Elder Health Care Ltd Auditor Reports

TO THE MEMBERS OF

ELDER HEALTH CARE LIMITED

Report on the Financial Statements

We have audited the accompanying financial statements of Elder Health Care Limited ("the Company") which comprise the Balance Sheet as at 30^th June, 2014, and the Statement of Profit and Loss and the Cash Flow Statement for the year ended on that date, and a summary of significant accounting policies and other explanatory notes.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and presentation of financial statements that give a true and fair view of the financial position, financial performance and cash flow of the Company in accordance with applicable Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 ("the Act") read with the General Circular 15/2013 dated 13 September 2013 of the Ministry of Corporate Affairs in respect of section 133 of the Companies Act, 2013. This responsibility includes the designing, implementing and maintenance of internal control relevant to the preparation and presentation of financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Standards on Auditing issued by the Institute of Chartered Accountants of India. Those standards 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.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s 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 control relevant to the Company’s preparation and fair presentation of financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our modified audit opinion.

Basis for Qualified Opinion

1. Fixed Assets

Some of the company’s Plant & Machineries acquired/installed have not been put to use and some have been operational for a small fraction of the installed capacity. On such assets, the company has not provided for impairment loss.

Non provision of impairment loss is a departure from AS-28 "Impairment of Assets" as prescribed under the Act. Management has neither provided a Technical Evaluation Report nor a Valuation Report in order to arrive at the fair value and, consequently, quantifying the possible impairment loss on these assets could not be arrived.

2. Legal suits

As informed, various legal suits have been filed against the Company under various Acts and Statutes applicable to the Company, the same are being contested by the Company at various foras. The outcome of such suites and their impact on the affairs of the Company were not made available/explained to us.

Emphasis of Matter

We draw attention to Note No. 33 of the Notes annexed to and forming part of the Financial Statements. The Company’s operations and operating results have been materially affected due to various factors. The appropriateness of the going concern assumption is dependent on the company’s ability to streamline its operations as well as infusing requisite finance to meet its short term and long term financial obligations and other statutory liabilities. Based on the mitigating factor discussed in the said note, management believes that the going concern assumption is appropriate and no adjustments have been made in the financial statements for the year ended June 30, 2014.

Our opinion is not qualified in respect of above matter.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matters described in the Basis for Qualified Opinion paragraph and Emphasis of Matter paragraph, the 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: I. In the case of Balance Sheet, of the state of affairs of the Company as at 30th June, 2014; II. In the case of Statement of Profit and Loss, of the Loss of the Company for the year ended on that date; and III. In the case of Cash Flow Statement, of the cash flows of the Company for the year ended on that date.

Report on Other Legal and Regulatory Requirements

1) As required by the Companies (Auditors’ Report) Order, 2003 ("the Order"), as amended, issued by the Central Government of India in terms of sub-section (4A) of the section 227 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said order.

2) As required by section 227 (3) of the Act, we report that:

a) we have 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 appears from our examination of those books;

c) the Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statement referred to in this report are in agreement with the books of account;

d) in our opinion, the Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statement comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Act read with the General Circular 15/2013 dated 13 September 2013 of the Ministry of Corporate Affairs in respect of section 133 of the Companies Act, 2013.

e) in absence of written representation from the Directors as on 30th June, 2014, we could not ascertain whether any of the Director is disqualified as on 30th June, 2014 from being appointed as director in terms of Clause (g) of sub- section (1) of section 274 of the Act.

For S.S.KHANDELWAL & CO.

Chartered Accountants

(Firm Registration No.105064W)

S.S. Khandelwal

Proprietor

(Membership No. 031487)

Mumbai, 28^th August, 2014

Annexure to the Independent Auditor’s Report

(Referred to in paragraph 1 under ‘Report on Legal and Regulatory Requirements’ section of our report of even date)

Based on the audit procedures performed for the purpose of reporting a true and fair view on the financial statements of the Company and taking in to consideration, the information and explanations given to us during the course of audit, we report that:

(i) (a) The Company has maintained proper records to show full particulars, including quantitative details and situation of fixed assets.

(b) As explained to us, some of the fixed assets of the Company have been physically verified by the management during the year in accordance with a phased program of verification designed to cover all the fixed assets over a period of three years, which in our opinion, is reasonable having regard to the size of the Company and nature of its assets. The discrepancies noticed on such physical verification were not material and have been properly dealt with in the books of account.

(c) The fixed assets disposed off during the year were not substantial and therefore do not affect the going concern status of the Company.

(ii) (a) As explained to us, the inventories have been physically verified by the management at regular intervals during the year. The intervals at which the inventories have been verified are, in our opinion, reasonable in relation to the size of the Company and nature of its business.

(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 nature of its business.

(c) The Company has maintained proper records of inventories. As explained to us, there was no material discrepancies noticed on physical verification of inventory.

(iii) (a) The Company has not granted any loan, secured or unsecured to companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Therefore, requirements of clauses (iii- b), (iii-c) and (iii-d) of the paragraph 4 of the order are not applicable.

(b) According to the information and explanations given to us, the Company has not taken any loans, secured or unsecured from the parties covered in the register maintained under section 301 of the Companies Act, 1956. Therefore requirements of clauses (iii-f) and (iii-g) of the paragraph 4 of the order are not applicable.

(iv) In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business for the purchase of inventory, fixed assets and for the sale of goods and services. In our opinion and according to the information and explanations given to us, there is no continuing failure to correct major weaknesses in such internal control systems.

(v) (a) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements, that need to be entered into the register 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, transactions made in pursuance to such contracts or arrangements are specialized in nature and comparable prices are not always determinable and the price is charged are prima facie reasonable.

(vi) In our opinion and according to the information and explanations given to us, the Company, except cases of short term borrowings for Working Capital requirements, has not accepted any deposits as defined under sections 58A, of the Companies Act, 1956 and Companies (Acceptance of Deposits) Rules, 1975.

(vii) The Company has an internal audit system, the scope of which need to be strengthen commensurate with the size and the nature of its business.

(viii) The Central Government has prescribed maintenance of Cost Records under Section 209(1) (d) of the Companies Act, 1956 in respect of certain manufacturing activities of the Company. We have broadly reviewed the accounts and records of the Company in this connection and are of the opinion, that prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the same.

(ix) (a) As per information and explanations given to us the Company has been irregular in depositing the undisputed statutory dues including Provident Fund, Income tax, sales tax, Profession Tax and Employees State Insurance and there has been serious delay in many cases. The Company has been regular in respect of payments of statutory dues payable under Customs Duty, Excise Duty and Cess with the appropriate authorities and there were no undisputed amounts payable in respect of such dues which have remained outstanding as at 30th June, 2014 for a period exceeding six months from the date they become payable.

The following undisputed statutory dues were outstanding as on 30th June 2014 for a period of more than six months from the date they become payable:

Name of the Statute	Nature of the Dues	Period to which the amount Relates	Amount	Payment made up to the date of Auditor’s Report
			(Rs )
Income Tax Act, 1961	Tax Deducted at Source	April -2013 to Dec-2013	7,531,378	Amount not paid till date
E.P.F.& M.P.F. Act, 1952	Provident Fund			Amount Paid	Date of Payment
		Aug -2012 to Nov -2012	2,174,875	2,174,875	05/08/2014
		Dec-2012 to Sep-2013	4,521,189	4,521,189	12/08/2014
		Oct -2013	434,846	387,801	12/08/2014
		Nov-2013	426,175	380,018	12/08/2014
		Dec-2013	413,825	369,573	12/08/2014
Professional Tax Act, 1975	Profession Tax	Jul-2013 to Dec-2013	27,318	Amount not paid till date
Employees’ State Insurance Act, 1948	Employees’ State Insurance Fund	Nov -2013 and Dec-2013	701	Amount not paid till date

(b) According to the information and explanations given to us, there are no disputed dues payable in respect of Income tax, sales tax, service tax, custom duty, excise duty and cess are pending as on 30th June, 2014.

(x) The Company has accumulated losses of not less than 50% of its net worth and has incurred cash losses during the financial year covered by our audit. The company had not incurred cash losses in the immediately preceding financial year.

(xi) According to information and explanations given to us and based on the documents and records produced before us, the Company has defaulted in repayment of dues to banks amounting to Rs 1,18,36,200/- upto 28^th March, 2014, the date on which the account was assigned and transferred by the bank to a Assets Reconstruction Company for recovery of principal and interest thereon.

Since the amount was due and payable to the Assets Reconstruction Company, the company has not considered the amount payable after 28^th March, 2014 as default in repayment to the bank.

(xii) In our opinion and according to the information and explanations given to us, the Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

(xiii) In our opinion and according to the information and explanations given to us, the nature of activities of the company does not attract any special statute applicable to chit fund and nidhi/ mutual benefit fund/ society

(xiv) The Company has maintained proper records of the transactions and contracts in respect of dealing in shares, securities and other investments and timely entries have been made therein. All shares, securities and other investments have been held by the Company in its own name.

(xv) According to the information and explanations given to us, the company has not given any guarantee for loans taken by others from bank and other financial institutions.

(xvi) To the best of our knowledge and belief and according to the information and explanation given to us by the management the term loans availed by the Company were, prima facie, applied by the Company for the purpose for which the loans were obtained.

(xvii) According to the Cash Flow statement and other records examined by us and the information and explanations given to us, on all overall basis, funds raised on short term basis, have prima facie, not been used during the year for long term investments.

(xviii) The company has not made any preferential allotment of shares to parties or companies covered in the register maintained under section 301 of the companies act, 1956.

(xix) As per information and explanation given to us and based on records examined by us the company has not issued any debentures during the year.

(xx) To the best of our knowledge and belief and according to the information and explanation given to us, the company has not raised any money through a public issue during the year.

(xxi) In our opinion and according to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the year, which causes the financial statements to be materially misstated.

For S.S.KHANDELWAL & CO.

Chartered Accountants

(Firm Registration No.105064W)

S.S. Khandelwal

Proprietor

(Membership No. 031487)

Mumbai, 28^th August, 2014