surana industries ltd Auditors report

TO THE MEMBERS OF SURANA INDUSTRIES LIMITED Report on the Standalone Ind AS Financial Statements

We have audited the accompanying Standalone Ind AS Financial Statements of SURANA INDUSTRIES LIMITED("the Company"), which comprise the Balance Sheet as at 31stMarch, 2017, the Statement of Profit and Lossand the Statement of Cash Flowsand the Statement of Changes in Equity for the year then ended and a summary of the significant accounting policies andother explanatory information (hereinafter referred to as ‘Standalone Ind AS Financials Statements)

Managements Responsibility for the Standalone Ind AS Financial Statements

The Companys Board of Directors is responsible for the matters stated in Section 134(5) of the CompaniesAct, 2013 ("the Act") with respect to the preparation of these Standalone Ind AS Financial Statements thatgive a true and fair view of the financial position, financial performance and cash flows and changes in equity of the Company inaccordance with the accounting principles generally accepted in India, including the Indian Accounting Standardsprescribed under section 133 of the Act, as applicable.

This responsibility also includes maintenance of adequate accounting records in accordance with the provisionsof the Act for safeguarding the assets of the Company and for preventing and detecting frauds and otherirregularities; selection and application of appropriate accounting policies; making judgments and estimatesthat are reasonable and prudent; and design, implementation and maintenance of adequate internal financialcontrols, that were operating effectively for ensuring the accuracy and completeness of the accountingrecords, relevant to the preparation and presentation of the Standalone Ind AS Financial Statements that give a true and fair viewand are free from material misstatement, whether due to fraud or error.

Auditors Responsibility

Our responsibility is to express an opinion on these Standalone Ind AS Financial statements based on our audit.

We have taken into account the provisions of the Act, the accounting and auditing standards and matters whichare required to be included in the audit report under the provisions of the Act and the Rules made thereunder.

We conducted our audit of the Standalone Ind AS Financial Statements in accordance with the Standards on Auditingspecified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirementsand plan and perform the audit to obtain reasonable assurance about whether the Standalone Ind AS Financial Statements are freefrom material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and thedisclosures in the Standalone Ind AS Financial Statements. The procedures selected depend on the auditors judgment, includingthe assessment of the risks of material misstatement of theStandaloneInd AS Financial Statements, whether due to fraud or error.In making those risk assessments, the auditor considers internal financial control relevant to the Companyspreparation of the StandaloneInd AS Financial Statements that give a true and fair view in order to design audit procedures that areappropriate in the circumstances. An audit also includes evaluating the appropriateness of the accountingpolicies used and the reasonableness of the accounting estimates made by the Companys Directors, as wellas evaluating the overall presentation of the Standalone Ind AS Financial Statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for ouradverse audit opinion on the Standalone Ind AS Financial Statements.

Basis for Adverse Opinion

(i) . We refer to the Note No. 4.2 relating to the investment in its subsidiaries Surana Power Limited (SPL).

The carrying value of the investment in the SPL as at March 31, 2017 was Rs. 45,350.00 lakhs (previous year Rs. 41,850.00 lakhs). In addition, the Company has also issued a financial guaranteeof Rs. 10,000 lakhs to the lenders against the loans taken by this subsidiary. The net worth of thissubsidiary has fully eroded as at the Balance Sheet date and its current liabilities exceeded its currentassets as on that date. The independent auditor of the subsidiary has given an adverse audit opinion on itsfinancial statements for the year ended March 31, 2017 stating that the going concern assumption is notappropriate and the carrying value of the assets of the subsidiary may also be impaired.No provision has been considered by the management for the diminution in the value of the investmentsin this subsidiary and for the likelihood of the devolvement of the guarantee on the Company.

(ii) . Attention is invited to Note No. 4.2 regarding investment in Subsidiary Surana Mines & Minerals

Limited having a carrying value aggregating to Rs.5,848.26 lakhsthat were approved for divestment due to continuing adverse market scenario which was impacting the survival of the parent Company. This investment is carried at cost and has not been assessed for any impairment to the carrying values.

(iii) . Inventory as at March 31,2017 aggregated to Rs. 14,879.51 lakhs,(previous year Rs. 16,576.85 lakhs) for

which the quantity quality and realizable value were not assessed and determined by the management. In the absence of evidence for physical existence of inventory as at March 31,2017 and net realizable value of inventory, we are unable to comment on the adjustment that may be required to the carrying value of the inventory.

(iv) . The carrying value of the financials assets as at March 31, 2017 are not measured in accordance with the

Ind AS- 109 and we are unable to comment on the adjustment that may be required to the carrying value of the financials assets.

(v) . The financial results for the year ended March 31, 2017 have been prepared on a going concern basis in

spite of negative net worth after considering the impact of the modifications mentioned in paragraph (a) and ( b ) above. The ability of the Company to continue as a going concern is significantly dependent on the successful outcome of the ongoing negotiations with the lenders and therefore, we are unable to comment if the going concern assumption is appropriate and any effect it may have on the financial results for the year ended March 2017.

(vi) The Company has considered trade receivables outstanding for more than 1 year of Rs. 11,582.16 Lakhs and capital advances of Rs. 6,170.88 Lakhs as good and recoverable. However, we were unable to confirm or verify, by alternative means, balances of such trade receivables and we are unable to comment on the adjustments that may be required as at March 31, 2017.

(vii) Had the provision been made for the financial liability arising out of the guarantee as referred to in paragraph (a) above, had the provision been made for trade receivables and capital advances as referred to in paragraph (b), the loss would have been increased by Rs. 27,768.24 Lakhs and consequently net worth would have been reduced by Rs. 27,768.24 Lakhs respectively.

Adverse Opinion

In our opinion and to the best of our information and according to the explanations given to us, dueto the significance of the matters described in the Basis of Adverse Opinion paragraph, the aforesaidStandalone Ind AS Financial Statements do not give the information required by the Companies Act, 2013 in the mannerso required and also do not give a true and fair view in conformity with the accounting principles generallyaccepted in India including Ind AS, of the financial position of the Company as at 31st March, 2017, and its financial performance including other comprehensive income, its cash flowsfor the year ended on that date.

Report on Other Legal and Regulatory Requirements

1. 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 thematters

specified in paragraphs 3 and 4 of the Order.

2. As required by Section 143 (3) of the Act, we report that:

a) We have sought and, except for the effects / possible effects of the matters described in theBasis for Adverse Opinion paragraph above, obtained all the information and explanationswhich to the best of our knowledge and belief were necessary for the purpose of our audit.

b) Except for the effects / possible effects of the matters described in the Basis for AdverseOpinion paragraph above, in our opinion proper books of account as required by law have beenkept by the Company so far as appears from our examination of those books.

c) The Balance Sheet, the Statement of Profit and Loss, the Statement of Cash Flows and Statement of changes in Equity dealt with bythis Report are in agreement with the books of account.

d) Except for the effects / possible effects of the matter described in the Basis for Adverse Opinionparagraph above, in our opinion, the aforesaid Standalone Ind AS Financial Statements comply withthe Accounting Standards prescribed under section 133 of the Act, as applicable.

e) The matter described in the Basis for Adverse Opinion paragraph above, in our opinion, may havean adverse effect on the functioning of the Company.

f) On the basis of the written representations received from the directors as on 31st March, 2017taken 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) The adverse remarks relating to the maintenance of accounts and other matters connectedtherewith are as stated in the Basis for Adverse Opinion paragraph above.

h) With respect to the adequacy of the internal financial controls over financial reporting of theCompany and the operating effectiveness of such controls, refer to our separate Report in"Annexure B". Our report expresses an adverse opinion on the adequacy and operatingeffectiveness of the Companys internal financial controls over financial reporting.

i) With respect to the other matters to be included in the Auditors Report in accordance with Rule 11of the Companies (Audit and Auditors) Rules, 2014, as amended, in our opinion and to the best of ourinformation and according to the explanations given to us:

i. Except for the effects / possible effects of the matters described in the Basis for Adverse Opinion paragraph above, the Company has disclosed the impact of pending litigations on itsfinancial position in its Standalone Ind As Financial statements;

ii. Except for the effects / possible effects of the matters described in the Basis for Adverse Opinion paragraph above, the Company did not have any long-term contracts includingderivative contracts for which there were 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. However, we are unable to obtain sufficient and appropriate audit evidence to report on whether the disclosures are in accordance with books of account maintained by the Company and as produced to us by the Management - Refer Note 35;.

For V D S R & Co.,

Chartered Accountants

Firm‘s Registration No.001626S

Sathish Kumar RK

Partner

Membership No. 220263

Place: Chennai

Date : May 18, 2017

ANNEXURE "A" TO THE INDEPENDENT AUDITORS REPORT

The Annexure referred to in Independent Auditors Report to the members of the Company on the Standalone Ind AS Financial Statements for the year ended 31 March 2017, we report that:

(i) (a) The Company has maintained proper records showing full particulars, including quantitativedetails

and situation of fixed assets.

(b) During the year, the Company has not carried out a physical verification of its fixed assets.The company does not have a regular programme for verification of its fixed assets.

(c) According to the information and explanations given to us and the records examined by us and based on the examination of the Memorandum of Entry executed by the Company, in respect of immovable properties of land that have been taken on lease and pledged as security for loans and disclosed as fixed asset in the financial statements, the lease agreements are in the name of the Company, where the Company is the lessee in the agreement. However we have not received any direct confirmations from the lenders in this regard.

(ii) As explained to us and read with our observation in paragraph (iii) ofthe Basis forAdverse Opinionparagraph of our report of even date, the inventories at the Raichur and the trading stocks at all locationswere not physically weighed / measured during the year by the management. Consequently we are unable tocomment on the discrepancies noticed on physical verification of inventories.

(iii) 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.

(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 Companies Act, 2013 in respect of grant of loans, making investments and providing guarantees and securities, as applicable.

(v) According to the information and explanations given to us, the Company has not accepted any depositduring the year. In respect of unclaimed deposits, the Company has complied with the provisions of Sections 73 to 76 or any other relevant provisions of the Companies Act, 2013.

(vi) The maintenance of cost records has been specified by the Central Government under section 148(1) of the Companies Act, 2013. We have broadly reviewed the cost records maintained by the Company pursuant to the Companies (Cost Records and Audit) Rules, 2014, as amended prescribed by the CentralGovernment under sub-section (1) of Section 148 of the Companies Act, 2013, and are of the opinionthat, prima facie, the prescribed cost records have been made and maintained We have, however, notmade a detailed examination of the cost records with a view to determine whether they are accurate orcomplete.

(vii) According to the information and explanations given to us, in respect of statutory dues:

(a) The Company has not been regular in depositing undisputed statutory dues, including Provident Fund, Employees State Insurance, Income-tax, Sales Tax, Service Tax,Customs Duty, Excise Duty,

Value Added Tax, cess and other material statutory dues applicable to it to the appropriate authorities and there were inordinate delays in a number of cases in respect of of Provident Fund, Tax deducted at Source, Value Added Tax and Service Tax.

(b) There were no undisputed amounts payable in respect of Provident Fund, Employees State Insurance, Income-tax, Sales Tax, Service Tax,Customs Duty, Excise Duty, Value Added Tax,cess and other material statutory dues in arrears as at March 31, 2017 for a period of more thansix months from the date they became payable, other than those disclosed below;

Name of Statue	Nature of Dues	Amount (Lakhs)	Period to which amount relates	Due Date	Date of Subsequent payment
			Before March	Before March
Employees Provident Fund &	Provident Fund	34.30	31, 2015	31, 2015	Unpaid
Miscellaneous Provision Act, 1952		18.35	October15 to August 2016	November 15 to September16	Unpaid
Income Tax Act, 1961	Tax Deducted at Source	18.21	Before March 31, 2016	Before May 2016	Unpaid
Tamilnadu Value			Before March	Before March
Added Tax 2006	VAT	1,213.03	31, 2016	2016	Unpaid
			Before March	Before March
		67.43	31, 2016	2016	Unpaid
Finance Act, 1994	Service Tax	3.22	April 16 to August 2016	May 16 to September 2016	Unpaid
The Tamil Nadu Town Panchayats, Municipalities and Municipal Corporations (Collection of Arrears of Tax on Profession, Trades, Calling and Employments) Rules, 1998	Professional tax	0.81	Before March 2016	Before March 2016	Unpaid

(c) Details of dues of Income-tax, Sales Tax, Service Tax, Customs Duty, Excise Duty, and Value Added Tax which have not been deposited as on March 31, 2017 on account of disputes are given below:

Name of Statute	Nature of Dues	Forum where Dispute is Pending	Period to which the Amount Relates	Amount Involved (Lakhs)	Amount Unpaid (Lakhs)
Employees State Insurance Act, 1948	Employee State Insurance	Honorable High Court of Chennai	2010-11	61.12	61.12
Central Excise Act, 1944	Central Excise	Commissioner of Central Excise, Commissioner II, Chennai	2006	138.33	138.33
Central Excise Act, 1944	Central Excise	Honorable High Court of Chennai	1999-2000	28.69	28.69
Central Excise Act, 1944	Central Excise	Appeal will be filed before CESTAT, Bangalore	2013	28.00	28.00
Central Excise Act, 1944	Central Excise	Honorable High Court of Chennai	1997-2000	93.89	93.89
Central Excise Act, 1944	Central Excise	Commissioner of Central Excise, Commissioner II, Chennai	2010	503.60	503.60
Central Excise Act, 1944	Central Excise	Commissioner of Central Excise, Commissioner I, Chennai	2010	150.00	150.00
Central Excise Act, 1944	Central Excise	CESTAT, Bangalore	2011	2,352.66	2,352.66
Central Excise Act, 1944	Customs Duty	Commissioner ( Appeals)	2012-13	622.14	622.14
Customs Act, 1962	Customs Duty	Honorable High Court of Chennai	1999-2000	20.86	20.86
Customs Act, 1962	Customs Duty	Honorable High Court of Chennai	1998-1999	7.82	7.82
Customs Act, 1962	Customs Duty	Honorable High Court of Chennai	2000-03	100.00	100.00
Customs Act, 1962	Customs Duty	Honorable Supreme court	2005-06	138.29	138.29
Various states ( Sales Tax Acts)	Value Added Tax	Pending before Sales Tax Tribunal Gulbarga	2007- 08 & 2008- 09	145.88	108.88
Various states ( Sales Tax Acts)	Value Added Tax	Pending before Sales Tax Tribunal Gulbarga	2010-11	8.58	8.58
Various states ( Sales Tax Acts)	Central Sales Tax	Honorable High Court of Chennai	2008-09	2.09	2.35
Various states ( Sales Tax Acts)	Central Sales Tax	Honorable High Court of Chennai	2008-09 - VIL	12.54	19.61
Various states ( Sales Tax Acts)	Central Sales Tax	Honorable High Court of Chennai	2009-10	227.72	226.28
Various states ( Sales Tax Acts)	Central Sales Tax	Honorable High Court of Chennai	2010-11	238.27	91.72
Various states ( Sales Tax Acts)	Central Sales Tax	Honorable High Court of Chennai	2005-06	89.13	88.48
Various states ( Sales Tax Acts)	TNVAT	Honorable High Court of Chennai	2006-07	664.35	141.53
Various states ( Sales Tax Acts)	TNVAT	Honorable High Court of Chennai	2007-08	3,059.54	214.91
Various states ( Sales Tax Acts)	TNVAT	Honorable High Court of Chennai	2008-09 - VIL	20.79	31.19
Various states ( Sales Tax Acts)	TNVAT	Honorable High Court of Chennai	2009-10	198.02	230.13
Various states ( Sales Tax Acts)	TNVAT	Honorable High Court of Chennai	2010-11	271.17	284.54
Various states ( Sales Tax Acts)	TNVAT	Honorable High Court of Chennai	2011-12	29.86	59.50
Various states ( Sales Tax Acts)	TNVAT	Honorable High Court of Chennai	2012-13	57.96	75.35
Various states ( Sales Tax Acts)	TNVAT	Honorable High Court of Chennai	2014-15	189.50	152.92
Various states ( Sales Tax Acts)	TNVAT	Honorable High Court of Chennai	2009-10	2.42	3.63
Various states ( Sales Tax Acts)	TNVAT	Honorable High Court of Chennai	2010-11	2.66	3.98
Central Excise Act, 1944	CENTRAL EXCISE OIO NO BEL/ EXCUS/000/ COM/ BKK/038/16- 17(cx)	Commissioner of Central Excise , Customs and Service Tax , Belgaum	May 2011- July 2013	1155.61	1155.61
Central Excise Act, 1944	CENTRAL EXCISE OIO NO BEL/ EXCUS/000/ DIVB/JTC/ SKM/021/16- 17(cx)	Commissioner of Central Excise , Customs and Service Tax , Belgaum	04/2006- 07/2009	36.48	36.48
Central Excise Act, 1944	CENTRAL EXCISE OIO NO BEL/ EXCUS/000/ DIVB/ASC/ Dr.A/45/16- 17(cx)	Assistant Commissioner of Central Excise , Customs and Service Tax , Bellary	08/2011- 12/2012	1.09	1.09
Central Excise Act, 1944	CENTRAL EXCISE OIO NO BEL/ EXCUS/000/ COM/ BKK/024/16- 17(cx)	Commissioner of Central Excise , Customs and Service Tax , Belgaum	2009-10	97.54	97.54
Central Excise Act, 1944	CENTRAL EXCISE OIO NO BEL/ EXCUS/000/ DIVB/ASC/ Dr.A/63/16- 17(ST)	Assistant Commissioner of Central Excise , Customs and Service Tax , Bellary	2013-2014	11.87	11.87

(viii) In our opinion and according to the information and explanations given to us, the Company hasnot defaulted in the repayment of loans or borrowings to financial institutions and banks, exceptas under.

Defaulted in the repayment of loans and borrowings to financial institutions, banks:

i. Principal portion due:period of default to be bring

The balances due in respect of principal outstanding as per books of accounts are as below:

Particulars	Amount of default of repayment (Lakhs)	Period of default
Due to Financial Institutions
IFCI	21,121	For FY 2014-15 & 2015-16 & 2016-17
Due to Banks
Allahabad Bank	4773.00
Bank of Baroda	2396.28
Bank of India	4755.00
Bank of Maharashtra	5208.00
Canara Bank	2320.00
Central Bank of India	10050.97
Dena Bank	10394.00	For FY 2015-16 &
IDBI	17371.72	2016-17
Indian Overseas Bank	2432.00
Oriental Bank of Commerce	7150.93
Punjab National Bank	21717.24
State Bank of India	4638.68
Syndicate Bank	3716.13
UCO Bank	3686.40

Note - The balance due in respect of principal outstanding is as per the repayment terms in the Recall Notice given by the lead bank, the Monitoring Institution (IDBI Bank) and the CDR Lenders on 24th March 2014. The above balance also includes devolved Letters of Credit which were outstanding as at March 31, 2017.

ii. Interest Due

Particulars	Amount of default of repayment (Lakhs)	Period of default
Due to Financial Institutions
IFCI	2650.57	Refer Note (a) below
Due to Banks
Allahabad Bank	5575.55
Bank of Baroda	964.98
Bank of India	2559.14
Bank of Maharashtra	3063.54
Canara Bank	3382.96
Central Bank of India	1775.25
Dena Bank	7608.65
IDBI Bank Limited	7986.22	Refer Note (b) below
Indian Overseas Bank	1159.45
Oriental Bank of Commerce	2186.00
Punjab National Bank	4467.85
State Bank of India	1212.23
Syndicate Bank	793.38
UCO Bank	601.13

Note (a) - The interest disclosed above has been computed by the company based on the borrowing rates which prevailed before the signing of MRA

Note (b) - All the consortium banks had classified the account of the Company as a Non Performing Asset (NPA) during the current year and consequently stopped charging interest on the loans extended to the Company. The interest disclosed above for the year ended March 31, 2017 has therefore been computed based on the terms specified in the MRA and has been provided for in the financial statements

(ix) 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 (ix) of the CARO2016 Order is not applicable.

(x) To the best of our knowledge and according to the information and explanations given to us, nofraud by the Company and no fraud on the Company by its officers or employees has been noticed or reported during the year.

(xi) In our opinion and according to the information and explanations given to us, the Company has paid managerial remuneration in accordance with the requisite approvals mandated by theprovisions of section 197 read with Schedule V to the Companies Act, 2013.

(xii) The Company is not a Nidhi Company and hence reporting under clause (xii) of the CARO 2016Order is not applicable.

(xiii) In our opinion and according to the information and explanations given to us the Company is incompliance with Section 188 and 177 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 financial statements etc. as required by the applicable accounting standards.

(xiv) During the year under review, in compliance of Corporate Debt Restructure (CDR) terms and conditions, equity shares were allotted to promoters, which is preferential allotment. The referred preferential allotment, in our view is not prejudicial to the interest of the Company, as the same is part of Debt restructure terms and conditions.

(xv) According to the information and explanations given to us, the Company has not entered into noncashtransactions with one of the directors/ person connected with the director during the year and in our opinion provisions of Section 192 of the Companies Act, 2013 have been complied with, to the extent applicable.

(xvi) The Company is not required to be registered under section 45-I of the Reserve Bank of IndiaAct, 1934.

For V D S R & Co.,

Chartered Accountants

Firm‘s Registration No.001626S

Sathish Kumar RK

Partner

Membership No. 220263

Place: Chennai

Date : May 18, 2017

ANNEXURE B TO THE INDEPENDENT AUDITORS REPORT

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 Surana Industries Limited ("the Company") as of March 31, 2017 in conjunction with our audit of the financial statements 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 basedon 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 overFinancial 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 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 Companys internal financial controls over financial reporting 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 material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financialcontrols system over financial reporting and their operating effectiveness. Our audit of internal financialcontrols over financial reporting included obtaining an understanding of internal financial controls overfinancial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design andoperating effectiveness of internal control based on the assessed risk. The procedures selected depend on theauditors judgment, including the assessment of the risks of 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 provide a basis for ouradverse audit opinion on the Companys internal financial controls system over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

Acompanys internal financial control over financial reporting is a process designed to provide reasonableassurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles. A companys internal financial controlover financial reporting includes those policies and procedures that (1) pertain to the maintenance of recordsthat, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of thecompany; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparationof financial statements in accordance with generally accepted accounting principles, and that receipts andexpenditures

of the company are being made only in accordance with authorisations of management anddirectors of the company; and (3) provide reasonable assurance regarding prevention or timely detection ofunauthorised acquisition, use, or disposition of the companys assets that could have a material effect on the AS financial statements.

Inherent Limitations of Internal Financial Controls over Financial Reporting

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 erroror fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to 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.

Adverse Opinion

According to the information and explanations given to us and based on our audit, material weaknesses havebeen identified as at March 31, 2017, with respect to the Company not establishing an internal control framework relating to all components of internal control and consequently controls have not been designed to evaluate appropriateness of the going concern assumption, determination of provisions for diminution in the value of investments and accrual for liability arising out of financial guarantee, evaluation of existence and valuation of inventory and determination of completeness of interest liability to banks and financial institutions and determination of prior period expenses.

A ‘material weakness is a deficiency, or a combination of deficiencies, in internal financial control overfinancial reporting, such that there is a reasonable possibility that a material misstatement of the companysannual or interim financial statements will not be prevented or detected on a timely basis.In our opinion, to the best of our information and according to the explanations given to us, because of theeffects of the material weaknesses described above on the achievement of the objectives of the control criteria,the Company has not maintained adequate and effective internal financial controls over financial reporting asof March 31, 2017, based on the internal control over financial reporting criteria established by the Companyconsidering the essential components of internal control stated in the Guidance Note on Audit of InternalFinancial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.

We have considered the material weaknesses identified and reported above in determining the nature, timing,and extent of audit tests applied in our audit of the financial statements of the Company for the year endedMarch 31, 2017, and these material weaknesses have affected our opinion on the said Standalone financialstatements of the Company and we have issued an adverse opinion on the Standalone financial statements ofthe Company.

For V D S R & Co.,

Chartered Accountants Firm‘s Registration No.001626S

Sathish Kumar RK Partner

Membership No. 220263

Place: Chennai

Date : May 18, 2017