1 We have audited the attached Balance Sheet of Hotel Leela venture
 Limited as at 31st March 2012, and also the Profit and Loss Account and
 the Cash Flow statement for the year ended as on that date, both
 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 misstatements. 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 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 as
 amended by the Companies (Auditor''s Report) (Amendment) Order, 2004
 (the ''order'') issued by the Central Government in terms of Section
 227(4A) of the Companies Act, 1956 we give in the annexure, a statement
 on the matters specified in paragraphs 4 and 5 of the said order to the
 extent applicable.
 
 4 Further to our comments in the Annexure referred to 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;
 
 b.  In our opinion, proper books of account as required by law have
 been kept by the Company so far as it appears from our examination of
 those books;
 
 c.  The Balance Sheet, the Profit and Loss Account and the Cash Flow
 Statement dealt with by this report are in agreement with the books of
 account;
 
 d.  In our opinion, the Balance Sheet, the Profit and Loss Account and
 the Cash Flow Statement dealt with by this report comply with the
 accounting standards, to the extent applicable, referred to in
 subsection (3C) of Section 211 of the Companies Act, 1956;
 
 e.  On the basis of written representations received from the directors
 and taken on record by the Board of Directors, we report that none of
 the directors is disqualified as at 31st March 2012 from being
 appointed as a director in terms of clause (g) of sub-section (1) of
 Section 274 of the Companies Act 1956; and
 
 f.  In our opinion, and to the best of our information and according to
 the explanations given to us, they said Accounts read with other notes,
 give information required by the Companies Act, 1956 in the manner so
 required and give a true and fair view;
 
 i.  in the case of Balance Sheet, of the state of affairs of the
 Company as at 31st March 2012;
 
 ii.  in the case of 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 for the
 year ended on that date.
 
 (i) (a) The Company has maintained proper records showing full
 particulars including quantitative details and situation of fixed
 assets on the basis of available information.
 
 (b) As explained to us, all the fixed assets were physically verified
 during the year by the Management in a phased periodical manner, which
 in our opinion is reasonable, having regard to the size of the Company
 and nature of its assets. According to the information and explanations
 given to us, no material discrepancies were noticed on such
 verification.
 
 (c) The fixed assets disposed off during the year, in our opinion, do
 not constitute a substantial part of the fixed assets of the Company
 and such disposal has, in our opinion, not affected the going concern
 status of the Company.
 
 (ii) (a) As explained to us, inventories were physically verified
 during the year by the Management at reasonable intervals.
 
 (b) In our opinion and according to the information and explanation
 given to us, the procedures of physical verification of inventories
 followed by the Management were reasonable and adequate in relation to
 the size of the Company and nature of the business.
 
 (c) In our opinion and according to the information and explanation
 given to us, the Company has maintained proper records of inventories
 and no material discrepancies were noticed on physical verification.
 
 (iii) According to the information and explanations given to us, the
 Company has not granted/ taken secured or unsecured loans to / from
 companies, firms or other parties covered in the Register maintained
 under Section 301 of the Companies Act, 1956.
 
 (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 nature of its business
 with regard to purchase of inventories and sale of goods and services.
 In our opinion, internal control systems for purchase of fixed assets
 needs to be strengthened. During the course of our audit, except for
 weakness in internal control system for purchase of fixed assets, we
 have not observed any continuing failure to correct major weaknesses in
 internal controls.
 
 (v) (a) To the best of our knowledge and belief and according to the
 information and explanations given to us, transactions to be entered in
 the register maintained under Section 301 of the Companies Act, 1956
 have been entered in the register.
 
 (b) According to the information and explanation given to us, the
 Company has not entered into any contracts / arrangements which need to
 be entered in the register maintained under Section 301 of the
 Companies Act, 1956 exceeding the value of Rs. 5 lakhs in respect of
 each party during the year under review.
 
 (vi) In our opinion and according to the information and explanations
 given to us, the Company has not accepted deposits in terms of the
 provisions of Sections 58A and 58AA or any other relevant provisions of
 the Companies Act, 1956.
 
 (vii) In our opinion, the Company has an adequate internal audit system
 commensurate with the size and nature of its business.
 
 (viii) The Central Government has not prescribed maintenance of cost
 records under section 209 (1) (d) of the Companies Act, 1956 in respect
 of any of the activities of the Company.
 
 (ix) (a) According to the information and explanations given to us,
 except wealth tax, the Company has generally been regular in depositing
 undisputed statutory dues, including Provident Fund, Investor Education
 and Protection Fund, Employees'' State Insurance, Income-Tax, Sales-Tax,
 Service Tax, Custom Duty, Excise Duty, Cess and any other material
 statutory dues with the appropriate authorities during the year under
 review and no undisputed amounts payable in respect of the aforesaid
 dues were outstanding as on 31st March 2012 for a period of more than
 six months from the date they became payable. Wealth Tax dues
 outstanding for more than six months as at the end of the year amounted
 Rs 12.76 lakhs.
 
 (b) According to the information and explanations given to us, details
 of disputed Sales Tax, Income Tax, Custom Duty, Wealth Tax, Service
 Tax, Excise Duty and Cess which have not been deposited with
 appropriate authorities as on 31st March, 2012 on account of dispute
 are given below :
 
 Name of the Statute    Nature of Dues           Amount
 
                                               (Rs. lakhs)
 
 Karnataka VAT 
 Act 2003               VAT with interest and    145.25 
                        penalty
 
 Income Tax Act 1961    Income Tax                30.14
 
 Wealth Tax Act, 1957   Wealth Tax                81.72
 
 Customs Act            Customs Duty and Penalty  75.09
 
 Customs Act            Customs Duty and Penalty   2.00
 
 
 
 Name of the Statute   Period to which the amount   Forum where dispute 
                                                    is pending
                       relates
 
 Karnataka VAT 
 Act 2003              2005-06, 2006-07, 2007-08 
                       and                          High Court of Karna
                                                    taka 2008-09
 
 Income Tax Act 1961   Assessment Year 2008-09      Commissioner of 
                                                    Income Tax (Appeals)
 
 Wealth Tax Act 1957                                Mumbai
 
                       Assessment Year 2004-05      Income Tax Appellate
                                                    Tribunal Mumbai.
 
 Customa ACT           1989 -90 and 2000-01         Customs, Excise & 
                                                    Service Tax
 
 Costoms Act                                        Appellate Tribunal, 
                                                    Mumbai
                       1990-91                      Commissioner of     
                                                    Customs, Mumbai
 
 (x) The Company does not have accumulated losses. The Company has not
 incurred cash losses during the financial year covered by our audit and
 in the immediately preceding financial year.
 
 (xi) As per the information and explanations given to us, the Company
 has defaulted in repayment of interest and term loan installment to
 banks, financial institutions and debenture holders relating to
 February and March 2012 amounting to Rs 15,446.52 lakhs.
 
 (xii) In our opinion and according to the information and explanations
 given to us, no loans and advances have been granted by the Company on
 the basis of securities by way of pledge of shares, debentures and
 other securities.
 
 (xiii) The Company is not a chit fund / nidhi / mutual benefit fund /
 society. Accordingly, clause 4 (xiii) of the Companies (Auditor''s
 Report) Order, 2003 is not applicable to the Company during the year
 under audit.
 
 (xiv) The Company during the year under review has not dealt or traded
 in shares, securities, debentures and other investments except
 investment in mutual funds for which proper records of the transactions
 and contracts are maintained. All investments have been held by the
 Company in its own name.
 
 (xv) The Company has not given any guarantee for loans taken by others
 from financial institutions or banks.
 
 (xvi) To the best of our knowledge and belief and according to the
 information and explanations given to us, in our opinion, term loans
 availed by the Company were, prima facie, applied by the Company during
 the year for the purposes for which the loans were obtained.
 
 (xvii) According to the information and explanations given to us, and
 on an overall examination of the Balance Sheet of the Company, funds
 raised on short term basis to the extent of Rs. 4,972 lakhs have been
 used during the year for long term investment.
 
 (xviii) During the year, the Company has not made preferential
 allotment of shares.
 
 (xix) The Company has created securities / charges in respect of
 secured debentures issued.
 
 (xx) The Company has not raised any monies by way of public issue
 during the year.
 
 (xxi) To the best of our knowledge and belief and according to the
 information and explanations given to us, no material fraud on or by
 the Company has been noticed or reported during the year.
 
 For PICARDO & CO.
 
 Chartered Accountants
 
 Registration No: 107917W
 
 K.V. Gopalakrishnayya
 
 Partner
 
 Membership No.21748
 
 Mumbai, 29th May, 2012