of Chartered Accountants of India. Those Standards and pronouncement require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

5. An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the standalone financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Companys preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audital so includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Companys Directors, as well as evaluating the overall presentation of the financial statements.

6. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements.

Basis for Qualified Opinion

7. The attached Balance Sheet as at 31st March, 2017 is drawn on the basis of the Principle of ‘Going Concern. We opine as follows in this connection :

7.1 An advance of Rs. 23,978.83 lakhs is due from a party for an inordinate period and in our opinion recovery of the same is doubtful. However, the company continues to classify such amounts as ‘Good.

However, no evidence has been given to us to consider those amounts as recoverable as on the date of Balance Sheet.

7.2 Attention of the members is invited to note 3.10 of the Notes regarding recognition of deferred tax credit on account of unabsorbed losses and allowances aggregating to Rs.34,517.47 lakhs (year ended March 31, 2016 Rs. 31,000.90 lakhs). This does not satisfy the virtual certainty test for recognition of deferred tax credit as laid down in Accounting Standard 22.

7.3 Reference is drawn to note no. 3.31 of the Notes regarding the amounts classified under "Fixed Assets" including "Intangible Assets Under Development" amounting to Rs. 22,458.78 lakhs. No evidence has been produced before us for testing its impairment and in the absence of the same, we are unable to express any opinion on the impairment to such asset. In our opinion, such test of impairment as on the date of Balance Sheet is mandatory, especially in view of the higher degree of the obsolescence of software which is stated to be under various stages of development, though no further developments have been carried out during the recent years.

7.4 The appropriateness of the ‘Going Concern concept based on which the accounts have been prepared is interalia dependent on the Companys ability to infuse requisite funds for meeting its obligations, rescheduling of debt and resuming normal operations.

8 We further report that, except for the effect, if any, of the matters stated in paragraphs 7.3 above, whose effect are not ascertainable, had the observations made in paragraphs 7.1 and 7.2 above been considered, the loss after tax for the year ended March 31, 2017 would have been higher by Rs. 58,496.30 lakhs.

Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the matters expressed in Basis for Qualified opinion and Emphasis of matter paragraph the aforesaid standalone financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at 31st March, 2017,its loss and its cashflows for the year ended on that date.

Emphasis of Matter

1. Redemption of Foreign currency convertible bond amounting to Rs. 29,085 lakhs (42 million Euros) to the holders of the bonds have fallen due during April 2011 and is yet to be redeemed as on the date of Balance Sheet. A winding up petition has been filed by the trustees of the Foreign Currency Convertible Bond holders against the Company, before the Honble High Court of Karnataka for non-payment of principal and the accrued interest thereon.

2. a) Term loans and working capital loans availed by the company from various banks amounting to Rs.78,132.25 lakhs, which includes an amount of Rs. 5,961.86 lakhs taken over by an Asset Reconstruction Company, remain unpaid and are overdue since 2009.

b) Legal proceedings u/s.138 of the Negotiable Instruments Act has been initiated by the following Banks against the company. i. State Bank of Travancore. ii. Canara Bank iii. Industrial Development Bank of India iv. State Bank of Mysore v. Bank of India

These Banks have filed cases before the Debt Recovery Tribunal (DRT) / Honble Courts, etc for recovery of dues. These proceedings are in various stages of disposal before the "DRT" and respective Honble Courts. Winding up petitions have been filed by Canara bank and Bank of India against the company, before the Honble High Court of Karnataka for non-payment of principal and the accrued interest thereon.

3. In our opinion the securities provided to Banks are not adequate to cover the amounts outstanding to them as on the date of Balance Sheet.

4. We would like to draw the attention of the members to note no. 3.25 of the financial statements regarding default of payments to various statutory authorities.

5. We draw attention to Note No. 3.35 of the financial statements regarding the investments (including receivables) made in wholly owned subsidiaries. As explained by the management, it being a long term and strategic investment, there is a reasonable certainty that there will be no diminution in the value of the investment and is confident of recovery of receivables and therefore no provisioning has been considered necessary. The details of investments (including receivables) in subsidiaries are as under.

Name of the Subsidiary Amount
1 Cranes Software Inc 5,369.02
2 Cranes Software International Pte Limited 1,503.33
3 Systat Software UK Ltd 243.62
4 Proland Software Private Limited 462.81
5 Systat Software Gmbh 187.11
6 Systat Software Inc. 13,103.69
7 Dunn Solutions Groups Inc 109.94
Total 20,979.51

6. The company had invested in the below mentioned wholly owned subsidiaries. Due to the cumulative losses in the subsidiaries, the value of investment is eroded.

Name of the Subsidiary Investment Shareholder Funds
1 Esqube Communication Solutions Pvt Ltd 179.78 (50.72)
2 Proland Software Pvt Ltd 318.89 (643.69)
3 Tilak Auto Tech Private Limited 51.62 (182.63)
4 Systat Software Inc. USA 1,851.18 (6,105.97)
5 Cranes Software International Pte Limited 44.31 (575.23)
TOTAL 2,445.78 (7,558.25)

The company has not provided for diminution / impairment in the value of its investments in the above wholly owned subsidiaries, as required by the Accounting Standard 13.

7. The company has provided interest on the term loans from banks, including penal interest, at the rates provided in the loan sanction letters. No confirmation is obtained from lenders for the dues as these have been classified as Non- Performing Assets (NPA) by the respective banks.

8. We further draw attention on the following non compliances under the Companies Act, 2013 and rules thereon a. Non-appointment of Chief Financial Officer as required under section 203 of the said Act. b. The Company has drawn and utilised an amount Rs. 43.77 lakhs from the ‘CSIL Employees Comprehensive Gratuity Trust fund for the purpose not intended in terms of‘The Payment of Gratuity Act, 1972. (See note No. 3.04 of the Financial Statements)

Our Report is not qualified in respect of the above matter.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditors Report) Order 2015 ("the order"), issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in the Annexure A, a statement on the matters specified in paragraphs 3 and 4 of the order to the extent applicable.

2. As required by Section143 (3) of the Act,we report that:

(a) We have sought and obtained all the information and explanations which to the best of our knowledge 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 the Company so far as it appears from our examination of those books;

(c) The Balance Sheet, the Statement of Profit and Loss, and the Cash Flow Statement dealt with by this Report are in agreement with the books of account.

(d) In our opinion, except for the matters expressed in paras 7.2 and 7.3 of the Basis for Qualified opinion,the a fore said standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7of the Companies (Accounts) Rules, 2014.

(e) In our opinion, the qualifications and matters specified in the ‘Emphasis of Matter" paragraph, may have an adverse effect on the functioning of the Company.

(f) On the basis of the written representations received from the directors as on 31st March, 2017 taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2017 from being appointed as a director in terms of Section 164(2) of the Act.

(g) 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 B"; and

(h) With respect to the other matters to be included in the Auditors Report in accordance with Rule11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us :

i. The Company has disclosed the impact of pending litigations on its financial position in its financial statements –Refer Note No. 3.25 to the financial statements;

ii. The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses;

iii. The Company has not transferred an amount of Rs. 7.21 Lakhs, which is required to be transferred to the Investor Education and Protection Fund.

iv. The Company has not provided requisite disclosures in its standalone financial statements as to holdings as well as dealings in Specified Bank Notes during the period from 8 November, 2016 to 30 December, 2016.

For S.JANARDHAN & ASSOCIATES
Chartered Accountants
Firm Registration No. 005310S
Vijay Bhatia
Bengaluru Partner
May 30, 2017 Membership No.201862