1.  We have audited the attached Balance Sheet of Himachal Futuristic
 Communications Limited (the Company) as at 31st March, 2011, the Profit
 & Loss Account and also the Cash Flow statement for the period 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 have 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, issued
 by the Central Government of India in terms of Section 227(4A) of the
 Companies Act, 1956 and on the basis of such checks as considered
 appropriate and according to the information and explanations given to
 us during the course of the audit, we enclose in the Annexure hereto a
 statement on the matters specified in paragraphs 4 and 5 of the said
 Order to the extent applicable.
 
 4.  a) As mentioned in Note B-9 of Schedule 19, the
 
 Company has accounted for the impact of Rework Package approved by the
 CDR Empowered Group after complying with most of the terms and
 conditions stipulated therein, though compliance of some of them is
 still in process and individual acceptance of one of lender is still
 awaited.
 
 b) With regard to the sundry debtors outstanding for a long period as
 mentioned in Note B-17 of Schedule 19, we are unable to comment on the
 extent of realisability and consequently on the adequacy of provision
 for doubtful debts made by the Company.  Impact thereof on the Profit
 for the period, if any, is unascertainable.
 
 c) As mentioned in Note B-21 of Schedule 19, balances of some of the
 sundry debtors, creditors, lenders and loans and advances are subject
 to confirmations, reconciliation and adjustments, if any.
 
 d) As stated in Note B-5 of Schedule 19, the Company has paid
 remuneration to managerial personnel during the period for which
 approval of central government is pending.
 
 The effect of items mentioned at paragraph 4(a), (b), (c) and (d) above
 is unascertainable, and hence the consequential cumulative effect
 thereof on Profit for the period, assets, liabilities and reserves is
 unascertainable.
 
 5.  Further to our comments in the Annexure referred to above
 paragraph, 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
 Companies Act, 1956.
 
 e) On the basis of written representations received from the 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 above date
 from being appointed as a director 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 accounts subject to para 4 above
 and read together with the other notes and the significant accounting
 policies 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 the case of the Balance Sheet, of the state of affairs of the
 Company as at 31st March, 2011;
 
 (ii) In the case of the Profit and Loss Account, of the Profit for the
 period ended on that date; and
 
 (iii) In the case of the Cash Flow Statement, of the cash flows for the
 period ended on that date.
 
 ANNEXURE TO THE AUDITORS’ REPORT
 
 Annexure referred to in paragraph 3 of the Auditors’ Report of even
 date to the Members of HIMACHAL FUTURISTIC COMMUNICATIONS LIMITED on
 the accounts for the period ended 31st March, 2011;
 
 (i) (a) The Company has maintained proper records showing full
 particulars including quantitative details and situations of Fixed
 Assets.
 
 (b) As per the information and explanations given to us, there is a
 phased programme of physical verification of fixed assets adopted by the
 Company and no material discrepancies were noticed on such verification.
 In our opinion, the frequency of verification is reasonable, having
 regard to the size of the Company and nature of its business.
 
 (c) During the period, the Company has not disposed off any substantial
 part of the fixed assets. However, at the period end the Company has
 determined the impairment loss on certain fixed assets amounting to
 Rs.795,275,065/-.
 
 (ii) (a) As per the information furnished, the Inventories have been
 physically verified by the management at reasonable intervals during the
 period. In our opinion, having regard to the nature and location of
 stocks, the frequency of physical verification is reasonable.
 
 (b) In our opinion, and according to the information and explanations
 given to us, 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 is maintaining proper records of Inventory. In our
 opinion, the discrepancies noticed on physical verification of stocks
 were not material in relation to the operation of the Company and the
 same have been properly dealt with in the books of account.
 
 (iii) (a) As per the information furnished, the Company has not granted
 any loans, secured or unsecured to and from companies, firms and other
 parties covered in the register maintained under Section 301 of the
 Companies Act, 1956. Accordingly, paragraphs 4(iii) (a), (b), (c) and
 (d) of the Order are not applicable.
 
 (b) As per the information furnished, 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
 
 Companies Act, 1956. Accordingly, Clause 4 (iii) (e), (f) and (g) of
 the said Order is not applicable.
 
 (iv) In our opinion and according to information and
 
 explanations given to us, there is an adequate internal control system
 commensurate with the size of the Company and the nature of its
 business with regard to purchase of inventory and fixed assets and for
 the sale of goods and services. During the course of our audit, no
 major weakness has been noticed in the internal controls.
 
 (v) Based on the audit procedure applied by us and
 
 according to the information and explanations provided by the
 management, during the period, there has been no contract or
 arrangement that needed to be entered into the register maintained
 under section 301 of the Companies Act, 1956. Accordingly, Clause 4
 (v)(b) of the said Order is not applicable.
 
 (vi) The Company has not accepted any deposits from the public within
 the meaning of the provisions of Section 58A, 58AA or any other
 relevant provisions of the Companies Act, 1956.
 
 (vii) Although the Company is having internal Audit System, the same
 needs to be strengthened further in terms of frequency of reporting to
 make it commensurate with the size of the Company and nature of its
 business.
 
 (viii) The Central Government has prescribed maintenance of the cost
 records under section 209(1)(d) of the Companies Act, 1956 in respect
 of one of the product 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 records.
 
 (ix) (a) According to the information and explanations given to us and
 records examined by us, the Company has generally been regular in
 depositing undisputed statutory dues with the appropriate authorities
 in respect of provident fund, employees’ state insurance, income tax
 deduced at source, wealth tax, excise duty, service tax and sales
 tax/works contract tax though there has been a slight delay in a few
 cases. According to information and explanations given to us, no
 undisputed arrears of statutory dues were outstanding as at 31st March,
 2011 for period of more than six months from the date they become
 payable.
 
 (b) According to the records of the Company, the dues of Sales tax,
 which have not been deposited on account of disputes and the forum
 where the dispute is pending, are as under:
 
 Name         Nature of     Amount      Period to         Forum
 of the       the dues       in Rs.       which the         where
 Statute                                amount relates    dispute is
                                                          pending
 
 1. Sales    Sales Tax    18,742,719   1997-1998 &        Hon’ble
 Tax Act                               1998-1999          High Court
                                                          of Punjab &
                                                          Haryana.
 
 2. Income   Income       82,160,582   A/Y 2002-2003      Commis-
 Tax Act     Tax                       & 2003-2004        sioner of
                                                          Income Tax
                                                          (Appeal),
                                                          New Delhi
 
 Total                   100,903,301
 
 (x) There are no accumulated losses of the Company at the end of the
 financial period. The Company has not incurred cash loss during the
 period. However, in the immediately preceding financial period, the
 Company had incurred cash loss.
 
 (xi) According to the information and explanations given to us and
 records examined by us, in view of the Rework Package approved by the
 Corporate Debt Restructuring (CDR) Empowered Group as explained in Note
 No.  B-9 of schedule 19, the Company has not defaulted in repayment of
 dues to financial institution or banks or debenture holders as at the
 Balance Sheet date.
 
 (xii) Based on our examination of the records and information and
 explanations given to us, the Company has not granted any loans and
 advances on the basis of security by way of pledge of shares,
 debentures and other securities.
 
 (xiii) As per the information and explanations given to us the
 provisions of any Special Statute applicable to Chit Fund do not apply
 to the Company. The Company is also not a nidhi/mutual benefit
 fund/society.
 
 (xiv) The Company has maintained proper records of transactions and
 contracts in respect of trading in shares, securities, debentures and
 other investments and timely entries have been made therein. All
 shares, debentures and other investments have been held by the Company
 in its own name, except 65,00,000 shares of AB Corp Limited, which are
 pledged with OBC (erstwhile GTBL).
 
 (xv) Based on our examination of the records and information and
 explanations given to us, the Company has given corporate/counter
 guarantees for loans taken by group companies, from banks and financial
 institutions. As one of the businesses of the Company is to promote the
 companies and also the long term involvement with those companies, the
 guarantees have not been considered prima facie, prejudicial to the
 interest of the Company.
 
 (xvi) Based on our examinations of the records and information and
 explanations given to us during the period no term loan with repayment
 period beyond 36 months has been obtained. However, during the period
 the Company has raised inter corporate loans which on an overall basis,
 have been applied for the purposes for which they were obtained.
 
 (xvii) According to the information and explanations given to us and on
 an overall examination of the balance sheet of the Company as at the
 end of the period, funds raised on short term basis have, prima facie,
 not been used for long term investment.
 
 (xviii) The Company has not made any preferential allotment of shares
 during the period to parties and companies covered in the register
 maintained under section 301 of the Act.
 
 (xix) The Company has not issued any secured debentures during the
 period.
 
 (xx) The Company has not raised any money by public issue during the
 period ended March 31, 2011.
 
 (xxi) To the best of our knowledge and belief and according to the
 information and explanations given to us, no fraud on or by the Company
 has been noticed or reported during the course of our audit.
 
                                              For KHANDELWAL JAIN & CO.,
 
 Firm Registration No. 105049W                    Chartered Accountants,
 
                                                       (Akash Shinghal)
 
 Place: New Delhi                                               Partner
 
 Dated: 30th May, 2011                            Membership No: 103490