Divis Laboratories

1 We have audited the attached Balance Sheet of DIVIS LABORATORIES
 LIMITED (the company) as at 31st March 2009, the Profit and Loss
 Account and also the Cash Flow Statement for the year ended on that
 date annexed thereto. 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 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 ( ‘the
 Order) issued by the Central Government of India in terms of Section
 227(4A) of the Companies Act, 1956 (the act), we enclose 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 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
 these 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.
 
 iv) With respect to the provision for current Income Tax, we draw your
 attention to Note No. 6 (i) - Current Income Tax of Notes to Accounts
 given as schedule - 24 to the financial statement. As stated in the
 note, the Company is of the view that the profits derived from export
 from their Unit notified under Special Economic Zone Act, 2005 are
 entitled for tax exmption in proportion of the export turnover of the
 unit to the total turnover of the unit and the provision for current
 income tax as been determined and provided in the financial statements
 accordingly. Pending clarification / amendments to relevant statutes
 proposed to be issued by the Government of India, the provision made
 for current income tax for the year ended 31st March
 
 2009 is lower by Rs.3,425 lakhs. Due to this, the Profit After Tax,
 Balance in Profit and Loss Account are overstated and the Provision for
 Taxation is understarted to the extent.
 
 v) 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 Section 211 (3C) of the Act, to the extent
 applicable.
 
 vi) On the basis of the written representations received from the
 directors, as on 31.03.2009, and taken on record by the Board of
 Directors, we report that none of the directors is disqualified as on
 31 st March, 2009 from being appointed as director in terms of clause
 (g) of sub-section (1) of section 274 of the Companies Act, 1956.
 
 vii)Subject to clause 4 (iv) of this report and in our opinion to the
 best of our information and according to the explanation given to us,
 the said accounts read in conjunction with the notes and accounting
 policies thereon give the information required by the Act, 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 Balance Sheet of the state of affairs of the Company
 as at 31st March, 2009;
 
 b) in the case of Profit and Loss Account of the Profit for the year
 ended on that date; and
 
 c) in the case of Cash Flow Statement, of the cash flows for the year
 ended on that date.
 
 ANNEXURE REFERRED TO IN PARAGRAPH 3 OF AUDIT REPORT OF EVEN DATE ON THE
 ACCOUNTS OF DIVIS LABORATORIES LIMITED (‘THE COMPANY) FOR THE YEAR
 ENDED 31ST MARCH 2009
 
 1.  (a) The company has maintained proper records
 
 showing full particulars including quantitative details and situation
 of Fixed Assets.
 
 (b) As explained to us, the fixed assets have been physically verified
 by the management according to the phased programme designed to cover
 all the fixed assets on rotation basis. In respect of fixed assets
 verified according to this programme, which is considered reasonable,
 no material discrepancies were noticed on such verification. As regards
 capital works in-progress, the same will be verified by the management
 on completion of assets.
 
 (c) The fixed assets disposed off during the year did not represent
 substantial part of fixed assets of the Company, which will affect the
 going concern status of the Company.
 
 2.  (a) The Inventories of the company have been physically
 
 verified by the Management during the year at reasonable intervals
 except stocks lying with others, which have been verified with
 reference to confirmations, certificates and other relevant documents
 where available.
 
 (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) The Company has maintained proper records of inventories and the
 discrepancies noticed on physical verification of stocks as compared to
 book records, which in our opinion were not material, have been
 properly dealt with in the books of account.
 
 3.  The Company has neither granted nor taken any loans, secured or
 unsecured to/from companies, firms or other parties covered in the
 register maintained under section 301 of the Act, 1956. Consequently,
 the provisions of Clause 4(iiib), 4(iiic), 4(iiid), 4(iiif) and 4(iiig)
 of the Order are not applicable to the Company.
 
 4.  In our opinion and according to the information and explanations
 given to us, there are adequate internal control systems commensurate
 with the size of the Company and the nature of its business with regard
 to purchase of inventory, 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 internal controls
 with regard to purchase of inventory, fixed assets and for the sale of
 goods and services.
 
 5.  (a) According to the information and explanations given
 
 to us and as confirmed by the Company Secretary and Management of the
 Company, we are of the opinion that the particulars of contracts or
 arrangements that need to be entered into the register maintained under
 section 301 of the Companies Act, 1956 have been so entered.
 
 (b) In our opinion and according to the information and explanations
 given to us, there are no transactions 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 Rs.5,00,000/- in
 respect of each party during the year.
 
 6.  According to the information and explanations given to us, the
 Company has not accepted any deposits from the public covered by the
 directives issued by the Reserve Bank of India and the provisions of
 Section 58A and 58AA or any other relevant provisions of the Act, and
 the rules framed there under. Consequently, the provisions of clause 4
 (vi) of the order are not applcable to the company.
 
 7.  In our opinion and according to the explanations given to us, the
 Company has an internal audit system commensurate with the size and
 nature of its business.
 
 8.  We have broadly reviewed the records maintained by the Company
 pursuant to the order made by the Central Government of India, for the
 maintenance of cost records under Section 209(1)(d) of the Companies
 Act, 1956 and are of the opinion that prima facie the prescribed
 records have been made and maintained. We have not, however, made a
 detailed examination of the records with a view to determine whether
 they are accurate or complete.
 
 9.  (a) According to the records of the Company and as per
 
 the information and explanations given to us, the Company is generally
 regular in depositing, with appropriate authorities, 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 applicable to it except in case of service tax where
 instances of delay have been observed in depositing the dues with the
 appropriate authorities and in respect of these statutory dues, there
 are no outstanding dues as on 31.3.2009 which are outstanding for a
 period of more than six months from the date they became payable.
 
 (b) According to the records of the Company and as per the information
 and explanations given to us, there are no dues of Sales Tax, Wealth
 Tax, Service Tax, and Cess, which have not been deposited on account of
 any dispute as on 31.3.2009 except Excise Duty, Custome Duty and Income
 Tax, the details of which are as given under:
 
 Name of the            Period to              Nature of dues
 Statute                  which the
                        amount relates
 
 Excise duty           August 2005      Penalty and fine for non-
                                        fulfillment of export obligation
                                       against goods imported under DEEC   
                                        Scheme
 Excise duty         January, 2007      Penalty for non-fulfillment of
                                        export obligation against goods
                                        imported under DEEC Scheme
 Excise duty           June 2006        to Customs duty foregone
                      July 2007         on materials used for
                                        manufacture of non-exci
                                       -sable goods, penalty for
                                        non-payment of
                                        customs duty and penalty for
                                        improper utilisation of
                                        Cenvat Credit
 Excise duty          August 2007       to Customs duty foregone
                       July 2008        on materials used for
                                        manufacture of non-exci
                                        -sable goods, penalty for
                                        non-payment of customs duty and
                                        penalty for improper utilisation
                                       of Cenvat Credit
 Income Tax              2004-05       Income Tax and interest
                                        demanded on completion
                                           of assessment
 Income Tax              2005-06       Interest for delay in
                                       payment of advance fringe
                                       benefit tax demanded on
                                       completion of assessment
 
 Amount                 Forum where
 Rs. in lakhs      dispute is pending
 
  0.30             Customs, Excise & Service Tax
                   Appellate Tribunal, south Zonal Bench, Bangalore
 10.00             Customs, Excise & Service Tax
                   Appellate Tribunal, south Zonal Bench, Chennai
 69.48             Customs, Excise & Service Tax
                   Appellate Tribunal, south Zonal Bench, Bangalore
 60.61             Customs, Excise & Service Tax
                   Appellate Tribunal, south Zonal Bench, Bangalore
 27.60             Commissioner of Income Tax,
                   Appeals-II, Hyderabad
  0.41             Additional Commissioner of
                   Income Tax, Range-1, Hyderabad
 
 10.As per the information and explanations given to us and on an
 overall examination of the financial statements of the Company for the
 current and immediately preceding financial year, we report that the
 Company does not have any accumulated losses at the end of the current
 financial year nor incurred cash losses in the current and immediately
 preceding financial year.
 
 11.According to records of the Company, during the year the Company has
 not defaulted in repayment of dues to financial institution or bank or
 debenture holders.
 
 12.As per the information and explanations given to us, as the Company
 has not granted any loans and advances on the basis of security by way
 of pledge of shares, debentures and other securities to any body during
 the year, the provisions of clause 4 (xii) of the order are not
 applicable to the company.
 
 13.In our opinion, as the Company is not a chit fund or a nidhi or
 mutual benefit fund or society, the provisions of Clause 4 (xiii) of
 the Order are not applicable to the Company.
 
 14.In our opinion, as the Company is not dealing in or trading in
 Shares, Securities, debentures and other investments, the provisions of
 Clause 4 (xiv) of the Order are not applicable to the company.
 
 15.As per the information and explanations given to us, as the Company
 has not given any guarantees for loans taken by others from banks or
 financial institutions, the provisions of clause 4 (xv) are not
 applicable to the company.
 
 16.According to records of the Company, the Company has not raised any
 term loans during the year and in respect
 
 of term loans raised in earlier years, the same have been applied for
 the purposes for which they were raised in the corresponding years.
 
 17. According to records and on an overall examination of the balance
 sheet and cashflow statement of the company, as the company has not
 raised any funds on shortterm basis during the year, the provisions of
 clause 4 (xvii) are not applicable to the company.
 
 18. As per the information and explanations given to us, as the Company
 has not made any preferential allotment of shares to parties and
 companies covered in the Register maintained under section 301 of the
 Act during the year, the provisions of clause 4 (xviii) are not
 applicable to the company.
 
 19.As the Company has not issued any debentures during the year, which
 requires the creation of security or charge, the provisions of clause 4
 (xix) are not applicable to the company.
 
 20.As the company has not raised any money by public issue during the
 year, the provisions of clause 4 (xx) are not applicable to the
 company.
 
 21.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 as per the representation given by the Company
 and relied on by us, we have neither come across any instance of
 material fraud on or by the Company, noticed or reported during the
 year, nor have we been informed of such cases by the management.
 
                                 For P.V.R.K. NAGESWARA RAO & CO.,
                                   Chartered Accountants
 
                                 P.V.R.K. NAGESWARA RAO
 HYDERABAD                       Partner
 6th June 2009                   Membership No.18840