Natco Pharma

We have audited the attached Balance Sheet of NATCO PHARMA LIMITED,
 HYDERABAD (A.P) as at 31st March 2009, its Profit and Loss Account for
 the year ended on that date annexed thereto, and its cash-flow
 statement for the year ended on that date. These financial statements
 are the responsibility of the Companys management. Our responsibility
 is to express an opinion on these financial statements based on our
 audit.
 
 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.
 
 As required by the Companies (Auditors Report) Order, 2003 issued by
 the Government of India in terms of sub-Section (4A) of Section 227 of
 the Companies Act, 1956, we enclose in the Annexure a statement on the
 matters specified in paragraphs 4 and 5 of the said Order.
 
 Further to our comments in the Annexure referred to 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 law have
 been kept by the company so far as appears from our examination of such
 books;
 
 c.  The Balance Sheet and Profit and Loss Account and Cash-flow
 Statement dealt with by this report are in agreement with the books of
 account;
 
 d.  In our opinion, the Balance Sheet and Profit and Loss account and
 the 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;
 
 e.  On the basis of written representations received from the
 directors, as on March 31, 2009, and taken on record by the Board of
 Directors, we report that none of the directors is disqualified as on
 March 31, 2009 from being appointed as a director in terms of clause
 (g) of sub-section (1) of Section 274 of the Companies Act, 1956;
 
 f. In our opinion and to the best of our information and according to
 the explanations given to us, the said accounts read in conjunction
 with the schedules annexed therewith 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;
 
 i.  In the case of the Balance Sheet, of the state of affairs of the
 Company as at March 31, 2009,
 
 ii.  In the case of the Profit and Loss Account, of the profit for the
 year ended on that date,
 
 iii.  In the case of the cash-flow statement, of the cash-flows of the
 company for the year ended on that date
 
 Annexure
 
 Re: NATCO PHARMA LIMITED, HYDERABAD (A.P.)
 
 Referred to in paragraph 3 of our report of even date,
 
 1.1 The company has maintained proper records showing full particulars
 including quantitative details and situation of its fixed assets.
 
 1.2 As explained to us, the management has physically verified most of
 the fixed assets during the year and 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.
 
 1.3 During the year the company has not disposed of a substantial part
 of its fixed assets that would affect the going concern status of the
 company.
 
 2.1 The inventory has been physically verified during the year by the
 management. In our opinion, the frequency of such verification is
 reasonable.
 
 2.2 In our opinion, 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.
 
 2.3 In our opinion, and according to the information and explanations
 furnished to us, the company is maintaining proper records of its
 inventory. The discrepancies noticed on physical verification, between
 the physical stocks and the book records were not material.
 
 3.1 The company has neither granted nor taken any loans, secured or
 unsecured to/ from companies, firms or other parties covered by the
 register maintained under Section 301 of the Companies Act 1956.
 
 3.2 In view of our comment in paragraph 3.1 above, clause (b), (c),(d),
 (e),(f) and (g) of clause 4(iii) of the Order are not applicable.
 
 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 the nature of its
 business with regard to purchases of inventory, fixed assets and with
 regard to the sale of goods and services. During the course of our
 audit, we have not come across any instances of major weaknesses in
 internal control that in our opinion, require correction but have so
 continued without correction.
 
 5.1 Based on the information and explanations given to us, we are of
 the opinion that 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.
 
 5.2 In our opinion and according to the information and explanations
 given to us, the transactions which have been entered into, pursuant to
 contracts that have been entered in the register maintained under
 Section 301 of the Companies Act 1956, have been made at prices which
 are reasonable having regard to prevailing market prices at the
 relevant time.
 
 6.  The company has not accepted deposits from the public. Hence the
 provisions of Section 58A and 58AA and other applicable provisions of
 the Companies Act, 1956 and Companies (Acceptance of Deposits) Rules,
 1975 are not applicable to the company during the year under report.
 
 7.  In our opinion, the company has an internal audit system
 commensurate with the size and nature of its business.
 
 8.  We have broadly reviewed the books of account and records
 maintained by the company pursuant to the Rules made by the Central
 Government for the maintenance of Cost Records under Section 209 (1)
 (d) of the Companies Act, 1956 and we are of the opinion that prima
 facie the prescribed accounts and records have been made and
 maintained. However, we have not carried out a detailed audit of the
 same.
 
 9.1 According to the records of the Company, apart from certain
 instances of delays noticed, the Company is generally regular in
 depositing with the appropriate authorities undisputed statutory dues
 including Provident Fund, Investor Education and Protection Fund,
 Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Service
 Tax, Custom Duty, Excise Duty, Cess and other material statutory dues
 applicable to it and there were no arrears, as at 31st March, 2009 for
 a period of more than six months from the date they became payable.
 
 9.2 According to the information and explanations given to us, there
 are no dues of Income Tax, Sales Tax, Wealth Tax, Customs Duty, Excise
 Duty, Cess and Service Tax, which have not been deposited on account of
 any dispute other than the following.
 
 Nature of     Amount       Amount      Period to  Forum where dispute
 the dues     (Rs.in lakhs) Paid under  which the  is pending
                            Protest     amount relates
                            (Rs. in lakhs)
 
 C.S.T.           86.90        25.00     1998-99    Honble High
                                                    Court ofAP
 
 Income Tax        1.85          -       2003-04    Income tax
 
                                        Asst.Year   Appellete Tribunal
                                                    (Hyderabad)
                 838.33                  2006-07    Commissioner ofIncome
                                        Asst.Year   tax (Appeals)
                                                    Hyderabad
 
 10.  The company had no accumulated losses at the end of the year under
 report and it did not incur cash losses during the financial year
 covered by our audit and in the immediately preceding financial year.
 
 11.  In our opinion and according to the information and explanations
 furnished to us by the company, there were no defaults in repayment of
 its dues to financial institutions, banks and no debentures were issued
 by the company.
 
 12.  The company has not granted any loans or advances on the basis of
 security by way of pledge of shares, debentures, and other securities.
 
 13.  The company is not a chit fund or a nidhi / mutual benefit fund/
 society and hence, the requirements of clause 4(xiii) of the Companies
 (Auditors Report) Order, 2003 are not applicable to the company during
 the year under report.
 
 14.  According to the information furnished to us, the company is not
 dealing in or trading in shares, securities, debentures and other
 investments. Accordingly, the requirements of clause 4(xiv) of the
 Companies (Auditors Report) Order, 2003 are not applicable to the
 company.
 
 15.  According to the information furnished to us, the company has
 given guarantee for loan taken by others from a bank. The terms and
 conditions on which such guarantee given is not prejudicial to the
 interest of the company.
 
 16.  In our opinion, and according to the information and explanations
 furnished to us, the term loans availed by the company were prima
 facie, applied by the company during the year for the purpose for which
 the loans were obtained.
 
 17.  In our opinion, and 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 have not been
 used for long-term investment.
 
 18.  According to the information and explanations furnished to us, the
 company has not made any preferential allotment of shares during the
 year to parties and companies covered in the register maintained under
 Section 301 of the Act.
 
 19.  During the year, the company has not issued any debentures and
 therefore the question of creating security or charge in respect
 thereof does not arise.
 
 20.  During the year the company has not raised any money through
 public issue of its securities, hence the question of end use of such
 money does not arise.
 
 21.  Based upon the audit procedures performed and according to the
 information and explanations given to us, we report that no fraud on or
 by the Company has been noticed or reported during the year.
 
 
                                         For BRAHMAYYA & CO
                                      Chartered Accountants
                                           D. Seetharamaiah
 Place: Hyderabad                                   Partner
 Date:30th June, 2009                    Membership No.2907