1.  We have audited the attached Balance Sheet of M/s Granules India
 Limited, Hyderabad as on March 31,2012 and the Profit and Loss Account
 and Cash Flow Statement of the Company 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 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.  Audit also includes assessing
 the accounting principles used and significant estimates made by the
 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, 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) & (4) above:
 
 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 the Law have
 been kept by the Company so far as it appears from our examination of
 such books.
 
 c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement
 referred to in 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 comply with the requirements of the Accounting Standards
 referred to in sub-section (3C) of Section 211 of the Companies Act,
 1956.
 
 e) On the basis of the written representations received from the
 directors, and taken on record by the Board of Directors, we report
 that none of the Directors are disqualified as on March 31, 2012, from
 being appointed as directors in terms of clause (g) of sub- section (1)
 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 Balance Sheet, Profit & Loss
 Account and Cash Flow Statement read together with the significant
 accounting policies and notes thereon, 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 so far as it relates to the Balance Sheet, of the state of
 affairs of the Company as on March 31, 2012.
 
 ii) in so far as it relates to the Profit & Loss Account, of the Profit
 of the Company for the year ended on that date
 
 iii) in case of the Cash Flow Statement, of the cash flows for the year
 ended on that date.
 
 I) Fixed Assets
 
 a) The Company is maintaining proper records showing full particulars
 including quantitative details and situation of fixed assets of the
 Company.
 
 b) The Physical verification of fixed assets is being carried out as
 per the program drawn up and to the extent the physical verification is
 carried out, no material discrepancies were noticed on such
 verification.
 
 c) There was no disposal of a substantial part of fixed assets during
 the year.
 
 II) Inventory
 
 a) The stocks of raw materials, consumables, stores, work-in-progress
 and finished goods have been physically verified during the year at
 regular intervals by the management.
 
 b) The procedures of physical verification of stocks followed by the
 management are reasonable and adequate in relation to the size of the
 Company and the nature of its business. In respect of finished goods
 lying with the consignees, the certificate given by the management is
 relied upon.
 
 c) The discrepancies noticed on verification of stocks as compared to
 books were not material and it has been properly dealt with in the
 books of account.
 
 III) Loans taken / granted
 
 According to the information and explanations given to us, the Company
 has neither taken for granted any loans, secured or unsecured to/from
 companies, firms or other parties covered in the register maintained
 under sec.301 of the Companies Act, 1956.
 
 IV) Internal control
 
 a) In our opinion and according to the information and explanations
 given to us, the internal control procedures are being strengthened on
 a continuous basis so as to be commensurate with the size of the
 Company and the nature of its business for the purchase of inventory
 keeping in view of the expansion.
 
 b) There are no major weaknesses in the internal control procedures.
 
 V) Section 301
 
 Necessary entries were made in the register maintained under sec. 301
 of the Companies Act, 1956.
 
 VI) Public deposits
 
 The Company has not accepted any deposits from the public.
 
 VII) Internal audit
 
 The Company has an internal audit system so as to be commensurate with
 its size and the nature of its business.
 
 VIII) Cost records
 
 The Central Government has prescribed maintenance of cost records in
 respect of manufacture of API products and formulations. The Company
 has made and maintained account and records of such activities.
 
 IX) Statutory dues
 
 a.  The Company is regular in depositing with appropriate authorities
 undisputed statutory dues including Provident Fund, Employees State
 Insurance, Income tax. Customs Duty, Wealth Tax, Sales Tax, Excise
 Duty, Cess and other applicable statutory dues with the appropriate
 authorities.  According to the information and explanations given to us
 no undisputed amounts payable in respect of outstanding statutory dues
 as at the last day of the year ending 31.03.2012 for period exceeding 6
 months from the date they became payable.
 
 b.  According to the records of the Company, the dues outstanding of
 Income tax. Customs Duty, Wealth Tax, Sales Tax, Excise Duty, Cess on
 account of any dispute, are as follows:
 
 Name of the 
 statute        Nature of
                dues          Rs in Lakhs    Period for 
                                             which         Forum where
                                                           dispute
                                             the amount 
                                             relate        is pending
 
 The Customs 
 Act, 1962      Duty demand 
                on Imports
                Linder DEEC         32.57    1993-94       High Court,
                                                           Andhra 
                                                           Pradesh
 
 The Customs
 Act, 1962      Duty demand 
                on Export 
                obligations          10.9    1993-94       CESTAT, 
                                                           Chennai
 
 Service Tax    Penalty on 
                Service Tax 
                Matters             89.37    2008-09       CESTAT, 
                                                           Bangalore
 
 The Central 
 Excise Act, 
 1944           Duty and
                Penalty on 
                Centvat 
                Availment
                                   105.78    2006-10       CESTAT, 
                                                           Bangalore
 
 The Income 
 Tax Act, 1961  Tax demand
                on Transfer
                pricing & 
                other 
                matters            466.77    2006-07       ITAT, 
                                                           Hyderabad
 
 The Income 
 Tax Act, 1961  Tax demand 
                on Transfer
                pricing & 
                other 
                matters          1,303.21    2007-08       DRP, 
                                                           Hyderabad
 
 X) Accumulated losses / cash losses
 
 The Company has no accumulated losses as on 31st March, 2012.
 
 XI) Repayment of dues
 
 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 financial institution or bank as at the
 Balance Sheet date.
 
 XII) Loans & advances
 
 The Company has not granted loans and advances on the basis of security
 by way of pledge of shares, debentures and other securities.
 
 XIII) Chit- Fund companies/ Nidhi/Mutual benefit societies The
 provisions of special statute relating to chit fund companies and the
 provisions of Nidhi or mutual benefit fund/ societies are not
 applicable to the Company.
 
 XIV) Financing companies
 
 The Company is not dealing or trading in shares, securities and other
 investments.
 
 XV) Guarantee for loans
 
 The Company has not given any guarantee for loans taken by others to
 banks or financial institutions.
 
 XVI) Term loans
 
 In our opinion and according to the information and explanations given
 to us, the term loans are applied for the purpose for which the loans
 were obtained.
 
 XVII) Usage of funds
 
 According to the information and explanations given to us and on an
 overall examination of Balance Sheet of the Company, we report that no
 funds raised on short- term basis have been used for long-term
 investment.  No long-term funds have been used to finance short- term
 assets except permanent working capital.
 
 XVIII) Preferential allotments
 
 The Company has not made any preferential allotment of shares to
 parties and companies covered in the register maintained under sec. 301
 of the Companies Act, 1956.
 
 XIX) Creation of securities
 
 The Company has not issued any debentures during the year; hence, the
 question of creation of securities does not arise.
 
 XX) Public issue
 
 The Company has not raised any money through Public Issue.
 
 XXI) Frauds
 
 According to the information and explanations given to us, no fraud on
 or by the Company has been noticed or reported during the year.
 
 
 
                                                  For M/s KUMAR &GIRI
 
                                                Chartered Accountants 
 
                                                 Firm Reg No: 001584S
 
                                                      J. Bhadra Kumar
 
 Place: Hyderabad                                             Partner
 
 Date: April 24, 2012                            Membership No. 25480