Elder Pharmaceuticals

1) We have audited the attached Balance Sheet of ELDER PHARMACEUTICALS
 LIMITED as at March 31,2009, the related Profit and Loss Account of the
 Company and 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 as
 amended by the Companies (Auditors Report) Order, 2004 (together the
 Order), issued by the Central Government of India in terms of
 sub-section (4A) of the section 227 of the Companies Act, 1956 and on
 the basis of such checks of the boobs and records of the Company as we
 considered appropriate and according to the information and
 explanations given to us. we report that:
 
 i) a) The Company has maintained proper records to show full
 particulars, including quantitative details and situation of fixed
 assets.
 
 b) As explained to us, the management during the year has physically
 verified the fixed assets in a phased periodical manner, which in our
 opinion is reasonable, having regard to the size of the Company and
 nature of its assets. No material discrepancies were noticed on such
 physical verification.
 
 c) In our opinion, the Company has not disposed of a substantial part
 of its fixed assets during the year and the going concern status of the
 Company is not affected.
 
 ii) a) As explained to us, the management at regular intervals during
 the year has physically verified inventories.
 
 b) In our opinion and according to the information and explanations
 given to us, the procedures of physical verification of inventories
 followed by the management are reasonable and adequate in relation to
 the size of the Company and nature of its business.
 
 c) The Company has maintained proper records of inventories. As
 explained to us, there were no material discrepancies noticed on
 physical verification of inventory.
 
 iii) a) According to the information and explanations given to us, the
 Company has not tafeen loans from the parties listed in the Register
 maintained under Section 301 of the Companies Act, 1956. The Company
 has granted unsecured loans to following parties listed in the register
 maintained under section 301.
 
                                Max Balance      Outstanding
 Name of the Company            during the year  As at 31-3-2009
                                (Rs. in lacs)    (Rs. in lacs)
 
 1.  Elder Instruments Pvt. Ltd.   210.00              Nil
 
 2.  EWF Pharmaceuticals Pvt. Ltd.  50.00              Nil
 
 3.  Elder Projects Ltd.          1189.00           1189.00
 
 We have relied on the representation of the management that the monies
 due from parties referred to in note No. 17 of Schedule 20, other than
 the above, are advances and not in the nature of loans.
 
 b) According to the information and explanations given to us. in our
 opinion, the rate of interest and other terms and conditions of loans
 granted to the above companies by the Company are not prejudicial to
 the interest of the Company.
 
 c) According to the information and explanations given to us, parties
 to whom loans and advances in the nature of loans have been given are
 repaying the principal amount and interest as stipulated.
 
 d) According to the information and explanations given to us, there in
 no over due amount of loans granted to the parties listed in the
 register maintained under section 301 of the Companies Act.
 
 iv) In our opinion and according to the information and explanations
 given to us, there are adequate internal control procedures
 commensurate with the size of the Company and the nature of its
 business for the purchase of inventory, fixed assets and for the sale
 of goods. During the course of our audit, we have not observed any
 major weakness in internal controls.
 
 v) a) In our opinion and according to the information and explanations
 given to us, the transactions made in pursuance 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) Based on the information and explanations given to us, we are of the
 opinion that the transactions made in pursuance of the contracts or
 agreements entered in the register maintained under section 301 of the
 Companies Act, 1956 and exceeding the vale of Rs.5 lakhs in respect of
 any party during the year have been made at reasonable prices, having
 regard to the prevailing market price at the relevant time.
 
 vi) In our opinion and according to the information and explanations
 given to us, the Company has complied with the provisions of sections
 58A and 58AA of the Companies Act, 1956 and Companies (Acceptance of
 Deposits) Rules, 1975 with regard to the deposits accepted from the
 public.
 
 vii) The Company has an internal audit system commensurate with the
 size and the nature of its business.
 
 viii) The Central Government has prescribed maintenance of Cost Records
 under Section 209(1 )(d) of the Companies Act.  1956 in respect of
 certain manufacturing activities of the Company. We have broadly
 reviewed the accounts and records of the Company in this connection and
 are of the opinion, that prima facie, the prescribed accounts and
 records have been made and maintained. We have not, however, made a
 detailed examination of the same.
 
 ix) a) According to the records of the Company, 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 statutory dues have been regularly
 deposited with the appropriate authorities.
 
 b) The disputed statutory dues that have not been deposited on account
 of matters pending before appropriate authorities are as under.
 
 No.  Name of the   Nature of    Forum where dispute is     Amount
      Statute       the dues            pending          (Rs. in Lacs)
 
 1 Sales Tax     Assessment Dues  Asst. Commissioner        8.61
                                  Commercial Tax, 
                                  West Bengal
 
 2 Income Tax    Assessment Dues  Commissioner of 
                                  Income Tax              263.14
 
 3 Customs Act   Adjudication 
                 Order Customs,   Excise & Service Tax     49.50
                                  Appellate tribunal
 
 4 Central       Adjudication     Customs, Excise &
   Excise          Order          Service Tax               7.94
                                  Appellate tribunal
 
 x) The Company has no accumulated losses and has not incurred any cash
 losses during the financial year covered by our audit or in the
 immediately preceding financial year.
 
 xi) Based on our audit procedures and according to the information and
 explanations given to us, we are of the opinion that the Company has
 not defaulted in repayment of dues to financial institutions and banks.
 
 xii) The Company has given guarantees for loans taken by a subsidiary
 from a bank. The terms and conditions thereof are not prima facie
 prejudicial to the interest of the Company.
 
 xiii) To the best of our knowledge and belief and according to the
 information and explanation given to us, term loans availed by the
 Company were, prima facie, applied by the Company during the year for
 the purpose for which the loans were obtained.
 
 xiv) According to the Cash Flow statement and other records examined by
 us and the information and explanations given to us, on an overall
 basis, funds raised on short term basis, have prima facie, not been
 used during the year for long term investments.
 
 xv) In our opinion and according to the information and explanations
 given to us, no fraud on or by the Company has been noticed or reported
 during the year, which causes the financial statements to be materially
 misstated.
 
 xvi) In our opinion and according to the information and explanations
 given to us, the nature of the Companys business/ activities during
 the year are such that clauses xii, xiii, xiv, xviii, xix, and xx of
 Para 4 of the Companies (Auditors Report) Order are not applicable to
 the Company.
 
 4) Further to our comments in paragraph (3) above, we state that:
 
 a) 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;
 
 b) In our opinion proper books of account as required by law have been
 feept by the Company so far as it appears from our examination of the
 books;
 
 c) The Balance Sheet, Profit and Loss Account and the Cash Flow
 Statement referred to in this report are in agreement with the boobs of
 account;
 
 d) In our opinion, the Cash Flow Statement, Profit and Loss Account and
 the Balance Sheet comply with the Accounting Standards referred to in
 sub-section (3C) of Section 211 of the Companies Act 1956
 
 e) On the basis of the written representation received from the
 Directors and taken on record by the Board of Directors, we report that
 none of the said Directors is disqualified as at 3 lstMarch, 2009 from
 being appointed as director in terms of Clause (g) of sub-section (l)
 of Section 274 of the Companies Act, 1956.
 
 f) In our opinion, and to the best of our information and according to
 the explanations given to us, the said accounts read with the notes
 there on 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 affairs of the
 Company as at 31st March, 2009;
 
 ii) In the case of the Profit and Loss Account of the Profit of the
 Company for the year ended on that date; and
 
 iii) In the case of the Cash Flow Statement of the cash flows of the
 Company for the year ended on that date.
 
 
                                            For S.S. KHANDELWAL & CO.
                                               Chartered Accountants
 
 
 Mumbai.                                             S.S. Khandelwal
 25th August, 2009                                        Proprietor
                                                Membership No. 31487