We have audited the attached Balance Sheet of Alembic Pharmaceuticals
 Limited as at 31st March, 2011, the Profit and Loss Account and also
 the Cash Flow Statement for the period from date of incorporation
 i.e.16th June, 2010 to 31st March, 2011 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 state that the ‘Pharmaceutical undertaking'' of Alembic Limited got
 demerged and transferred to the Company pursuance to the Scheme of
 Arrangement as approved by the Hon''ble Gujarat High Court. Accordingly
 these financial statements include the Financial Statements of the said
 ‘Pharmaceutical undertaking'' of Alembic Limited for the period from the
 Appointed date i.e. 01-04-2010 to 31-03-2011.
 
 We further state that these Financial Statements pertaining to the said
 Pharmaceutical undertaking have been extracted from the books of
 account and records maintained by Alembic Limited jointly with its
 Vadodara undertaking in its SAP ERP system.  This extraction and
 compilation of Financial Statements of the said Pharmaceutical
 undertaking is as envisaged in the Scheme and is based on various
 allocations made by the management on reasonable bases as detailed in
 Note No. 2 of Schedule T to the Financial Statements and have been
 relied upon by us.
 
 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 as amended
 by Companies (Auditor''s Report)(Amendment) Order, 2004 issued by the
 Central Government of India in terms of sub-section (4A) of section 227
 of the Companies Act, 1956, 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:
 
 (i) 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;
 
 (ii) 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;
 
 (iii) The Balance Sheet, Profit and Loss Account and Cash Flow
 Statement dealt with by this report are in agreement with the books of
 account maintained as disclosed at Para 3 above;
 
 (iv) In our opinion, the Balance Sheet, Profit and Loss Account and
 Cash Flow Statement dealt with by this report comply with the
 Accounting Standards referred to in sub-section (3C) of section 211 of
 the Companies Act, 1956
 
 (v) On the basis of written representations received from the
 Directors, as on 31st March, 2011, and taken on record by the Board of
 Directors, we report that none of the Directors is disqualified as on
 31st March, 2011 from being appointed as a Director in terms of clause
 (g) of sub-section(1) of section 274 of the Companies Act, 1956;
 
 (vi) In our opinion and to the best of our information and according to
 the explanations given to us, the said accounts 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;
 
 a) in the case of the Balance Sheet of the state of the affairs of the
 Company as at 31st March, 2011;
 
 b) in case of the Profit and Loss Account, of the Profit for the period
 ended on that date; and
 
 c) in the case of Cash Flow Statement of the cash flows for the period
 ended on that date.
 
 Annexure to the Auditors'' Report
 Re : Alembic Pharmaceuticals Limited
 Referred to in paragraph 3 of our report of even date,
 
 (i) (a) The Company has maintained proper records showing full
 particulars, including quantitative details and situation of Fixed
 Assets. However, item wise value in respect of assets other than land,
 buildings and vehicles acquired prior to 1982 are not available.
 
 (b) Fixed assets have been physically verified by the management during
 the year as per the phased programme of physical verification of fixed
 assets. As informed to us the programme is such that all the fixed
 assets will get physically verified in three years time. In our opinion
 the same is reasonable having regard to the size of the Company and the
 nature of its fixed assets. No material discrepancies were noticed on
 such verification.
 
 (c) During the year, the Company has not disposed off substantial part
 of its fixed assets.
 
 (ii) (a) The inventory has been physically verified during the year by
 the management at reasonable intervals.
 
 (b) The procedures for physical verification of inventory followed by
 the management are reasonable and adequate in relation to size of the
 Company and nature of its business.
 
 (c) The Company is maintaining proper records of inventory. The
 discrepancies noticed on verification between the physical stocks and
 the book records were not material.
 
 (iii) (a) The Company has granted unsecured loans to five companies
 covered in the register maintained under section 301 of the Companies
 Act, 1956 wherein the balance recoverable as at the period end is
 Rs.26,40,00,000/- (Maximum balance during the year Rs.80,96,00,000/-).
 
 (b) In our opinion, the rate of interest and other terms and conditions
 of loans given by the Company, secured or unsecured, to parties listed
 in the register maintained under section 301 of the Companies Act, 1956
 are not, prima- facie, prejudicial to the interest of the Company.
 
 (c) In respect of the above loans granted, receipt/renewal of the
 principal amount and interest were regular, as stipulated.
 
 (d) There is no overdue amount of more than rupees one lakh of loans
 granted to companies, firms or other parties listed in the register
 maintained under section 301 of the Companies Act, 1956.
 
 (e) The Company has not taken any unsecured loan from any party covered
 in the register maintained under section 301 of the Companies Act,
 1956. Therefore, the requirement of clause (f) and (g) are not
 applicable.
 
 (iv) 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
 purchases of inventory and fixed assets and for the sale of goods and
 services. During the course of our audit, we have not observed any
 continuing failure to correct major weaknesses in the internal control
 system.
 
 (v) (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.
 
 (b) In our opinion and according to the information and explanations
 given to us, the transactions made in pursuance of such contracts or
 arrangements exceeding Rs.5,00,000 have been made at prices which are
 reasonable having regard to the prevailing market prices at the
 relevant time.
 
 (vi) In our opinion and according to the information and explanations
 given to us, the Company has complied with provisions of Section 58A
 and 58AA or any other relevant provision of the Companies Act, 1956 and
 the Companies (Acceptance of Deposits) Rules, 1975 with regard to the
 deposits accepted from the public. No order has been passed by the
 Company Law Board, National Company Law Tribunal or Reserve Bank of
 India or any Court or any other Tribunal.
 
 (vii) In our opinion, the Company has an internal audit system
 commensurate with its size and nature of its business.
 
 (viii) We have broadly reviewed the books of account relating to
 materials, labour and other items of cost maintained by the Company
 pursuant to the Rules made by the Central Government for the
 maintenance of cost records under Section 209 (1)(d) of the Companies
 Act, 1956 and we are of the opinion that, prima facie, the prescribed
 accounts and records have been made and maintained. However, we have
 not made a detailed examination of the records for determining whether
 they are accurate or complete.
 
 (ix) (a) The Company is generally regular in depositing with
 appropriate authorities, undisputed statutory dues including
 
 Provident Fund, Investor Education and Protection Fund, Employee''s
 State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Custom
 Duty, Excise Duty, Cess and any other material statutory dues
 applicable to it and there are no arrears outstanding as at the year
 end for a period of more than six months from the date they became
 payable.
 
 (b) According to the records of the Company, the following dues of
 Sales Tax, Income Tax, Wealth Tax, Service Tax, Custom Duty, Excise
 Duty and Cess have not been deposited on account of some dispute or are
 partially deposited under protest.
 
 
 Statue & Nature     Amount not     Forum where                 Period
 of dues.            deposited      dispute is   
                                    pending.
 
 Sales Tax Act.     4,82,244        Joint Commissioner         2008-09
 Sales Tax,                         Appeals
 interest and 
 penalty.
 
                    13,12,295       High Court               1999-2000
 
                    1,63,84,603     Asst. Commissioner 
                                    Demand                     2003-04
 
                    44,830          Additional Commissioner    2004-05
 
                    3,99,262        Sr. Joint Commissioner     2006-07
 
                    17,49,933       Joint Commissioner 
                                    Appeals                    2009-10
 
                    7,38,67,430     Additional Commissioner 
                                   (Appeals)                   2007-08
 
                    1,84,321        Additional Commissioner 01-04-2006
                                                                    to 
                                                            30-11-2008
 
                    24,654          Additional Commissioner 01-12-2008
                                                                    to 
                                                            31-10-2009
 
                    34,11,482       Additional Commissioner    2007-08
 
 Central Sales Tax  1,00,00,000     Additional Commissioner 
                                    Appeals                    2007-08
 
                    5,20,052        Commissioner               2005-06
 
                    1,51,971        Additional Commissioner 01-04-2006 
                                                                    to 
                                                            30-11-2008
 
                    75,612          Additional Commissioner 01-12-2008    
                                                                    to
                                                            31-10-2009
 
                    2,46,931        Deputy Commissioner II     2003-04
 
                    1,50,355        Joint Commissioner 
                                   (Appeals)                   2005-06
 
                    10,93,955       Deputy Commissioner II     2006-07
 
                    71,728          Sr. Joint Commissioner     2006-07
 
 The Central 
 Excise Act.        2,13,95,574     CESTAT, Comm.(A)           2005-06
 Excise Duty, 
 Interest & 
 Penalty.           56,58,800       CESTAT, Comm. (A)          2007-08
 
                    23,53,824       CESTAT, Comm. (A)          2001-02
 
                    2,10,579        CESTAT, Comm. (A)          1998-99
 
                    35,000          CESTAT, Comm. (A)          2009-10
 
                    50,03,165       High Court                 1995-96
 
                    1,20,99,486     Supreme Court              1996-97
 
 (x) As the Company is registered for a period less than 5 years, the
 requirement of the Order of reporting on accumulated losses and cash
 losses is not applicable.
 
 (xi) In our opinion and according to the information and explanations
 given to us, the Company has not defaulted in repayment of dues to a
 financial institution, bank or debenture holders.
 
 (xii) 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) The Company is not a Chit Fund or a Nidhi/Mutual Benefit
 Fund/Society. Therefore, the provisions of Clauses 4(xiii) of the
 Companies (Auditor''s Report) Order, 2003 (as amended) are not
 applicable to the Company.
 
 (xiv) In our opinion, the Company is not dealing in or trading in
 shares, securities, debentures and other investments.  Accordingly, the
 provisions of clause 4(xiv) of the Companies (Auditor''s Report) Order,
 2003 (as amended) are not applicable to the Company.
 
 (xv) According to the information and explanations given to us, the
 Company has not given any guarantee for loans taken by others from bank
 or financial institutions.
 
 (xvi) According to the information and explanations given to us, the
 term loans have been applied for the purpose for which the loans were
 obtained.
 
 (xvii) According to the information and explanations given to us, and
 on an overall examination of Balance Sheet of the Company, we report
 that no funds raised on short-term basis have been used for long term
 investment.
 
 (xviii) 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.
 
 (xix) The Company has created security in respect of debentures issued.
 
 (xx) The Company has not raised any money during the year by public
 issue.
 
 (xxi) As per the information and explanations given to us, no fraud on
 or by the Company has been noticed or reported during the course of our
 audit.
 
                                               For K. S. AIYAR & CO.
                                              Chartered Accountants; 
                                                        FRN:100186W
 
 
                                                  RAGHUVIR M. AIYAR
                                                            Partner 
                                                Membership No.38128
 
 Mumbai
 DATE: 2nd May, 2011