Arshiya International

1.  We have audited the attached Balance Sheet of Arshiya International
 Limited (the Company) as at March 31, 2009, and the related Profit
 and Loss Account and Cash Flow Statement for the year ended on that
 date (all together referred as financial statements) annexed thereto,
 which we have signed under reference to this report. These financial
 statements are the responsibility of the Companys 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. 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.  As required by the Companies (Auditors Report) Order, 2003, as
 amended by the Companies (Auditors 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 of India (the Act) 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 give in the Annexure a statement on the
 matters specified in paragraphs 4 and 5 of the said Order.
 
 4.  Further to our comments in the Annexure referred to in paragraph 3
 above, we report that:
 
 (a) 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;
 
 (b) 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;
 
 (c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement
 dealt with by this report are in agreement with the books of account;
 
 (d) 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 Act;
 
 (e) On the basis of written representations received from the directors
 and taken on record by the Board of Directors, none of the directors is
 disqualified 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 Act;
 
 (f) 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 in the prescribed
 manner the information required by the Act 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 affairs of the
 Company as at March 31, 2009;
 
 (ii) in the case of the Profit and Loss Account, of the profit for the
 year ended on that date; and
 
 (iii) in the case of the Cash Flow Statement, of the cash flows for the
 year ended on that date.
 
 ANNEXURE TO AUDITORS REPORT
 
 [Referred to in Paragraph 3 of the Auditors Report of even date to the
 members of Arshiya International Limited on the financial statements
 for the year ended March 31, 2009.]
 
 1.  (a) The Company is maintaining proper records showing full
 particulars including quantitative details and situation of fixed
 assets.
 
 (b) The fixed assets of the Company have been physically verified by
 the management during the year and no material discrepancies between
 the book records and the physical inventory have been noticed. In our
 opinion, the frequency of verification is reasonable.
 
 (c) In our opinion and according to the information and explanations
 given to us, a substantial part of fixed assets has not been disposed
 off by the Company during the year.
 
 2.  (a) According to information and explanations given to us, the
 Company has granted unsecured loans, to one company covered in the
 register maintained under Section 301 of the Act. The maximum amount
 involved during the year and the year-end balance of such loans
 aggregates to Rs. 22,512,082 and Rs. 22,512,082 respectively.
 
 (b) In our opinion, the rate of interest and other terms and conditions
 of such loans are not prima facie prejudicial to the interest of the
 Company.
 
 (c) In respect of the aforesaid loans, no principal amounts were due as
 at the year end and the party has paid interest, where stipulated.
 
 (d) In respect of the aforesaid loans, there is no overdue amount.
 
 (e) According to information and explanations given to us, the Company
 has not taken any loans, secured or unsecured from companies, firms or
 other parties covered in the register maintained under Section 301 of
 the Act.
 
 3.  In our opinion and according to the information and explanations
 given to us, having regard to the explanation that certain capital
 items purchased are of special nature for which suitable alternative
 sources do not exist for obtaining comparative quotations, there is an
 adequate internal control system commensurate with the size of the
 Company and the nature of its business, for the purchase of fixed
 assets and for the sale of services. The Companys operation does not
 involve purchase of inventories and sale of goods. Further, on the
 basis of our examination of the books and records of the Company and
 according to the information and explanations given to us, we have
 neither come across nor have been informed of any continuing failure to
 correct major weaknesses in the aforesaid internal control system.
 
 4.  (a) In our opinion and according to the information and
 explanations given to us and based on the disclosure of interest made
 
 by the directors of the Company, the particulars of contracts or
 arrangements referred to in Section 301 of the Act 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 for sale of services made in pursuance of
 contracts or arrangements entered in the register maintained under
 Section 301 of the Companies Act, 1956 and exceeding the value of
 rupees five lacs, are in respect of service of a special nature, for
 which comparative prices are not available. Hence, we are unable to
 comment on the reasonableness of the price or otherwise of such
 transactions.
 
 5.  The Company has not accepted any deposits from the public within
 the meaning of Sections 58A and 58AA of the Act and the rules framed
 there under. Accordingly, paragraph 4 (vi) of the Order is not
 applicable.
 
 6.  In our opinion, the Company has an internal audit system
 commensurate with its size and the nature of its business.
 
 7.  (a) According to the information and explanations given to us and
 records of the Company examined by us, in our opinion, the Company is
 generally regular in depositing the undisputed statutory dues including
 provident fund, investor education and protection fund, employees
 state insurance, income tax, sales tax, wealth tax, customs duty,
 excise duty, cess and other material statutory dues as applicable with
 the appropriate authorities, except for dues in respect of income tax
 and
 
 service tax. The extent of arrears of statutory due outstanding as at
 March 31, 2009, for a period of more than six months from the date they
 become payable, in respect of service tax is as follows -
 
 Name of the statute  Nature of dues  Amount  Period  Due date Date of 
 (Rs.)                                       to which           Pay
                                             relates           -ment
 
 Finance Act 1994      Service tax  726,664   April 
                                              2008 to 
                                            September 
                                              2008     Various July 15, 
                                                                2009
 
 (b) According to the information and explanations given to us and the
 records of the Company examined by us, the particulars of dues of
 income tax dues as at March 31, 2009 which have not been deposited on
 account of dispute, are as follows -
 
 Name of the   Nature of dues  Amount (Rs.)  Period to   Forum where 
 statute                                     which the   the dispute
                                              amount        is
                                             relates     pending
 
 Income tax 
 Act, 1961     Income tax      13,541,555    Assessment 
                                               Year 
                                             2005-2006   Commissioner 
                                                          of Income-
                                                         tax (Appeals)
 
 Income tax 
 Act, 1961     Income tax       8,426,422    Assessment 
                                             Year 
                                             2006-2007   Commissioner 
                                                         of Income-
                                                         tax (Appeals)
 
 8.  The Company has no accumulated losses as at the year end and has
 not incurred any cash losses during the financial year ended on that
 date and in the immediately preceding financial year. Accordingly,
 paragraph 4 (x) of the Order is not applicable.
 
 9.  According to the records of the Company examined by us and the
 information and explanations given to us, the Company has not defaulted
 in repayment of dues to any banks. The Company has not obtained any
 borrowings from financial institution or by way of debenture.
 
 10.  The Company has not granted any loans or advances on the basis of
 security by way of pledge of shares, debentures and other securities.
 Accordingly, paragraph 4 (xii) of the Order is not applicable.
 
 11.  The provisions of any special statute applicable to chit fund /
 nidhi / mutual benefit fund/societies are not applicable to the
 Company. Accordingly, paragraph 4 (xiii) of the Order is not
 applicable.
 
 12.  In our opinion and according to the information and explanations
 given to us, the Company is not a dealer or trader in shares,
 securities, debentures and other investments.
 
 13.  In our opinion and according to the information and explanations
 given to us, the terms and conditions of the guarantees given by the
 Company for loans taken by subsidiary from banks during the year are
 not prejudicial to the interest of the Company.
 
 14.  In our opinion and according to the information and explanations
 given to us, the Company has raised short term loans for funding
 specific capital project and for general purposes, which has been
 utilized for the purpose for which it has been obtained, except for Rs.
 188,756,087 which has been utilized for funding other capital projects,
 capital assets purchases etc. As at the year end, Rs. 75,640,948 was
 lying in the current bank accounts and fixed deposit of the Company,
 pending utilisation.
 
 15.  According to the information and explanations given to us, and on
 an overall examination of the Balance Sheet of the Company, we report
 that the Company has used funds of Rs. 502,566,160 raised on short-term
 basis for long-term investments, namely, funding capital projects,
 purchase of fixed assets etc.
 
 16.  The Company has, upon conversion of share warrants into equity
 shares, made preferential allotment of equity shares to a party covered
 in the register maintained under Section 301 of the Act during the
 year. In our opinion and according to the information and explanations
 given to us, the price at which such shares have been issued is not
 prejudicial to the interest of the Company.
 
 17.  The Company has not issued any debentures. Accordingly, paragraph
 4 (xix) of the Order is not applicable.
 
 18.  The Company has allotted equity shares on conversion of share
 warrants during the year. The management has disclosed the end use of
 monies raised during the current year and the previous year, (by way of
 issue of equity shares to qualified institutional buyers and conversion
 of warrants) and the same has been verified by us. (Refer Note 9 of
 Schedule 17)
 
 19.  During the course of our examination of the books and records of
 the Company, carried out in accordance with the generally accepted
 auditing practices in India, and according to the information and
 explanations given to us, we have neither come across any instance of
 fraud on or by the Company, noticed or reported during the year, nor
 have we been informed of such case by the management.
 
 20.  The clauses (ii) and (viii) of paragraph 4 of the Order are not
 applicable in the case of the Company for the current year, since in
 our opinion, there is no matter which arises to be reported in the
 Order.
 
                                                   Vilas Y. Rane
 
                                                        Partner
                                     Membership Number.: F-33220
 
                                             For and on behalf of
 Place: Mumbai                                   Price Waterhouse
 
 Date: August 6, 2009                       Chartered Accountants