1.  We have Audited the attached Balance Sheet of M/s Laurel Organics
 Limited (the Company) as at 31 st March, 2011, and also 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 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, of India (''the Act'') 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 paragraph 4
 and 5 of the said Order to the extent applicable.
 
 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;
 
 b) In our opinion, proper books of account as required by the law have
 been kept by the Company so far as appears from our examination of
 these books;
 
 c) The Balance Sheet, Profit and Loss Account and the Cash Flow
 Statement dealt with by this report are in agreement with the books of
 account;
 
 d) The Balance Sheet, Profit and Loss Account and the Cash Flow
 Statement dealt with by this report comply with the Accounting
 Standards referred to in Section 211 (3C) 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 March
 31,2011 from being appointed as Director in terms of clause (g) of
 Sub-Section (1) of Section 274 of the Companies Act, 1956
 
 f) Attention is invited to the following note in Schedule No.19::
 
 Note No. (B)(23) : regarding provision of ESIC liability for FY 2008-09
 Rs. 4.61 lacs treating the same as current liability.
 
 5.  Subject to the foregoing, in our opinion and to the best of our
 information and according to the explanations given to us, the said
 accounts read together with the Significant Accounting Policies and
 other 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 :
 
 (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 Profit and Loss Account, of the loss for the year
 ended on that date ; and
 
 (c) in the case of Cash Flow Statement, of the cash flows for the year
 ended on that date.
 
 Annexure to the Auditors'' Report
 
 (Referred to in Paragraph 3 of the Auditors'' Report of even date to the
 members of Laurel Organics Limited on the accounts for the year ended
 31st March, 2011)
 
 01.  (a) The company has maintained records showing particulars
 including quantitative details and situation of its Fixed Assets on
 computer assisted system.
 
 (b) As per information and explanations given to us, the Fixed Assets
 of the Company have been physically verified by the management during
 the year and it seems that the procedure of physical verification
 employed was reasonable having regard to the size of the Company and
 the nature of its assets. No material discrepancies were found on such
 verification.
 
 (c) As explained to us, substantial part of the fixed assets has not
 been disposed off by the Company during the year. As per management
 perception, all the worn out and discarded assets have been identified
 and written off during the year. Necessary entries have been passed in
 the accounts.
 
 02.  (a) The inventory (for self and principal) has been physically
 verified by the management during the year at reasonable initials.
 
 (b) In our opinion, the procedure of physical verification of inventory
 followed by the management is reasonable and adequate in relation to
 the size of the company and nature of its business.
 
 (c) The Company is maintaining proper records of inventory. The
 discrepancies noticed on physical verification of inventory were not
 material as compared to the book records in relation to the operation
 of the Company and the same have been properly dealt with in the books
 of account.
 
 03.  Based on the audit procedures applied and according to the
 information and explanations given to us, the company has neither
 granted nor taken loans in the nature of loans, secured or unsecured,
 to or from Companies, Firms or other parties covered in the register
 maintained u/s 301 of the Companies Act,1956.Accordingly, paragraphs
 4(iii) (a), (b), (c), (d), (e), (f) and (g) of the Order are not
 applicable.
 
 04.  In our opinion and according to the Information and explanation
 given to us, there are adequate internal control procedures
 commensurate with the size of the Company and the nature of its
 business, for purchase/procurement of inventory and fixed assets and
 for the sale of goods and services.  Further, we have neither come
 across nor have we been informed of any continuing failure to correct
 major weaknesses in the aforesaid internal control procedures.
 
 05.  In our opinion and according to the information and explanations
 given to us, there are no contracts and arrangements referred to in
 Section 301 of the Companies Act, 1956 entered into during the year
 that need to be entered in the register maintained under that Section.
 Accordingly, sub-clause (b) of sub-para (v) of para 4 of the Order is
 not applicable to the Company for the current year.
 
 06.  As informed the company has not accepted any deposits from the
 public within the meaning of section 58A and Section 58AA or any other
 relevant provisions of the Companies Act, 1956 and the Rules framed
 there under during the year.
 
 07.  As explained to us, the company has maintained reasonable records
 for sale, realizable by- products and production scrap generated during
 job work activity of the Principal Company. However, cost of deemed
 sales for utilization of consumable stores and indirect raw materials
 during job manufacturing processes were charged to manufacturing
 expenses.
 
 08.  In our opinion, the Company''s present internal audit system
 require further strengthening to be commensurate with the size and
 nature of its business.
 
 09.  The Central Govt, has prescribed Rules for the maintenance of the
 cost records u/s 209(1 )(d) of the Companies Act, 1956. However, the
 records were not maintained and produced for verification. As per
 explanation received, the Company is engaged in processing of Drug
 intermediates for other major pharmaceutical Company on fixed monthly
 Job Charges basis. Therefore, cost data were not available with the
 Company.
 
 10.  (a) According to the information and explanation glvjn to us and
 the records of the Company examined by us, in our opinion, the Company
 has delayed deposit of the undisputed statutory dues relating to Income
 Tax Deducted at Source, PF, i-Si, Labor Welfare Fund contribution and
 Sales Tax amounts, which have not been paid in time due to financial
 sickness. However, in other cases the Company is generally regular in
 depositing the undisputed statutory dues as applicable with appropriate
 authorities in India.
 
 (b) According to the information and explanation given to us and the
 records of the Company examined by us, no disputed statutory dues were
 outstanding for payments before any forum for relief or otherwise.
 
 11.  (a) The accumulated losses as at March 31, 2011 of the Company
 stand at Rs.638.56 lacs (Last Year Rs.737.02 Lacs).  (b) Out of old
 outstanding Sales Tax liability of Rs.45.56 (last year Rs.59.89 lacs),
 a sum of Rs.  18.10 lacs (last year Rs.14 lacs) are paid to the
 Department during the year. Interest and penalty on old Sales tax
 liability has not been quantified, provided for or paid. We are unable
 to quantify impact on revenue of the year.
 
 12.  According to the records of the Company examined by us. earlier
 the Company had eaten up its equity and free reserves completely,
 therefore, had been classified as sick Industrial Company under the
 provisions of the SICA by the Hon''ble BIFR during the last week of
 March,2004 at the instance of the Company, providing major financial
 relief with agreement of the Financial Institution and the Bank.
 However, the Hon''ble BIFR vide its Order Dt.27/12/2005 had considered
 the Company as an ancillary of Ranbaxy Lab. Ltd., which is using 100 %
 capacity for manufacturing various intermediate products on job charges
 basis of the company. However, during the year under consideration,
 company has converted its negative net worth to positive net worth
 territory by a small amount.
 
 13.  The Company has not granted loans and advances on the basis of
 security by way of pledge of shares, debentures and other securities.
 
 14.  The provisions of any special statute applicable to chit
 fund/nidhi/mutual benefit fund/societies are not applicable to the
 Company.
 
 15.  The Company is not a dealer or trader in shares, securities,
 debentures and other investments during the year.
 
 16.  In our opinion, and according to the information and explanations
 given to us, the Company has not given any guarantee for loans taken by
 others from banks or financial institutions during the year.
 
 17.  The Company has not taken any term loans, excepting car loans,
 during the year. No defaults in car loans were noticed.
 
 18.  Based on the information and explanations given to us and on an
 overall examination of the Balance Sheet of the Company, in our
 opinion, there are no funds raised on short term basis which have been
 used for long term investment, and vice versa.
 
 19.  The Company has not raised any capital by way of Public Issue. The
 Company has also not issued any Debentures during the year.
 
 20.  According to the information and explanations given to us, 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 Companies Act,1956. However, Company has made an
 application to the Hon''ble BIFR/AAIFR to issue appropriate orders to
 regularize preferential allotment of 8.85 lacs equity shares of Rs.10
 each fully paid-up at par made to the IDBI during earlier year as part
 of OTS reached with them, due to which regularization of listing of
 equity is also pending.
 
 21.  According to the information and explanations given to us and
 based on the audit procedures performed and representation obtained
 from the management, we report that no fraud on or by the Company,
 having material misstatement on the financial statements has been
 noticed or reported during the year under audit.
 
                                              For A K Jalan & Associates
 
 Place: New Delhi                              Chartered Accountants
 
 Date : 23/08/2011                              Firm No. 500107n
 
                                                       Sd/-
 
                                                (A K Jalan), Partner
 
                                                     M.No.52776