Apollo Hospitals Enterprises

1.  We have audited the attached Balance Sheet of APOLLO HOSPITALS
 ENTERPRISE LIMITED as at 31st March 2009, the related Profit and Loss
 Account and the Cash Flow statement 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.
 
 2.  We conducted our audit in accordance with the 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(s). 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.
 
 3.  We have also considered the independent audit observations of the
 divisional auditors for the Pharmacy Division, Projects Division,
 Hyderabad Division, Bilaspur Division, Mysore Division, Vizag Division,
 Pune Division, Karim Nagar Division and Mandya Division for forming an
 opinion on the accounts for the respective Divisions.
 
 4.  As required by the Companies (Auditor’s Report) Order 2003, as
 amended by the 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, and on the basis of such
 checks of the books and records of the Company as we considered
 appropriate and according to the information and explanations given to
 us, we set out in the Annexure a statement on the matters specified in
 paragraphs 4 and 5 of the said Order.
 
 5.  In the absence of any notification from the Central Government with
 respect to the Cess payable under Section 441A of the Companies Act,
 1956, no quantifcation is made. Hence, no opinion is given on Cess
 unpaid or paid, as per the provisions of Section 227(3)(g) of the
 Companies Act, 1956.
 
 6.  Further to our comments in the Annexure referred to in paragraph 4
 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 purpose 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, the Profit and Loss Account and the Cash Flow
 Statement dealt with by this report are in agreement with the books of
 account;
 
 (iv) In our opinion, the Balance Sheet, the Profit and Loss Account and
 the Cash Flow Statement dealt with by this report comply with the
 Accounting Standards specified by the Institute of Chartered Accountants
 of India, referred to in subsection (3C) of Section 211 of the
 Companies Act, 1956;
 
 (v) On the basis of written representations received from the
 directors, as on March 31 ,2009 and taken on record by the Board of
 Directors, we report that none of the directors is disqualifed as on
 March 31, 2009 from being appointed as a director in terms of clause
 (g) of sub-section (1) of Section 274 of the Companies Act, 1956, and
 
 (vi) In our opinion and to the best of our information and according to
 the explanations given to us, the said financial statements together
 with the notes thereon and attached thereto, give the information
 required by the Companies Act, 1956, in the prescribed manner and also
 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 affairs of the
 company as at 31st March, 2009;
 
 (b) in the case of the Profit and Loss Account, of the PROFIT of the
 company for the year ended on that date; and
 
 (c) in the case of the Cash Flow Statement, of the cash fows of the
 company for the year ended on that date.
 
 Annexure to the Auditors’ Report
 
 (i) (a) The Company is maintaining proper records showing full
 particulars including quantitative details and situation of fixed
 assets.
 
 (b) The Company has a programme of physical verifcation of its fixed
 assets by which all fixed assets are verifed in a phased manner over a
 period of three years. In our opinion, this periodicity of physical
 verifcation is reasonable having regard to the size of the company and
 the nature of its assets. According to the information and explanations
 given to us, no material discrepancies were observed by the management
 on such verifcation.
 
 (c) In our opinion and according to the information and explanation
 given to us, the fixed assets that have been sold /disposed off during
 the year do not constitute a substantial part of the total fixed assets
 of the Company.  Hence, the going concern assumption has not been
 affected.
 
 (ii) (a) Stock of medicines, stores, spares, consumables, chemicals lab
 materials and surgical instruments have been physically verifed at
 reasonable intervals by the management.
 
 (b) In our opinion and according to the information and explanations
 given to us, the procedures of physical verifcation of stock of
 medicines, stores, spares, consumables, chemicals lab materials and
 surgical instruments followed by the management are reasonable and
 adequate in relation to the size of the Company and the nature of its
 business.
 
 (c) In our opinion and according to the information and explanations
 given to us and on the basis of our examination, the Company is
 maintaining proper records of inventory.  Further in our opinion and
 according to the information and explanations given to us no material
 discrepancies were noticed between the physical stocks verifed and book
 records.
 
 (iii) In respect of loans, secured or unsecured, granted to companies,
 froms or other parties covered in the Register maintained under Section
 301 of the Companies Act, 1956.
 
 (a) The company has given unsecured loan to its subsidiary on various
 terms and conditions.
 
 In respect of the said loan the year end balance is Rs. 19.4 Crores.
 
 (b) In our opinion and according to the information and explanations
 given to us, the rate of interest and other terms and conditions given
 by the company are prima facie not prejudicial to the interest of the
 company.
 
 (c) In our opinion and according to the information and explanations
 given to us, the Company is regular in receipt of the principal and
 interest as per the terms and conditions.
 
 (d) In our opinion and according to the information and explanations
 given to us, reasonable steps have been taken by the company to recover
 the principal and interest where the amount overdue is more than rupees
 one lakh.
 
 (e) The Company has not taken any loans, secured or unsecured, from
 companies, froms or other parties covered in the register maintained
 under Section 301 of the Companies Act, 1956.  Hence sub clauses (e),
 (f) and (g) of clause (iii) are not applicable to the Company.
 
 (iv) In our opinion and according to the information and explanations
 given to us, and having regard to the explanation that some of the
 items purchased are of a special nature and suitable alternative
 sources do not exist for obtaining comparable quotations, there are
 adequate internal control procedures commensurate with the size of the
 Company and the nature of its business for the purchase of stores,
 medicines and fixed assets and for sale of goods and services. During
 the course of our audit, we have not observed any major weaknesses in
 the internal control system.
 
 (v) (a) In our opinion, 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 explanation
 given to us the transactions made in pursuance of such contracts or
 arrangements have been made at prices which are reasonable, having
 regard to the prevailing market prices.
 
 (vi) In our opinion and according to the information and explanations
 given to us, the Company has complied with the directives issued by the
 Reserve Bank of India and provisions of Section 58A, Section 58AA and
 other relevant provisions of the Companies Act, 1956 and Companies
 (Acceptance of Deposits) Rules, 1975 with regard to the deposits
 accepted from the public including unclaimed deposits matured in
 earlier years that are outstanding during the year. To the best of our
 knowledge and according to the information and explanations given to
 us, 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 on the company in respect of the aforesaid deposits.
 
 (vii) The Company has froms of Chartered Accountants as Internal
 Auditors for its various Divisions and pharmacies including a Private
 Limited Company. On the basis of the reports submitted by them to the
 management, in our opinion, the internal audit system is reasonable
 having regard to the size and nature of its business.
 
 (viii) According to the information and explanations given to us, the
 Central Government has not prescribed the maintenance of cost records
 under Section 209(1)(d) of the Companies Act, 1956 for any of the
 activities of the Company.
 
 (ix ) (a) According to the information and explanations given to us,
 the Company is regular in depositing with appropriate authorities
 undisputed statutory dues including Provident Fund, Investor Education
 and Protection Fund, Employees’ State Insurance, Income Tax, Sales Tax,
 Service tax , Customs Duty, Cess, Wealth Tax and other statutory dues
 applicable to it.  To the best of our knowledge and according to the
 information and explanations given to us, there are no arrears of
 outstanding statutory dues as at 31st March 2009 for a period of more
 than six months from the date they became payable. To the best of our
 knowledge and belief and according to the information and explanations
 given to us, excise duty is not applicable to this Company.
 
 (b) According to the information and explanations given to us and the
 records of the company examined by us, there are no dues disputed with
 respect to Cess, Wealth Ta x and Service tax. The particulars of Sales
 tax, Customs duty and Income tax which have not been deposited on
 account of any dispute are as follows:
 
 Name of the        Nature of the       Amount
 statute            dues                (Rs.)
                                        31.03.09
 
 Central Sales Tax  Sales tax          1,039,135
 Act, 1956
 
 Customs Act,       Customs duty      99,700,026
 1962
 
 Value Added Tax    Value Added        1,273,277
 Act 2004           Tax
 
                                      29,199,000
 
 Income Tax Act,                      70,793,000
                    Income Tax
 1961
 
                                     136,760,038
 
 TOTAL                               344,467,199
 
 Period to which           Forum where dispute is
 the amount                           pending
 relates
 
 Assessment Years       @ Delhi Sales Tax
 2000-01, 2001-02       Deputy Commissioner
 & 2003-04              (Delhi)
 
 1996,1997              # Assistant Collector of
                        Customs (Chennai &
                        Hyderabad)
 
 2008-09                Deputy Commissioner of Com-
                        mercial Tax (Enforcement)
 
 Assessment Years       Income Tax Appellate Tribunal
 1997-1998, 1998-       has reverted the case back to
 1999, 2002-2003        the Assessing Officer
 
 Assessment Years       CIT (Appeals)
 2001-2002, 2004-
 2005, 2006-2007
 
 Assessment Year        Honorable Supreme Court
 2000-2001
 
 
 @ Refer Clause (3) (i) (ii) Schedule (J) - Notes forming part of
 Accounts
 
 # Refer Clause (3) (g) Schedule (J) - Notes forming part of Accounts
 
 * Out of these disputed dues, an amount totaling Rs. 140,091,000/- has
 been adjusted by the Income Tax Department from various amounts
 refundable to the Company.
 
 ** Refer Clause (3) (d) Schedule (J) – Notes forming part of Accounts.
 
 (x) In our opinion and according to the information and explanations
 given to us, the company has no accumulated losses as at 31st March
 2009. The company has also not incurred cash losses in such financial
 year and in the immediately preceding financial year.
 
 (xi) In our opinion and according to the information and explanations
 given to us, the Company has not defaulted in repayment of any dues to
 financial institutions, banks and debenture holders.
 
 (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 company is not a Chit Fund, Nidhi, Mutual Beneft Fund
 or Society and hence Clause (xiii) of the Companies(Auditor’s Report)
 Order, 2003, as amended by the Companies ( Auditor’s Report) (
 Amendment) Order, 2004 is not applicable to the company
 
 (xiv) Based on our examination of the records and evaluation of the
 related internal controls, we are of the opinion that proper records
 have been maintained of the transactions and contracts relating to
 shares, securities debentures and other investments dealt in by the
 company and timely entries have been made in the records. We also
 report that the company has held and dealt with shares, securities
 debentures and other investments in its own name.
 
 (xv) In our opinion and according to the information and explanations
 given to us, the Company has given guarantees for loans taken by Joint
 Ventures from banks and financial institutions, the terms and conditions
 whereof are not prejudicial to the interest of the Company.
 
 (xvi) In our opinion and according to the information and explanations
 given to us, the Company has availed term loans and these were applied
 for the purpose for which the loans were obtained.
 
 (xvii) In our opinion and according to the information and explanations
 given to us, the Company has not used any funds raised on short term
 basis for long term investments.
 
 (xviii) The 1,550,000 equity share warrants issued to a party covered
 in the register maintained under section 301 of the Companies Act, 1956
 during the year 2006- 07 at the minimum price of Rs.442.55 as fixed in
 accordance with the guidelines for preferential issue of the Securities
 and Exchange Board of India (Disclosure and Investor Protection)
 Guidelines 2000 has been converted into equity shares of Rs.10/- each
 fully paid on 22nd August 2008 (Refer Clause 12 of Schedule J - Notes
 Forming part of Accounts).
 
 (xix) The Company has not issued any debentures during the year. Hence
 clause (xix) is not applicable to the Company.
 
 (xx) During the year the management has not raised money through public
 issue and hence we offer no comments on the same.
 
 (xxi) According to the information and explanations given to us, by the
 Company, no fraud on or by the Company has been noticed or reported,
 during the year.
 
 17, Bishop Wallers Avenue (West),             For M/s. S. VISWANATHAN
 CIT Colony, Mylapore,                         Chartered Accountants
 Chennai – 600 004.
 
 Place : Chennai                               V.C. KRISHNAN
 Date  : 29th June 2009                        Partner
                                               Membership No.: 22167