We have audited the attached Balance Sheet of ADVANI HOTELS & RESORTS
 (INDIA) LIMITED, as at 31st March, 2011 and also the Profit and Loss
 Account and the Cash Flow Statement of the Company for the year ended
 on that date annexed thereto. These financial statements are the
 responsibility of the Company''s management. Our responsibility is to
 express an opinion on these financial statements based on our audit.
 
 We conducted our audit in accordance with auditing standards generally
 accepted in India. Those standards require that we plan and perform the
 audit to obtain reasonable assurance about whether the financial
 statements are free of material misstatement. An audit includes
 examining, on a test basis, evidence supporting the amounts and
 disclosures in the financial statements. An audit also includes
 assessing the accounting principles used and significant estimates made
 by management, as well as evaluating the overall financial statement
 presentation. We believe that our audit provides a reasonable basis for
 our opinion.
 
 As required by the Companies (Auditor''s Report) Order, 2003, issued by
 the Central Government of India in terms of sub-Section (4A) of Section
 227 of the Companies Act, 1956, and on the basis of such checks as we
 considered appropriate, we enclose in the Annexure a statement on the
 matters specified in paragraphs 4 and 5 of the said Order.
 
 Further to our comments in the Annexure referred to above, we report
 that:
 
 1.  We have obtained all the information and explanations, which to the
 best of our knowledge and belief were necessary for the purpose of our
 audit.
 
 2.  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.
 
 3.  The Balance Sheet, Profit and Loss Account and Cash Flow Statement,
 dealt with by this Report, are in agreement with the books of account.
 
 4.  In our opinion, the Balance Sheet, Profit and Loss Account and Cash
 Flow Statement comply with the applicable Accounting Standards referred
 to in sub-Section (3-C) of Section 211 of the Companies Act, 1956.
 
 5.  On the basis of written representations received from the Directors
 of the Company and taken on record by the Board of Directors, we report
 that none of the Directors of the Company is disqualified as on 31st
 March, 2011 from being appointed as a Director under Clause (g) of
 sub-Section (1) of Section 274 of the Companies Act, 1956.
 
 6.  In our opinion and to the best of our information and according to
 the explanations given to us, the said accounts, read together with the
 significant accounting policies stated in Schedule K and the other
 notes appearing thereon, give the information required by the Companies
 Act, 1956, 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 the Balance Sheet, of the state of the affairs of
 the Company as at 31st March, 2011; 
 
 (ii) in the case of Profit and Loss Account, of the profit 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.
 
 ANNEXURE REFERRED TO IN OUR REPORT OF EVEN DATE
 
 1.  (a) The Company has maintained proper records showing full
 particulars including quantitative details and situation of fixed 
 assets.
 
 (b) During the year under report, the Company has formulated a policy
 to carry out physical verification of its fixed assets in a phased
 manner at regular intervals, which in our opinion is reasonable having
 regard to its size of the Company and nature of fixed assets. The
 Company has physically verified its fixed assets during the year in
 accordance with the above policy. No material discrepancies were
 noticed by the Management on such physical verification as compared to
 book records.
 
 (c) In our opinion, the Company has not disposed off a substantial part
 of its fixed assets during the year and the going concern status of the
 Company is not affected.
 
 2.  (a) The inventories have been physically verified during the year
 by the Management. In our opinion, the frequency of verification is 
 reasonable;
 
 (b) 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.
 
 (c) On the basis of our examination of the inventory records of the
 Company, we are of the opinion that the Company is maintaining proper
 records of inventory. Discrepancies, which were noticed on physical
 verification of inventory as compared to book records, were not
 material and have been properly dealt with in the books of account.
 
 3.  (a) The Company has not granted any loan or advance to companies,
 firms or other parties covered in the Register maintained under Section
 301 of the Companies Act, 1956 except an interest free advance of 
 Rs. NIL (maximum balance Rs. 96,980,573/-) being amount due on current 
 account from one of its erstwhile subsidiaries, out of which Rs. 
 25,315,947/- has been written off as irrecoverable against the 
 provision made for the same in the previous year.
 
 (b) The terms and conditions of above interest free advance given were
 prima facie not prejudicial to the interest of the Company except to
 the extent indicated in 3(a) above.
 
 (c) According to the information and explanations given to us, there is
 no stipulation for repayment of the above advance given by the Company
 to its subsidiary. However, the entire amount except Rs. 25,315,947/-
 which is considered doubtful by the Management has been recovered
 during the year.
 
 (d) In view of our comment in paragraph 3 (c) above, clause Ml (d) of
 paragraph of the aforesaid Order is not applicable to the Company.
 
 (e) The Company has not taken any loan, secured or unsecured, during
 the year from companies, firms and other parties covered in the
 Register maintained under Section 301 of the Companies Act, 1956. In
 view of the same, our comments on clauses III (f) and (g) of paragraph
 (4) of the aforesaid Order are not applicable to the Company.
 
 4.  In our opinion, and according to the information and explanations
 given to us, there is an adequate internal control system commensurate
 with the size of the Company and the nature of its business for the
 purchase of inventory and fixed assets and for the sale of goods and
 services. During the course of our audit, no major weaknesses have been
 noticed in the internal control system.
 
 5.  To the best of our knowledge and belief and according to the
 information and explanations given to us, (a) the particulars of
 contracts or arrangements referred to in Section 301 of the Companies
 Act, 1956 have been entered in the register required to be maintained
 under that Section; and (b) such transactions exceeding the value of
 Rupees Five lacs in respect of any party during the year have been made
 at prices, which are reasonable having regard to prevailing market
 prices at the relevant time.
 
 6.  The Company has not accepted any deposits from the public within
 the meaning of Section 58A, 58AA and other provisions of the Companies 
 Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975. 
 Hence the clause (vi) of the Order is not applicable to the Company.
 
 7.  In our opinion, the internal audit functions carried out during the
 year by a firm of Chartered Accountants appointed by the Management
 have been commensurate with the size of the Company and nature of its
 business.
 
 8.  The maintenance of cost records has not been prescribed by the
 Central Government under Section 209(1 )(d) of the Companies Act, 1956
 for any of the products of the Company.
 
 9.  (a) According to the records of the Company and the information and
 explanations given to us, the Company has been generally regular in 
 depositing undisputed statutory dues, including provident fund, 
 investor education & protection fund, employees'' state insurance, 
 income-tax, sales-tax, wealth-tax, service tax, customs duty, excise 
 duty, cess and other applicable statutory dues with the appropriate 
 authorities during the year. The Company''s operations do not give 
 rise to any excise duty liability. 
 
 (b) According to the information and explanations given to us, there
 are no undisputed amounts payable in respect of undisputed statutory
 dues as at 31st March, 2011 which were outstanding for a period of more
 than six months from the date they became payable.
 
 (c) According to the information and explanations given to us and on
 the basis of our examination of the documents and records, there are no
 cases of non-deposit with appropriate authorities of disputed dues of
 income-tax, sales-tax, wealth tax, service tax, customs duty, excise
 duty, cess except the following:
 
 Name of the        Nature of dues         Amount     Period to which 
 statute                                  (Rs. in     the amount 
                                            lakhs)    relates 
 
 Central Sales      Central Sales tax       12.16     Asst. Years
 Tax Act, 1956                                        2005-06 & 
                                                      2006-07
 
 Income-tax Act,    Income-tax on           10.66     Asst. Year 
 1961               completion of                     2005-06 
                    regular assessment
 
 Income-tax Act,    Income-tax on           15.13     Asst Years 
 1961               assessment of TDS                 2005-06 to 
                                                      2008-09 
 
 
 
 Name of the statute      Forum where the
                          dispute is pending
 
 Central Sales Tax Act,
 1956                     Asst. Commissioner
                          of Commercial Tax
                          (Value Added Tax)
 
 Income-tax Act, 1961     Income-Tax
                          Appellate Tribunal
 
 Income-tax Act, 1961     Commissioner of
                          Income-tax (Appeals)
 
 10.  The Company neither had accumulated losses at the end of the
 financial year nor incurred any cash losses either during the financial
 year or preceding financial year.
 
 11.  According to the records of the Company examined by us and the
 information and explanations given to us, the Company had not defaulted
 in repayment of dues to banks as per loan agreements or extended due
 dates. There were no borrowings from any financial institutions or by
 way of debentures.
 
 12.  According to the information and explanations given to us, the
 Company has not granted loans and advances on the basis of security by
 way of pledge of shares, debentures and other securities.
 
 13.  The provisions of any special statute applicable to chit fund /
 nidhi / mutual benefit fund / societies are not applicable to the
 Company.
 
 14.  The Company is not a dealer or trader in shares, securities,
 debentures, and other investments.
 
 15.  According to the information and explanations given to us, the
 Company had given a guarantee for loan taken by one of its erstwhile
 subsidiaries from a bank, the terms and conditions whereof, in our
 opinion, were not prima facie prejudicial to the interest of the
 Company. The said guarantee has been extinguished during the year.
 
 16.  In our opinion on an overall basis, and according to the
 information and explanations given to us, the term loans taken during 
 the year were applied for the purpose for which the loans were obtained.
 
 17.  According to the information and explanations given to us and on
 an overall examination of the Balance sheet of the Company, we report
 that funds raised on short term basis have prima facie, not been used
 during the year for long term investment.
 
 18.  The Company has not made any preferential allotment of shares to
 parties and companies covered in the Register maintained under Section
 301 of the Companies Act, 1956.
 
 19.  The Company has not issued any debentures during the year under
 audit. Accordingly, the provisions of clause (XIX) of paragraph 4 of
 the aforesaid Order are not applicable to the Company.
 
 20.  The Company has not raised money by public issue during the year.
 Accordingly, the provisions of clause (XX) of paragraph 4 of the
 aforesaid Order are not applicable to the Company.
 
 21.  To the best of our knowledge and belief, and according to the
 information given to us, no fraud on or by the Company was noticed or
 reported during the year.
 
                                                  For J.G.VERMA & CO.
                                                Chartered Accountants 
                                             Registration No. 111381W
 
                                                           J.G. VERMA
                                                              Partner 
                                                  Membership No. 5005
 
 Mumbai, May 13, 2011