We have audited the attached Balance Sheet of Lotus Chocolate Company
 Limited as at March 31, 2012 and the Profit and Loss Account and the
 cash flow statement for the year ended on that date.  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. We report as follows:
 
 1.  We conducted the 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.
 
 2.  The Company has not provided the interest if any on overdue
 Deferred Sales Tax Loan in the Books of Account.
 
 3.  As required by the Companies (Auditor''s Report) Order, 2003 issued
 and subsequently amended by the Central Government in exercise of the
 power conferred by section 227(4A) of the Companies Act, 1956 and
 according to the information and explanations given to us and on the
 basis of such checks as we considered appropriate, we enclose in the
 Annexure, a statement on the matters specified in paragraphs 4 and 5 of
 the said order.
 
 4.  Subject to our remarks in paragraph 2 and the annexure referred to
 in paragraph 3, we report:
 
 (i) 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;
 
 (ii) In our opinion, proper books of account as required by law have
 been kept by the Company so far it appears from our examination of such
 books;
 
 (iii) The Balance Sheet, Profit and Loss Account and Cash Flow
 statement dealt with by this report are in agreement with the books of
 account;
 
 (iv) 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 section 211(3C) of the Companies
 Act, 1956;
 
 (v) On the basis of the written representation received from the
 directors, and taken on record by the Board of Directors, none of the
 directors is disqualified as on 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;
 
 (vi) In our opinion and to the best of our information and according to
 the explanations given to us, the said accounts, read together with
 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 Balance Sheet, of the state of affairs of the
 Company as at March 31, 2012,
 
 (b) in the case of Profit and Los 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.
 
 Place : Hyderabad                                 For S.R. Mohan & Co.,
 
 Date : August 20, 2012                            Chartered Accountants
 
                                                          FR No. 002111S
 
                                                                    Sd/-
 
                                               B.  Brahmanandam, Partner
 
                                                   Membership No. 020026
 
 Ref: LOTUS CHOCOLATE COMPANY LIMITED ANNEXURE REFERRED TO IN PARAGRAPH
 3 OF AUDITORS'' REPORT OF EVEN DATE
 
 (i) (a) The Company has maintained proper records showing full
 particulars including quantitative details and situation of fixed
 assets.
 
 (b) The Company has a phased programme of physical verification of
 Fixed Assets which in our opinion is reasonable having regard to the
 size of the Company and nature of its business. No material
 discrepancies were noticed on such verification.
 
 (c) The Company has not disposed of fixed assets during the period,
 which affects the going concern concept.
 
 (ii) (a) As explained to us, all the inventory of the Company except
 stock-in-process has been physically verified by the management at the
 year-end. Stock-in-process has been taken as per the management''s
 technical estimate. In our opinion and according to the information and
 explanations given to us, the frequency of the verification is
 reasonable.
 
 (b) In our opinion and according to the information and explanations
 given to us, the procedures of physical verification of inventories
 followed by the management and read with our comments in paragraph (ii)
 (a) above, are reasonable and adequate in relation to the size of the
 Company and nature of its business.
 
 (c) On the basis of examination of the records of inventory and
 according to the information and explanations given to us, we are of
 the opinion that the Company is maintaining proper records of
 inventory. Discrepancies noticed on physical verification of stocks
 were not material.
 
 (iii) (a) On the basis of examination of records and according to the
 information and explanation given to us, 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 Companies
 Act, 1956.
 
 (b) On the basis of examination of records and according to the
 information and explanation given to us, the Company has taken
 unsecured loans from two parties covered in the register maintained
 under section 301 of companies Act, 1956. The maximum amount at any
 time during the year was '' 1751.01 Lakhs and year-end balance
 outstanding was ''1390.77 Lakhs.
 
 (c) In our opinion, the rate of interest and other terms and conditions
 on which loans taken are not prejudicial to the interest of the
 Company.
 
 (d) The aforesaid loans given to the company are repayble on demand and
 there is no repayment schedule. Therefore, the question o repayment
 being regular does not arise.
 
 (iv) In our opinion and according to the information and explanations
 given to us, there is an adequate internal control system commensurate
 with the size of the Company and nature of its business with regard to
 the purchase of inventories and fixed assets and with regard to the
 sale of goods and services.  In our opinion, and according to the
 information and explanation given to us, there is no continuing failure
 to correct major weaknesses in the internal control system.
 
 (v) (a) In our opinion and according to the information and
 explanations given to us, the particulars of contracts or arrangements
 referred to in section 301 of the Companies Act, 1956 have been entered
 in the register required to be maintained under that section.
 
 (b) In our opinion and according to the information and explanations
 given to us, the transactions made in pursuance of contracts and
 arrangements referred to in (a) above and exceeding the value of '' 5
 lakhs with any party during the year have been made at prices which are
 reasonable having regard to the prevailing market prices at the
 relevant time.
 
 (vi) The Company has not accepted any deposits under section 58A and
 58AA or any other relevant provisions of the Companies Act, 1956 and
 rules framed there under.
 
 (vii) In our opinion, Company has 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 for the
 products of the Company;
 
 (ix) (a) According to the records of the Company and the information
 and explanations given to us, the Company is regular in depositing with
 appropriate authorities undisputed statutory dues including Provident
 Fund, Employees'' State Insurance, Income Tax, Sales Tax, Wealth Tax,
 Service Tax, Custom Duty, Excise Duty and other statutory dues
 applicable to it.
 
 (b) According to records of the Company and the information and
 explanations given to us, no undisputed amounts payable in respect of
 Income Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty and Excise
 Duty were outstanding as at 31st March, 2012 for a period of more than
 six months from the date they became payable.
 
 (c) According to the records of the Company and as per the information
 and explanations given to us by the management, the details of disputed
 statutory dues which have not been deposited are as given below:
 
 Name of   Nature of dues  Amount   Period to     Forum where pending
 Statute                   (Rs in   which it 
                           Lakhs)   relates
 
 Customs   Customs Duty    319.04   1996-1997     High Court, Chennai
 
 Customs   Customs Duty    180.00   1996-1997     Appellate Tribunal, 
                                                  Chennai
 
 (x) In our opinion, the accumulated losses of the company are more than
 its Net worth as on 31st March, 2012. The Company has incurred Cash
 Loss of '' 170.89 Lakhs during the Financial year covered by our audit
 and '' 436.06 Lakhs In the immediately preceding Financial year.
 
 (xi) Based on our examination of documents and records and according to
 the information and explanations given to us, the Company has not
 defaulted in repayment of dues to financial institutions and banks.
 
 (xii) Based on our examination of documents and records and according
 to the information and explanations given to us, the Company has not
 granted loans and advances on the basis of security by way of the
 pledge of shares, debentures and other securities.
 
 (xiii) The Company is not a chit fund or nidhi/ mutual benefit
 fund/society. Therefore, the provisions of the clause 4(xiii) of the
 Companies (Auditor''s Report) Order, 2003 are not applicable to the
 Company.
 
 (xiv) The Company is not dealing in or trading in shares, securities,
 debentures and other investments.  Accordingly, the provisions of
 clause 4(xiv) of the Companies (Auditor''s Report) Order, 2003 are not
 applicable to the Company.
 
 (xv) 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.
 
 (xvi) The Company has not taken any term loan during the year.
 
 (xvii) According to the information and explanations given to us and on
 an overall examination of the Balance Sheet of the Company, we report
 that no funds raised on a short-term basis have been used for long-term
 investments.
 
 (xviii) 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 during the year.
 
 (xix) According to the information and explanations given to us and the
 records examined by us, no debentures have been issued during the year.
 Accordingly, provisions of Clause 4(xix) of the Order are not
 applicable to the Company.
 
 (xx) Based on the records examined by us, the Company has not raised
 monies by public issue during the year.
 
 (xxi) During the course of our examination of books of account carried
 out in accordance with generally accepted practices in India, we have
 neither come across any incidence of fraud on or by the Company nor
 have we been informed of any such case by the management.
 
 Place : Hyderabad                             For S.R. Mohan & Co.,
 
 Date : August 20, 2012                        Chartered Accountants
 
                                               FR No. 002111S 
 
 
                                               Sd/-
 
                                               B. Brahmanandam, Partner
 
                                               Membership No. 020026