SDF Industries Ltd Directors Report.

The Members

5DF Industries Limited.

Report on the Financial Statements

We have audited the accompanying Financial Statements of SDF Industries Limited (the Company1), which comprise the Balance Sheet as at31 st March 2017, the statement of Profit and Loss, the Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information in the notes to accounts. Managements Responsibility forthe Financial Statements

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 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.

Auditors Responsibility

Our responsibility is to express an opinion on these 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 thereunder.We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. 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 the disclosures in the 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 audit also 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.

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

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid 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, and its profit and its cash flows for the year ended on that date.

Emphasis of Matter

We draw attention to the following matters in the Notes to the Financial Statements;

i. We draw attention to Note No.28 to the financial statements which states that no provision has been made in the accounts towards interest payable on turnover tax liability of Rs.5,08,57,015 relating to earlier years ,for the reasons stated therein.

ii. We draw attention to Note No. 29.1 to the financial statements Claims against the company not acknowledged as debt in respect of lawsuits filed before various authorities, the outcome ofwhich is uncertain.

Our opinion is not modified in respect of the above matters

Report on Other Legal and Regulatory Requirements

1. 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 Act,2013 we give in the Annexure "A" a statement on the matters specified in the paragraphs 3 and 4 of the Order, to the extent applicable.

2. As required by Section 143 (3) ofthe 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 Companyso 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 booksof account;

d. In our opinion, the aforesaid financial statements comply with the Accounting Standards specified under Section 133 oftheAct,readwithRule7oftheCompanies(Accounts) Rules, 2014;

e. On the basis ofthe written representations received from the directors as on 31 stMarch 2017 taken on record by the Board of Directors, none of the directors is disqualified as on31 st March 2017 from being appointed as a director in terms of Section 164 (2) ofthe Act;

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 B";

g. 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, 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 29to the financial statements;

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

iii. There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company.

iv. The Company has provided requisite disclosures in the financial statements as to holdings as well as dealings in Specified Bank Notes during the period from 8th November, 2016 to 30th December, 2016. Based on audit procedures and relying on the management representation we report that the disclosures are in accordance with books of account maintained by the Company and as produced to us by the Management -Refer Note 25 to the financial statements.

For Varma & Varma
Chartered Accountants
FRN: 004532S
Kozhikode S. Raghunandan
30.05.2017 (Partner)
Membership No. 23592

ANNEXURE "A" REFERRED TO IN PARAGRAPH 1 OF REPORT ONOTHER LEGAL AND REGULATORY

REQUIREMENTS OF OUR REPORT OF EVEN DATE

1. In respect of fixed assets-

(a) The Company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets.

(b) We are informed that most of the fixed assets of the Company have been physically verified by the management during the year, which, in our opinion, is reasonable having regard to the size of the company and the nature of its assets and that no material discrepancies has been noticed on such verification.

(c)According to the information and explanations given to us and on the basis of our examination of the records of the Company, the title deeds of the immovable propertiesare held in the name of the Company.

2. We are informed that the physical verification of inventory has been conducted at reasonable intervals by the management and that no material discrepancies were noticed on such verification.

3. The Company has not granted any loans, secured or unsecured, to companies, firms, limited liability partnerships or other parties covered in the register maintained under Section 189 of the Companies Act, 2013.

4. The company has not made any investment or granted any loans or given any security or given any guarantee for which the provisions of sections 185 and 186 of the Companies Act, 2013 are applicable

5. The Company has not accepted any deposits from the public and hence, the directives issued by the Reserve Bank of India and the provisions of Sections 73 to 76 or any other relevant provisions of the Act and the Rules framed there underare not applicable.

6. To the best of our knowledge and according to the information and explanations given to us, the Central Government has not prescribed the maintenance of cost records under Section 148 (1) of the Act for the Company at this stage.

7. In respect of statutory dues-

(a) According to the records of the Company, the Companyis generally regular in depositing undisputed statutory dues including provident fund, employees state insurance dues, income tax, sales tax, value added tax,service tax, income tax, customs duty, excise duty, cess and other statutory dues to the appropriate authorities.

According to the explanations given to us, there are no arrears of undisputed statutory dues outstanding for a period of more than six months from the date on which they become payable except the followings;

Name of the statute Nature of the dues Amount (Rs) Period to which the amount relates
KGST Act 1963 Turnover Tax 5,08,57,015 1997-98 to 2008-09
KVAT 2003 Sales Tax 2,92,500 2007-08 to 2014-15

(b) According to information and explanations given to us and as per our verification of the records of the company, the following disputed amounts of tax/duties have not been deposited with appropriate authorities as at 31st March 2017;

Name of the1 Statute Nature of the dues Amount (Rs) Period to which the amount relates Forum where dispute is pending
Abkari Act 1967 Excise duty 46,65,802 1997-2007,2008-09,2009-10 High Court of Kerala
Abkari Act 1967 Import Fee 1,31,840 2010-11 High Court of Kerala
KVAT Act 2003 : Sales Tax Employees State Insurance 76,44,938 2005-13 Assistant Commissioner (Appeals), Palakkad
Employees State Ins. Act, 1948 47,52,953 April 2005 to May 2010 High Court of Kerala

8. The Company does not have any loans or borrowings from any financial institution, banks, government or debenture holders during the year. Accordingly paragraph 3(viii) of the order is not applicable.

9. The company has not raised any moneys by way of initial public offer or further public offer (including debt instruments). The company has not availed any term loans during the year.

10. During the course of our examination of the books and records of the company, carried out in accordance with generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instances of material fraud by the company or on the company by its officers or employees, noticed or reported during the year, nor have been informed of any such case by the Management.

11. According to the information and explanations given to us and the records of the Company examined by us, the Company has not paid/provided for managerial remuneration. Accordingly, paragraph 3(xi) of the order is not applicable.

12. As Since the Company is not a Nidhi Company, the relative reporting requirements in this regard are not applicable.

13. According to the information and explanations given to us and the records of the Company examined by us, all transactions with the related parties are in compliance with sections 177 and 188 of the Companies Act, 2013 where applicable and the details have been disclosed in Note 26 to the financial statements as required by the applicable Accounting Standards.

14. According to the information and explanations given to us and based on our examination of the records of the Company, the Company has not made any preferential allotment or private placement of shares or fully partly convertible debentures during the year.

15. According to the information and explanations given to us and records of the Company, examined by us, the Company has not entered into any non-cash transactions with directors or persons connected with him. Accordingly, paragraph 3 (xv) of the Order is not applicable.

16. According to the information and explanations given to us and the records of the Company examined by us, the company is not required to be registered under section 45 lAof the Reserve Bank of India Act, 1934. Accordingly, the reporting requirement under Clause (xvi) of paragraph 3 of the Order is not applicable.

ANNEXURE B REFERRED TO IN PARAGRAPH 2 (f) OF REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS OF OUR REPORT OF EVEN DATE

Report on the Internal Financial Controls 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 SDF Industries Limited ("the Company") as of March 31,2017 in conjunction with our audit of the financialstatements of the Company for the year ended on that date. Managements Responsibility for Internal Financial Controls

The Companys management 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 operatingeffectively for ensuring the orderly and efficient conduct of its business, including adherence tocompanys policies, the safeguarding of its assets, the prevention and detection of frauds anderrors, the accuracy and completeness of the accounting records, and the timely preparation ofreliabie financial information, asrequired under the CompaniesAct, 2013.

Auditors Responsibility

Our responsibility is to express an opinion on the Companys internal financial controls overfinancial reporting based on our audit. We conducted our audit in accordance withthe Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the"Guidance Note") and the Standards on Auditing, issued by Institute of Chartered Accountants of India and deemed to be prescribedunder section 143(10) of the CompaniesAct, 2013, to the extent applicable to an audit ofinternal financial controls, both applicable to an audit of Internal Financial Control andboth issued by the Institute of Chartered Accountants of India. Those Standards and the GuidanceNote require that we comply with ethical requirements and plan and perform the audit toobtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.

Material misstatement of the financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to providea basis for our audit opinion on the Companys internal financial controls system overfinancial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A companys internal financial control over financial reporting is a process designed to providereasonable assurance regarding the reliability of financial reporting and the preparation of financialstatements for external purposes in accordance with generally accepted accountingprinciples. Acompanys internal financial control over financial reporting includes those policiesand 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 authorisations 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.

Inherent Limitations of Internal Financial Controls over Financial Reporting

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

Opinion

In our opinion, the Company has, in all material respects, an adequate internal financial controls system overfinancial reporting and such internal financial controls over financial reporting were operating effectively as at March 31,2017, 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.

For Varma & Varma
Chartered Accountants
FRN: 004532S
Kozhikode S. Raghunandan
30.05.2017 (Partner)
Membership No. 23592