(1) We have audited the attached balance sheet of Madhucon Projects
 Limited, as at 31st March 2011, the profit & loss account and also 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 the 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 disclosure 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 In terms of Sub-Section (4A) of Section 227
 of the Companies Act, we enclose in the Annexure a Statement on the
 matters specified in paragraphs 4 and 5 of the said order.
 
 (4) Further to our comments in the Annexure referred to above, we
 report that:
 
 (i) 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.
 
 (ii) 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.
 
 (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 Sub-Section (3C) of section 211 of
 the Companies Act.
 
 (v) 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
 31st March 2011 from being appointed as a Director in terms of clause
 (g) of Sub-Section (1) of the Section 274 of the Companies Act.
 
 (vi) In our opinion and to the best of our information and according to
 the explanations given to us, the said accounts give the information
 required by the Companies Act, 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 the Profit and Loss account, of the profit for the
 ended on that date; and
 
 c) In the case of the Cash Flow Statement, of the cash flow for the
 year ended on that date.
 
 Annexure to the Auditor''s Report
 (As referred to in paragraph 3 of our report of even date)
 
 1.  In respect of fixed assets:
 
 (a) The company has maintained proper records showing full particulars
 including quantitative details and situation of fixed assets.
 
 (b) All the assets have not been physically verified by the management
 during the year but there is a regular programme of verification which,
 in our opinion, is reasonable having regard to the size of the company
 and the nature of its assets. No material discrepancies were noticed on
 such verification.
 
 (c ) During the year, the company has disposed few items of machinery.
 According to the information and explanations given to us we are of the
 opinion that the sale of the said part of plant and machinery has not
 affected the going concern status of the company.
 
 2.  In respect of its inventories:
 
 (a) The inventory has been physically verified during the year by the
 management. In our opinion, the frequency of verification is
 reasonable.
 
 (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 ) The company is maintaining proper records of inventory. The
 discrepancies noticed on verification between the physical stocks and
 the book records were not material.
 
 (d) The company has a reasonable system of authorization at proper
 levels and an adequate system of internal control commensurate with the
 size of the company and the nature of its business on issue of stores
 and allocation of stores and labour of jobs.
 
 3.  In respect of the loans, secured or unsecured, granted or taken by
 the Company to / from companies, firms or other parties covered in the
 register maintained under Section 301 of the Companies Act, 1956:
 
 (a) The company has granted unsecured loans to companies, firms & other
 parties covered In the register maintained under Section 301 of the
 Act. The number of parties are 14 (Fourteen) and the amount involved is
 Rs. 517069.40 lakhs.
 
 (b) The rate of interest and other terms and conditions of the above
 loans are not prima facie, prejudicial to the interest of the company.
 
 (c ) The principle and interest are payable on demand and there is no
 repayment schedule.
 
 (d) In respect of the said loans, the same are repayable on demand and
 therefore the question of overdue does not arise.
 
 (e) The Company has taken loans during the year from companies, firms
 or other parties covered in the register maintained under section 301
 of The Companies Act 1956. The same are repayable on demand. The rate
 of interest and other terms and conditions are not prima facie
 prejudicial to the interest of the Company. The number of parties are
 (1) and the maximum out standing balance during the year is and the
 year end balance is Rs. 2112 lakhs.
 
 4.  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 inventory, fixed assets and with regard to
 the sale of goods and services.
 
 5.  In respect of contracts or arrangements referred to in Section 301
 of the Companies Act, 1956.
 
 (a) According to information and explanation given to us, we are of the
 opinion that the transactions that need to be entered in to the
 register maintained u/s 301 of the companies Act, 1956 have been so
 entered.
 
 (b) In our opinion and according to the information and explanation
 given to us, the transactions made in pursuance of contracts or
 arrangements entered in the Register maintained u/s 301 of the
 Companies Act, 1956 and exceeding the value of Rs. 5,00,000 in respect
 of each party during the year, have been made at prices which are
 reasonable having regard to the prevailing market prices at the
 relevant time as per the information available with the Company.
 
 6.  The Company has not accepted any deposits from the public during
 the year.
 
 7.  In our opinion, the company has an adequate internal audit system
 commensurate with the size and nature of its business.
 
 8.  According to the information and explanations given to us the
 Central Government has not prescribed the maintenance of cost records
 under Section 209(1) (d) of the Companies Act for any of the products
 of the company.
 
 9.  In respect of statutory dues:
 
 (a) The company has generally deposited with appropriate authorities
 undisputed Statutory dues including Provident Fund, Investor Education
 Protection Fund, Employee''s State Insurance, Income Tax, Sales Tax,
 Wealth Tax, Customs Duty, Excise Duty, Cess and other material
 statutory dues applicable to it.
 
 (b) According to the information and explanation given to us, no
 undisputed amounts payable in respect of Income Tax, Sales Tax. Customs
 Duty, Excise Duty and Cess were in arrears, as at 31.03.2011 for a
 period of more than six months from the date they became payable.
 
 (c ) According to information and explanation given to us and the
 records of the Company examined by us, there are no dues on account of
 Income Tax, Sales Tax, Customs Duty, Excise Duty Cess and other
 statutory dues as at 31st March 2011, which have not been deposited on
 account of dispute except the following:
 
 S.
 No. Nature of due    Amount (in lakhs)   Period    From where dispute is
                                                    pending
 
 1   Income Tax       4279.56            2000-01 to Second appeal to be 
                                                    filed with ITAT,
                                         2008-09    Hyderabad
 
 2.  Sales Tax         974.03            Demand 
                                         raised     Appeal pending with 
                                                    Hon''ble High
                                         in 2004-05 Court of AP
 
 10.  The company does not have any accumulated losses and has not
 incurred any cash losses during the current financial year and
 immediately preceding financial period.
 
 11.  Based on the examination of the books of account and related
 records and according to the information and explanations provided to
 us, the company has not defaulted in repayment of dues to the banks.
 
 12.  The Company has not granted loans and advances on the basis of
 security by way of pledge of shares, debentures and other securities.
 
 13.  In our opinion, the Company is not a Chit Fund/Nidhi/Mutual
 Benefit Fund/Society therefore, the provisions of clause (xiii) of
 paragraph 4 of the Order are not applicable to the Company.
 
 14.  The Company has maintained proper records of investments in
 shares, securities, debentures and others and timely entries have been
 made therein. All the investments have been held by the company in its
 own name.
 
 15.  According to the information and explanations given to us, the
 company has given guarantee for loans taken by others from bank or
 Financial Institutions:
 
 Sl. 
 No.  Name of the Company    Guarantee ( Rs. in lakhs)    No. of Shares
                                                          Pledged
 
 1    Nama Hotels Private 
      Limited                       25293                 13821000
 
 2    Madurai - Tuticorin 
      Expressways Ltd                 -                   73454000
 
 3    Madhucon Infra 
      Limited                       20000                     -
 
 16.  The Company has raised new term loans during the year. The term
 loans outstanding at the beginning of the year and those raised during
 the year have been applied for the purposes for which they were raised.
 
 17.  Based on the examination of the books of account and related
 records and according to the information and explanations provided to
 us, the company has not utilized funds raised on short-term basis for
 long term investment and vice versa.
 
 18.  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.
 
 19.  The Company has not issued secured debentures during the year.
 
 20.  There are no shares issued during the said period under review.
 
 21.  According to the information and explanations given to us, no
 fraud on or by the company has been noticed or reported during the
 year.
  
                                                 For KOTA & COMPANY
 
                                              Chartered Accountants 
 
                                                    FRN 011982S
 
                                                  K.S.R.K.Prasad
 
 Place: Hyderabad                                   PARTNER
 
 Date: 30.08.2011                                 M.No. 022964