1.  We have audited the attached Balance Sheet of Golden Tobacco
 Limited as at 31st March, 2011, 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
 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. 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 (Auditor''s Report) Order, 2003 issued
 by the Central Government of India in terms of Section 227 (4A) of the
 Companies Act, 1956 (herein after referred to as 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 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; i
 
 (b) In accordance with the consistent practice followed by the Company,
 no provision has been made in the accounts in respect of the estimated
 total liability for future payment of gratuity of Rs. 57,646,424
 determined on the basis of actuarial valuation as on March 31, 2011.
 The accounting method of providing gratuity liability as and when due
 is not in accordance with the accounting method prescribed in
 Accounting Standard 15 of Accounting for Employee Benefits issued by
 Companies (Accounting Standards) Rules, 2006. (Refer Note no. 11 (a) in
 Schedule ''Q''to the accounts);
 
 (c) (i) Certain Sundry Debtors and Loans & Advances aggregating to Rs.
 4,93,09,336 which, have been classified by the management as
 ''considered good'' are, in our opinion, doubtful of recovery and are
 therefore required to be provided for as doubtful debts. (Refer Note
 no.7(i) in Schedule ''Q ''to the accounts).  (ii) Inventories include Rs.
 1,04,94,596 which in our opinion needs to be provided for because of
 its obsolescence. (Refer Note no. 7(H) in Schedule ''Q ''to the
 accounts).
 
 (d) Subject to what is stated in paragraph 4(b) above, 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;
 
 (e) The Balance Sheet, Profit and Loss Account and Cash Flow Statement
 dealt with by this report are in agreement with the books of account;
 
 (f) Subject to what is stated in paragraph 4(b) above, in our opinion,
 the Balance Sheet, Profit and Loss Account and Cash Flow Statement
 dealt with by this report comply with the Accounting Standards
 prescribed by Companies (Accounting Standards) Rules, 2006, to the
 extent applicable ;
 
 (g) On the basis of written representations received from 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 of the Company in terms of
 Section 274(1 )(g) of the Act;
 
 (h) We further report that, without considering the matter referred to
 in clause 1 (b) of the Annexure to this report, the effect of which
 could not be determined, had the observations made by us in paragraph
 4(b) and 4(c) above been considered, the loss for the year would have
 been Rs. 45,62,83,831 (as against reported loss figure of
 Rs.33,88,33,475), accumulated losses would have been Rs. 75,79,31,470
 (as against reported figure of Rs. 64,04,81,114), current assets, loans
 & advances would have been Rs. 333,82,80,968 (as against reported
 figure of Rs. 339,80,84,900 and current liabilities and provisions
 would have been Rs.  205,67,63,762 (as against reported figure of Rs.
 199,91,17,338);
 
 (i) We draw attention to Note no. 14(a) regarding recognizing of
 Rs.12,91,63,685 as Other Income being the differential amount between
 fair market value on the date of conversion and the actual cost in
 respect of conversion of property (fixed assets) into stock in trade at
 fair value considered by the stamp authorities.
 
 (j) In our opinion and to the best of our information and according to
 the explanations given to us, the said financial statements subject to
 our comments in paragraph 4(h) above and read together with Note no.2
 regarding contingent liabilities , Note no.11(b) regarding amount
 invested in and advances due from a subsidiary Company, Note no.23
 regarding certain amount of remuneration payable to directors for which
 the Central Government approval is being obtained and other notes
 appearing in Schedule ''Q'' of Significant Accounting Policies and Notes
 to accounts'' and those appearing elsewhere in the accounts, 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 the Balance Sheet, of the state of affairs of the
 Company as at 31st March,2011 ;
 
 (b) in the case of the Profit and Loss Account, of the loss of the
 Company for the year ended on that date ; and
 
 (c) in the case of the Cash Flow statement, of the Cash Flows of the
 Company for the year ended on that date.
 
 ANNEXURE TO THE AUDITORS'' REPORT (Referred to in paragraph 3 of
 Auditors'' Report of even date on the financial statements for the year
 ended and as on 31st March, 2011 of Golden Tobacco Limited)
 
 On the basis of such checks as we considered appropriate and according
 to the information and explanations given to us during the course of
 audit, we state that:
 
 1.  (a) The Company has generally maintained proper records showing
 full particulars including quantitative details and situation of fixed
 assets.
 
 (b) During the year, the management has physically verified the fixed
 assets in accordance with a phased programme which, in our opinion, is
 reasonable having regard to the size of the Company and nature of its
 assets. The discrepancies noticed on such verification have been dealt
 with in the books of account except a Flat-Gross Block of Rs.6,644,825
 (Net Block Rs.4,266,950) as on 31st March, 2011 which, as explained by
 the Management, is in the wrongful possession of the family member of
 an ex- employee for a long time. The Company has already initiated
 legal proceedings against the said ex- employee and on his demise, the
 names of his family members were substituted. The Company is rigorously
 following litigation so that flat can be vacated at the earliest. We
 are, however, unable to comment as to when the said flat would be
 released to the Company and on the ultimate realisability of the
 carrying value thereof. (Refer Note no. D in Schedule ''E'' to the
 accounts).
 
 (c) During the year, no substantial part of the fixed assets has been
 disposed off by the Company.
 
 2.  (a) The inventories of the Company at all its locations have been
 physically verified by the management at reasonable intervals during
 the year.  Inventory lying with third parties and in-transit as on 315''
 March, 2011 have been verified with reference to confirmation or
 statement of account or correspondence obtained from the third parties
 and /or subsequent receipt (f inventory.
 
 (b) In our opinion, the procedures of physical verification of
 inventory 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 inventory and the
 discrepancies noticed between the physical stocks and the book records
 were not material considering the operations of the Company and have
 been properly dealt with in the books of account.
 
 3.  The Company has not taken or granted any loans, secured or
 unsecured, from / to companies, firms or other parties covered in the
 register maintained under Section 301 of the Act.
 
 4.  In our opinion and according to the information and explanation
 given to us, having regard to the explanations that purchase of certain
 items of fixed assets and inventory 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 inventory and fixed assets and for the sale of goods and
 services. 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 we have been
 informed of any continuing failure to correct major weaknesses in the
 aforesaid internal control system.
 
 5.  (a) According to the information and explanations provided by the
 management, we are of the opinion that the particulars of contracts or
 arrangements referred to in Section 301 of the Act that need to be
 entered into the register maintained under the said Section have been
 so entered .  (b) In our opinion, and according to the information and
 explanations given to us, the transactions made in pursuance of
 contracts and arrangements referred to in (a) above and exceeding the
 value of Rs 5 lacs with any party during the year have been made at
 prices which are reasonable having regard to the prevailing market
 prices at the relevant time.
 
 6.  The Company has not accepted any fixed deposits from the public
 within the meaning of Section 58A, 58AA or any other relevant
 provisions of the Act and rules framed thereunder.
 
 7.  In our opinion, the Company has an adequate internal audit system
 commensurate with the size of the Company and nature of its business.
 
 8.  As per the information and explanations given to us and to the best
 of our knowledge, the Central Government has not prescribed the
 maintenance of cost records under Section 209(1 )(d) of the Act for any
 of the products of the Company for the year under review.
 
 9.  (a) According to the information and explanations given to us and
 according to the books and records as produced and examined by us, the
 undisputed statutory dues including Provident Fund, Investor Education
 and Protection Fund, Employees'' State Insurance, Income Tax, Sales Tax,
 Wealth Tax, Service Tax, Customs Duty, Excise Duty, Cess and other
 material statutory dues as applicable have generally been regularly
 deposited by the Company during the year with the appropriate
 authorities and there were no arrears as at 31st March, 2011 for a
 period of more than six months from the date they became payable.  (b)
 According to the records of the Company and the information and
 explanations given to us by the management, there are no amounts in
 respect of income tax, sales tax, wealth tax, service tax, custom duty,
 excise duty and cess that have not been deposited with the appropriate
 authorities on account of any dispute except for the amounts mentioned
 below :
 
 NAME OF THE 
 STATUTES       NATURE OF  PERIOD TO WHICH  AMOUNT    FORUM
                                                      WHERE DISPUTED
                DUES        IT RELATES    (IN RS.)
 
 Tamilnadu 
 General Sales 
 Tax Act, 1959  Sales Tax   1993-98       6,88,531  Sales Tax Commissi
                                                    -oner (Appeals)
 Employees''State 
 Insurance 
 Act, 1948      E.S.I.C.    Various Years18,71,197  Deputy Regional 
                                                    Officer
 
 Entry Tax 
 (Various 
 States)        Entry Tax   Various Years 16,88,73,143   High Court
 
 Entry Tax 
 - Madhya 
 Pradesh        Entry Tax   Various Years  45,84,065  Supreme Court
 
 Income Tax 
 Act, 1961      IncomeTax   Various Years 78,38,13,545 Income tax 
                                                  Appellate Tribunal
 
                                         670,19,33,640 Income tax 
                                                      commissioner
                                                         (Appeals)
 
 Central 
 Excise Act, 
 1944                                     8,34,41,266 Assessing Officer
 
                Excise Duty Various Years 301,757,161     Supreme Court
 
                                           50,356,013        High Court
 
                                         32,68,10,740    Customs Excise
                                                         Service Tax
 
                                          1,27,83,817    Appellate 
                                                         Tribunal
                                                         Upto Commissi
                                                         -oner Level
 
 10.  The accumulated losses of the Company at the end of the financial
 year are more than 50% of its net worth after considering, interalia,
 the matters referred in para 4 (b) and 4(c) of the auditors'' report and
 without considering the matters referred to in clause 1 (b) herein
 above, the effect of which could not be determined. The Company has
 incurred cash losses during the current financial year as well as in
 the immediately preceding financial year.
 
 11.  The Company has not defaulted in repayment of dues to banks and
 debenture holder except dues aggregating to Rs. 100 lacs payable to a
 debenture holder as of March 31, 2011.
 
 12.  The Company has not granted any loans and advances on the basis of
 security by way of pledge of shares, debentures and other securities.
 
 13 As the Company is not a nidhi /mutual benefit fund/society, the
 provisions of clause 4(xiii) of the Order are not applicable to the
 Company.
 
 14 As the Company is not dealing 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.  In our opinion and according to the information and explanations
 given to us, the terms and conditions on which the Company has given
 guarantee for loans taken by others from banks or financial
 institutions are, prima facie, not prejudic''*l to the interest of the
 Company.
 
 16.  In our opinion and according to the information and explanations
 given to us, the term loan was applied for the purposes for which it
 was obtained.
 
 17.  According to the information and explanations given to us and on
 an overall examination of the Cash Flow statement and Balance Sheet of
 the Company, in our opinion, the funds raised on short-term basis have,
 prima facie, not been used for long term investment.
 
 18.  During the year, 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 or in the recent past.
 
 19.  According to the information and explanations given to us,
 securities have been created in respect of debentures privately placed
 with IFCI Ltd.
 
 20.  The Company has not raised any money by way of public issue during
 the year or in the recent past.
 
 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 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.
 
                                          For LODHA & CO.  
                                    Chartered Accountants
 
                                            A.M.Hariharan
 
                                                  Partner
 
 Place : Mumbai                       Membership No.38323
 
 Dated : 25th May, 2011     Firm Registration No. : 301051E