1.  We have audited the attached Balance Sheet of Kingfisher Airlines
 Limited (formerly known as Deccan Aviation Limited) (the Company) as
 at March 31, 2011, the Profit and Loss Account and 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 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 sub-section (4A) of
 section 227 of the Companies Act, 1956 (the Act), as amended by the
 Companies (Auditor''s Report) (Amendment) Order, 2004 (herein after
 collectively referred to as the Order) we enclose in the annexure a
 statement on matters specified in paragraphs 4 and 5 of the Order.
 
 4.  Other Income for the fifteen months ended June 30, 2006 included a
 sum of Rs. 2,672.20 Lacs towards certain subsidy provided to the
 Company by one of its suppliers in conjunction with lease of aircrafts
 on operating lease basis. The previous auditors had reported that they
 were of the opinion that such accounting treatment was not in
 accordance with Accounting Standard 19 on Leases and the subsidy
 should be recorded on a straight-line basis over the period of the
 lease. Their audit report on the financial statements for the fifteen
 months ended June 30, 2006 was modified in this matter. We concur with
 the views of the said auditors in principle that such subsidy should be
 recognized on a systematic basis in the Profit and Loss Account over
 the periods necessary to match them with the related costs, which they
 are intended to compensate although the matter does not appear to be
 covered explicitly by the said AS 19.
 
 5.  As reported in paragraph 6 of our report dated July 28, 2009, the
 Company novated its rights in certain aircrafts purchase agreements
 during the year ended March 31, 2009 in favor of certain lessors and
 took such aircrafts back on operating lease from the same persons. The
 Company incurred a loss of Rs.  14,437.15 Lacs on such novation
 (including interest on loans borrowed for making pre-delivery payments
 to aircraft manufacturers of Rs. 5,305.34 Lacs). As already reported in
 the said report, in the absence of an independent valuation report, we
 had relied on the representations of the management that the novation
 was not established at fair value, the fair value of the aircrafts is
 at least equal to or more than the cost of acquisition and the
 preconditions specified in AS 19 for deferring the said loss are
 satisfied. We do not express any independent opinion in the matter.
 
 6.  Attention is invited to note 27 of schedule 19 regarding method of
 accounting of costs incurred on major repairs and maintenance of
 engines of aircrafts taken on operating lease during the year
 aggregating to Rs.12,256.85 lacs (year ended March 31, 2010 Rs.
 207,00.76 lacs) which have been included under fixed assets and
 amortized over the estimated useful life of the repairs. In our
 opinion, this accounting treatment is not in accordance with current
 accounting standards.
 
 7.  Attention is invited to note 28 of Schedule 19 regarding use fees
 payable by the Company in respect of certain assets taken on operating
 lease aggregating to Rs 5,576.45 Lacs as maintenance reserves, in
 accordance with its understanding. Pending formalization of the matter
 with the relevant lessor, we do not express any independent opinion in
 the matter.
 
 8.  We further report that, except for the effect, if any, of the
 matters stated in paragraph 5 and 7 above and 13(a) below, paragraph
 1(b) of the annexure to this report and notes 23 and 25 of schedule 19,
 whose effect are not ascertainable, had the observations made in
 paragraphs 4 & 6 above been considered, the loss after tax for the year
 ended March 31, 2011 would have been Rs.104,951.58 Lacs (March 31, 2010
 - Rs.175,350.66 Lacs) as against the reported loss of Rs.102,739.80
 Lacs (March 31, 2010 - Rs 164,722.06 Lacs), debit balance in profit and
 loss account as at March 31, 2011 would have been Rs.548,493.43.Lacs
 (March 31, 2010 - Rs. 443,541.85 lacs) as against the reported figure
 of Rs.  534,847.43 Lacs (March 31, 2010 - Rs. 432,107.63 Lacs), other
 liabilities would have been Rs.  58,553.65 Lacs (March 31, 2010 -
 Rs.44,043.05 Lacs) as against the reported figure of Rs.58,275.12 Lacs
 (March 31, 2010 - Rs.43,311.74.  Lacs), and fixed assets (excluding
 capital work in progress) would have been Rs. 137,071.61 Lacs (March
 31, 2010 - Rs. 139,061.17 Lacs) as against the reported figure of Rs.
 157,188.69 Lacs (March 31, 2010 - Rs.155,451.42 Lacs).
 
 9. Attention of the members is invited to note 24 of schedule 19
 regarding the financial statements of the Company having been prepared
 on a going concern basis, notwithstanding the fact that its net worth
 is completely eroded. The appropriateness of the said basis is
 interalia dependent on the Company''s ability to infuse requisite funds
 for meeting its obligations.
 
 Further to our comments in the annexure referred to above, we report
 that:
 
 10.  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.  ^
 
 11.  In our opinion, the Company has kept proper books of account as
 required by Law so far as appears from our examination of those books.
 
 12.  The Balance Sheet, Profit and Loss Account and Cash Flow Statement
 dealt with by this report are in agreement with the books of account.
 
 13.  (a) Attention of the members is invited to note 16 of schedule 19
 regarding recognition of deferred tax credit during the year
 aggregating to Rs. 49,341.80 Lacs (year ended March 31, 2010
 Rs.76,463.31lacs) (Total amount recognized up to March 31, 2011 Rs.
 292,778.31 Lacs) by virtue of which its loss for the year and debit
 balance in Profit and Loss Account stand reduced by Rs. 493,41.80 Lacs
 (year ended March 31, 2010 Rs. 76,463.31 Lacs) and Rs.  292,778.31 Lacs
 (as at March 31, 2010 Rs.243,436.51 Lacs) respectively. In view of
 explanation 1 to clause 17 of Accounting Standard 22, we cannot express
 any independent opinion in the matter.
 
 (b) In our opinion, subject to the effect of the matters stated in
 paragraphs 4 to 6 and 13(a) above, the Balance Sheet, Profit & Loss
 Account and Cash Flow Statement dealt with by this report comply in all
 material respects, with the mandatory Accounting Standards referred to
 in sub-section (3C) of section 211 of the Act.
 
 14.  On the basis of written representations received from Directors as
 on March 31, 2011 and taken on record by the Board of Directors, we
 report that none of the Directors of the Company, are disqualified as
 on that date from being appointed as a director, under clause (g) of
 sub-section (1) of section 274 of the Act.
 
 15. In our opinion and to the best of our knowledge and according to
 the information and explanations given to us, the said accounts subject
 to note 21 of schedule 19 and read with other notes on accounts, give
 the information required by the Act in the manner so required and
 subject to the effect of the matters stated in paragraphs 4 to 8 &
 13(a) above, note 23 of schedule 19 regarding certain accounts detailed
 in the said note being under review and reconciliation and note 25 of
 schedule 19 regarding the basis of computation of unearned revenue as
 at March 31, 2011 (Data of number of unflown tickets and their average
 value, based on which management has estimated the amount of unearned
 revenue, not being drawn from accounting records, could not be verified
 by us) (Effect thereof on revenue not ascertainable) 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 March 31, 2011,
 
 ii. In the case of Profit and Loss account, of the loss for the year
 ended on that date and
 
 iii. In the case of Cash Flow Statement, of the cash flows for the year
 ended on that date.
 
 Annexure to the Auditors'' report
 
 (As referred To in PArAgrAPh 3 of oUr rePorT of eVen dATe To The
 MeMbers of Kingfisher Airlines li MiTed)
 
 1.  a. The Company has maintained records showing full particulars
 including quantitative details and situation of fixed assets. However,
 comprehensive description of assets and current location are to be
 incorporated in the asset records after completion of reconciliation
 referred to in paragraph 1(b) below.
 
 b.  Fixed assets have been physically verified by the management during
 the year. Pending completion of reconciliation which is reportedly in
 progress, discrepancies, if any, cannot be ascertained (refer note 30
 of schedule 19).
 
 c.  There was no substantial disposal of fixed assets during the year.
 
 2.  a. Management has conducted physical verification of inventory at
 reasonable intervals during the year.
 
 b.  The procedures of physical verification of inventories followed by
 the management are reasonable and adequate in relation to the size of
 the Company and the nature of its business.
 
 c.  No material discrepancies were noticed on physical verification.
 
 3.  a.  As informed, the Company has not granted any loans, secured or
 unsecured to companies, firms or other parties covered in the register
 maintained under section 301 of the Act.
 
 b. As informed, the Company has taken loans from four companies covered
 in the register maintained under section 301 of the Act. The total loan
 amount outstanding as at year end was Rs. 6,554.14 lacs and the maximum
 amount outstanding at any time during the year were Rs. 113,433.14
 lacs. The rate of interest and terms and conditions on which the said
 loans are taken is not prima-facie prejudicial to the interests of the
 Company. No stipulations for repayment have been prescribed and as such
 no comments regarding regularity of payments are being made.
 
 4.  In our opinion and according to the information and explanation
 given to us, and taking into consideration management''s representation
 that a large number of items purchased are of a special nature for
 which alternative quotations cannot be obtained, there are adequate
 internal control procedures commensurate with the size of the Company
 and the nature of its business for the purchases of inventory and sale
 of services (subject to note 25 of schedule 19). Internal controls in
 respect of purchase of fixed assets to be strengthened. Subject to our
 observations in paragraph 1(b) above and note 25 of schedule 19, during
 the course of our audit, no continuing failure to correct major
 weakness in internal controls has been noticed.
 
 5.  a.  According to the information and explanations given to us, we
 are of the opinion that transactions that need to be entered into the
 register maintained under section 301 of the Companies Act, 1956 have
 been so entered.
 
 b. Further, contracts or arrangements referred to in section 301 of the
 Act and aggregating to Rs. 5.00 lacs or more per party have been
 entered into at prices which are reasonable as compared to similar
 services ~rendered to / by other parties except in respect of
 advertisement & sales promotional expenses of Rs 630.65 lacs and
 miscellaneous income of Rs.787.36 lacs where we are unable to make any
 comments on reasonability of rates since there were no similar
 transactions with third parties at the relevant time.
 
 6.  The Company has not accepted any deposits from the public.
 
 7.  The Company has an internal audit system commensurate with the size
 and nature of its business.
 
 8.  To the best of our knowledge and as explained, the Central
 Government has not prescribed the maintenance of cost records under
 section 209(1) (d) of the Act for the products of the Company.
 
 9.  a.  Undisputed statutory dues in respect of service tax,
 withholding taxes, provident fund, fringe benefit tax, investor
 education and protection fund and employees'' state insurance dues have
 not been regularly deposited with the appropriate authorities.
 Undisputed statutory dues in respect of wealth tax, customs, excise
 duty, cess as applicable, have generally been regularly deposited with
 the appropriate authorities. Since to the best of our knowledge, the
 Central Government has till date not prescribed the amount of cess
 payable under section 441A of the Act, no comments in this respect have
 been made.
 
 b.  According to the information and explanations given to us:-
 
 (i) No amounts were outstanding as at year end on account of undisputed
 amounts payable in respect of investor education and protection fund,
 sales tax, customs duty, excise duty and cess for a period of more than
 six months from the date they became payable.
 
 (ii) Undisputed amounts payable in respect of employees state insurance
 of Rs.0.75 lacs, provident fund of Rs.43.80 lacs, tax deducted at
 source of Rs. 42,297.52 lacs, service tax of Rs.1,047.76 lacs,
 professional tax of Rs.2.46 lacs (In all cases relating to the years
 2008-09, 2009- 2010 and 2010 - 2011) and fringe benefit tax of Rs.
 450.70 lacs (balance of tax and interest for the financial year
 2008-09) were outstanding for a period of more than six months from the
 date they became payable (excluding applicable interest in all cases
 except in respect of fringe benefits tax) (to the extent identified
 pending review and reconciliation of the relevant accounts). The due
 dates for these amounts are as per respective statutes.
 
 c.  According to the information and explanations given to us, the
 following dues have not been deposited with the concerned authorities
 on account of dispute
 
 Year                             Amount     Pending before
                                  (Rs in
                                   lacs)
 
 Tax deducted at source
 
 2006-07 and 2007-08              333.25    Commissioner of
                                            Income Tax (Appeals)
 
 Estimated total                6,019.06    Delhi High Court. In
 
 liability arising out of                   certain cases, writs
 
 rejection of approvals                     proposed by the
 
 under section 10(15A)                      Company are yet to be
 
 of the Income Tax Act,                     filed.
 
 1961.
 
 service Tax
 
 2004-05 to 2007-08               448.63    Customs, Excise and
 
                                            Service Tax Appellate
 
                                            Tribunal
 
 January 2005 to               16,164.30    Customs, Excise and
 September 2007                             Service Tax Appellate
                                            Tribunal.
 
 10.  The Company''s accumulated losses at the end of the financial year
 were more than fifty percent of its net worth. The Company has incurred
 cash losses during the financial year and in the immediately preceding
 financial year.
 
 11.  Based on our audit procedures and as per the information and
 explanations given by the management, the Company has defaulted in
 repayment of loans and interest to banks and financial institutions.
 Delays were noticed in payment of interest & principal on several
 occasions during the year. The unpaid overdue installments and interest
 to banks and institutions as at March 31, 2011 were Rs.3,750.00 lacs
 and Rs.2,066.14 lacs respectively. The unpaid installments fell due on
 December 31, 2010. Unpaid interest relate to the months of December
 2010 to March 2011. There were no dues payable to the debenture holders
 as at March 31, 2011.
 
 12.  According to the information and explanations given to us and
 based on the documents and records produced to us, the Company has not
 granted loans and advances on the basis of security by way of pledge of
 shares, debentures and other securities. Accordingly, the provisions of
 the clause 4(xii) of the Order are not applicable to the Company.
 
 13.  In our opinion, the Company is not a chit fund or a nidhi, mutual
 benefit fund / society. Accordingly, the provisions of the clause
 4(xiii) of the Order are not applicable to the Company.
 
 14.  In our opinion the Company is not dealing in or trading in shares,
 securities, debentures and other investments.  Accordingly, the
 provisions of clause 4(xiv) of the Order are not applicable to the
 Company.
 
 15.  According to the information and explanations given to us, the
 Company has not given guarantees during the year for loans taken by
 others from banks or financial institutions. Accordingly, the
 provisions of clause 4(xv) of the Order are not applicable to the
 Company.
 
 16.  Based on information and explanations given to us by the
 management, term loans taken during the year have been applied for the
 purpose for which they were obtained, wherever specified by the bank in
 the relevant sanction letters.
 
 17.  According to the information and explanations given to us and on
 an overall examination of the balance sheet of the company, we report
 that funds raised on short- term basis to an aggregate extent of
 Rs.279,659.60 Lacs has been used for long term investment as at March
 31, 2011.
 
 18.  The Company has made preferential allotment of shares to parties
 or companies covered in the register maintained under section 301 of
 the Act. In our opinion, the price at which such shares were issued is
 prima facie not prejudicial to the interests of the Company.
 
 19.  Debentures issued during the year are unsecured.  Accordingly, the
 provisions of clause 4(xix) of the Order are not applicable to the
 Company.
 
 20.  The Company has not raised any money by public issue during the
 year. Accordingly, the provisions of clause 4(xx) of the Order are not
 applicable to the Company.
 
 21.  As per the information and explanations furnished to us by the
 management, no material frauds on or by the Company and causing
 material misstatements to financial statements have been noticed or
 reported during the course of our audit, except for charge backs
 received by the Company from credit card service providers due to
 misutilisation of credit cards by third parties of Rs.107.76 lacs.
 
 
                                           For B. K. RAMADHYANI & Co.
 
                                               Chartered Accountants
 
                                   Firm registration number: 002878S
 
 Place : Bangalore                                 (shyam ramadhyani)
 
 Date : June 29, 2011                                        Partner
 
                                               Membership No. 019522
 
 b. K. ramadhyani & Co.
 
 Chartered Accountants
 
 4B, Chitrapur Bhavan
 
 No. 68, 8th Main, 15th Cross
 
 Malleswaram
 
 Bangalore - 560 055