We have audited the attached Balance Sheet of LYKA LABS LIMITED as at
 31st March, 2012 and also the Profit and Loss Account and the Cash Flow
 Statement for the period ended on that date annexed thereto (in which
 are incorporated the accounts of the company''s branches at Ankleshwar
 and Tarapur audited by other auditors making such changes as were
 considered for the purpose of incorporation). 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 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.
 
 1 As required by the Companies (Auditor''s Report) Order, 2003, issued
 by the Central Government in terms of sub- section (4A) of section 227
 of the Companies Act, 1956 as amended by the Company (Auditors Report)
 (Amendment) Order 2004, we give in the Annexure a statement on the
 matters specified in the said Order'' as amended.
 
 2 Further to our comments in the annexure referred to in paragraph 1
 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 purpose 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. Proper returns adequate for the purpose of our audit have been
 received from the Branches not visited by us. The Branch Auditor''s
 Reports have been forwarded to us and have been appropriately dealt
 with;
 
 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
 and with the audited returns from the Branches;
 
 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, except Accounting Standard 5 (AS-5) Net Profit
 or Loss for the Period, Prior Period Items and Changes in Accounting
 Policies'''' and Accounting Standard 10 (AS-10) Accounting for
 Fixed Assets as referred to in Para 3(B) herein.
 
 e) On the basis of written representation received from the Directors
 as on 31st March, 2012 and taken on record by the Board of Directors,
 we report that none of the Directors are disqualified as on 31st March,
 2012 for being appointed as a Director in terms of clause (g) of
 sub-section (1) of section 274 of the Companies Act, 1956.
 
 3 Attention is invited to the following Notes in Schedule 15 :
 
 (A) In respect of which are enable to express an opinion:
 
 i.  Certain unsecured loans and advances referred to in notes 7(ii),
 (Hi) and (iv) amounting to Rs. 77,633,760, Rs.48,606,065 and Rs.50,000,000
 respectively, considered by the company as good for recovery.
 
 ii.  Note No 9 regarding non provision for diminution in value of cost
 of investments.
 
 iii. The Company has incurred an aggregate expenditures of Rs.80,004,844
 on New products Developments and Applied Research, which has
 been held in Intangible Capital Work-In-Progress pending recognition as
 Intangibles Viz. Technical Know How or Trade Marks, as referred to in
 note No. 10
 
 (B) During the previous year the Company had written off / adjusted the
 slow and non- moving raw and packing material, certain long overdue
 debts, loans & advances and deferred revenue expenses, aggregating to
 Rs.243,576,752 to the Revaluation Reserve instead of the Profit and Loss
 Account, which was not in accordance with the Generally Accepted
 Accounting Practice (GAAP) and requirements of Accounting Standard 5
 (AS-5) Net Profit or Loss for the Period, Prior Period Items and
 Changes in Accounting Policies. Further, the recognition of profit
 on sale of Revalued Fixed Assets is not in accordance with Accounting
 Standard 10 (AS-10), as referred to in note No. 6(B)(ii).
 
 4 In our opinion and to the best of our information and according to
 the explanations given to us, we further report that, without
 considering items mentioned in para (3)(A) (i), (ii), and (Hi), the
 effect of which we are unable to express an opinion on and subject to
 the consequential effects of the item referred to in para 3(B) of not
 increasing the loss for the period, the said accounts read with
 Significant Accounting Policies and other notes thereon, while giving
 the information required by the Companies Act, 1956, in the manner so
 required to 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, 2012;
 
 (b) in the case of the Profit and Loss Account, of the loss for the
 period ended on that date; and
 
 (c) in the case of the Cash Flow Statement, of the cash flows for the
 period ended on that date.
 
 ANNEXURE TO THE AUDITORS'' REPORT
 
 (Referred to in paragraph 1 of our report of even date)
 
 (i) In respect of its fixed assets:
 
 (a) The Company has maintained proper records showing full particulars,
 including quantitative details and situation of fixed assets.
 
 (b) There is a phased programme of verification which, in our opinion,
 is reasonable having regard to the size of the company and the nature
 of its assets. The discrepancies noticed on such verification which are
 not material have been suitably dealt with in the books of account.
 
 (c) In our opinion, a substantial part of the fixed assets has been
 disposed off during the period. However it has not affected the going
 concern status of the company.
 
 (ii) In respect of its inventories:
 
 (a) As explained to us, inventories were physically verified during the
 period by the management at regular intervals except the inventories
 lying with the third parties for which confirmations have been
 obtained.
 
 (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 are reasonable and adequate in relation to
 the size of the company and the nature of its business.
 
 (c) In our opinion and according to the information and explanations
 given to us, the Company has maintained proper records of its
 inventories and discrepancies noticed on physical verification which
 are not material have been properly dealt with in the books of account.
 
 (iii) (a) The Company has granted interest bearing unsecured loans in
 earlier years to two parties covered in the register maintained under
 section 301 of the Companies Act, 1956 (the Act). Further, during the
 period the Company has granted interest bearing unsecured loan
 amounting to Rs. 20,000,000 repayable on demand, to a subsidiary. The
 maximum amount outstanding at any time during the period and the year
 end balance is Rs. 98,606,065 and Rs. 98,606,065 respectively.
 
 (b) In our opinion, the rate of interest and other terms and conditions
 of unsecured loans given by the Company, are prima facie not
 prejudicial to the interests of the Company.
 
 (c) Since the loans / interest are repayable on demand there is no
 overdue and hence, the question of Company taking reasonable steps for
 recovery thereof does not arise.
 
 (d) Since the loans / interest are repayable on demand, the question of
 regular receipt of the principal amounts and interest does not arise.
 
 (e) The Company had taken interest bearing unsecured loans in earlier
 years from two parties, covered in the register maintained under
 section 301 of the Act, the amount outstanding at the beginning of the
 year was Rs. 2,355,000. During the period Company borrowed Rs. 205,000 from
 one of the parties and repaid an aggregate of Rs. 600,000 to both the
 parties.
 
 The maximum balance outstanding at any time during the period and the
 period end balance is Rs. 2,355,000 and Rs. 1,960,000 respectively.
 
 (f) The rate of interest and other terms and conditions of such
 unsecured loans are, in our opinion, prima facie not prejudicial to the
 interest of the Company.
 
 (g) Since the principal and interest thereon are payable on demand, the
 question of payment of the same being regular does not arise.
 
 (iv) In our opinion and according to the information and explanations
 given to us, there are internal control procedures commensurate with
 the size of the Company and the nature of its business for the purchase
 of inventory and fixed assets and for the sale of goods and services.
 
 (v) (a) According to the information and explanations given to us, the
 particulars of contracts or arrangements referred to in section 301 of
 the Act, have been entered in the register maintained thereunder.
 
 (b) According to the information and explanations given to us, the
 transactions made in pursuance of such contracts or arrangement have
 been made at prices which are prima facie reasonable having regard to
 the prevailing market prices at the relevant time except that, the
 prices at which sales of branded pharma products made to the aforesaid
 parties during the period, as informed to us, are not comparable in
 view of marginal presence of the company in branded pharma products.
 
 (vi) In our opinion and according to the information and explanations
 given to us, the Company has generally complied with the provisions of
 Sections 58A and 58AA and other relevant provisions of the Act, and the
 rules framed there under and the directives issued by the Reserve Bank
 of India, where applicable, with regard to the deposits accepted from
 the public.
 
 (vii) In our opinion, the scope and extent of internal audit is
 commensurate with the size of the Company and the nature if its
 business.
 
 (viii) We have broadly reviewed the books of account and records, to
 the extent, maintained by the Company relating to the manufacture of
 Bulk Drugs and Formulations, pursuant to the Order made by the Central
 Government for the maintenance of cost records under Section 209(1)(d)
 of the Act, and are of the opinion that prima facie most of the
 prescribed accounts and records have generally been made and
 maintained. We have, however, not made a detailed examination of the
 records with a view to determining whether they are accurate or
 complete.
 
 (ix) According to the information and explanations given to us and as
 per the relevant records produced before us in respect of statutory and
 other dues:
 
 (a) During the period Company has not been regular in depositing
 undisputed statutory dues relating to Provident Fund, Professional Tax,
 E.S.I.C., Service Tax, Income-tax and Sales-tax. The arrears of the
 said dues as at the last day of the financial period and outstanding
 for more than six months from the date they become payable are as
 follows:
 
 Sr. Nature of Dues                                           Amount
 No.                                                           (Rs.)
 
 1.   Tax Deducted at Source                               2,211,304
 
 2.   Sales Tax Payable                                    3,434,738
 
 (b) Following dues have not been deposited since the matters are
 pending with the respective forums:
 
 Sr. Nature of dues          Amount    Period to which the Name of Forum
 No.  (Rs.)                                                amount 
                                                           relates
 
 1.   Demand under Drugs 
      Price               209,440,565  Demands raised in   Gujarat 
                                                           High Court
      Control Order        1987, 1990  and 1995
 
 2.   Purchase Tax          1,600,442  1991-96             Gujarat 
                                                           Sales Tax
                                                           Appellate 
                                                           Tribunal
 
 3.   Excise duty, 
      penalties &           1,122,138  Since August 22,    Commissioner 
                                                            of
      interest thereon                 2006.               Excise 
                                                           & Customs
 
 4.   Bombay Sales Tax      6,186,400  1998-99             Appellate 
                                                           Tribunal.
 
                            1,007,436  2000-01
 
                              420,682  2002-03
 
                              379,164  2004-05
 
                              792,379  2006-07
 
 5    Sales Tax - Tarapur      50,714  2004-05             Joint 
                                                           Commissioner
 
 6    Central Sales Tax     1,795,241  1998-99             Appellate 
                                                           Tribunal
                            1,060,992  2000-01
 
 7    Service Tax           1,809,830  2011-12             Additional
                                                           Commissioner
 
 8    Gujrat Sales Tax      8,545,195  2002-03             Commissioner
                                                              of
 
                            1,370,850  2006-07             Sales Tax 
                                                           Appeal
 
                              673,902  2007-08
 
 (x) The accumulated losses of the Company have not exceeded fifty per
 cent of its net worth as at the end of the period. The Company has
 incurred cash losses during the period. In the immediately preceding
 financial year the Company had not incurred cash losses.
 
 (xi) During the period, the Company''s Banker has granted reschedulement
 and repayment of loans. In the view of the same and as also based on
 our audit procedures and on the basis of information and explanations
 given by the management, the Company has not defaulted in the repayment
 of dues to Banks.
 
 (xii) According to the 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. Therefore,
 the provisions of clause 4 (xii) of the Order'', are not applicable
 to the Company.
 
 (xiii) In our opinion, the Company is not a chit fund or a nidhi mutual
 benefit fund / society. Therefore, the provisions of clause 4 (xiii) of
 the Order, are not applicable to the Company.
 
 (xiv) The Company is not dealing in or trading in shares, securities,
 debentures and other investments. The shares held by the Company are in
 its own name.
 
 (xv) According to the information and explanations given to us, the
 Company has not given guarantee for loans taken by others from banks or
 financial institutions. Therefore, the provisions of clause 4 (xv) of
 the Order'', are not applicable to the Company.
 
 (xvi) To the best of our knowledge and belief and according to the
 information and explanations given to us, term loans availed by the
 Company were, prima facie, applied by the Company during the period for
 the purposes for which the loans were obtained.
 
 (xvii) According to the records examined by us and the information and
 explanations given to us, on an overall basis, funds raised on
 short-term basis have not been used for long term purposes.
 
 (xviii)The Company has not made preferential allotment of shares during
 the period to parties covered under section 301 of the Act. Therefore,
 the provisions of clause 4 (xviii) of the Order, are not applicable
 to the Company.
 
 (xix) According to the information and explanation given to us and the
 records examined by us, the Company has created a charge in respect of
 the Non Convertible Debentures (privately placed) issued during the
 period aggregating to Rs. 98,200,000.
 
 (xx) The Company has not raised money by public issue during the period
 and accordingly the question of disclosure of end use of money raised
 does not arise.
 
 (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
 was noticed or reported during the period.
 
                                                  For M. A. Parikh & Co.
 
                                                  Chartered Accountants
 
                                                  Firm Reg. No. 107556W
 
                                                            Mukul Patel
 
                                                                Partner
 
                                                   Membership No. 32489
 
 Place: Mumbai
 
 Date: 31st August, 2012