Orchid Chemicals and Pharmaceuticals

1.  We have audited the attached Balance Sheet of Orchid Chemicals &
 Pharmaceuticals Limited (the Company) as at March 31, 2009 and also the
 Profit and Loss Account of the Company for the year ended on that date
 annexed thereto and the 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.
 
 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 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 (Auditors Report) Order, 2003 issued
 by the Central Government of India in terms of sub-section (4A) of
 Section 227 of the Companies Act, 1956, we annexe hereto 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:
 
 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
 those books;
 
 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;
 
 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 as 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;
 
 5.  a.  The company has made an application to the Central Government
 for
 
 approval of the remuneration amounting to Rs.343.45 lakhs paid to the
 Managing Director and whole time Director as the minimum remuneration
 payable in case of inadequacy of profit and the approval of the same is
 still awaited.
 
 b. Debtors are subject to confirmation. Refer Note No. 30 of Schedule
 ‘Q.
 
 6.  In our opinion and to the best of our information and according to
 the explanations given to us, subject to Para 5(a) & (b) above, the
 said accounts read with notes thereon, specifically Note No.2 (i) (4)
 regarding adoption of amended Accounting Standard (AS-11) and the
 impact of the same on the loss for the year of the company, 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 31st March 2009;
 
 ii. In the case of the Profit and Loss Account, of the Loss for the
 year ended on that date; and
 
 iii. In the case of Cash Flow Statement, of the cash flows for the year
 ended on that date.
 
 ANNEXURE TO AUDITORS REPORT
 
 Referred to in Paragraph 3 of our Report of even date:
 
 1.  The Company has maintained proper records showing full particulars
 including quantitative details and situation of its fixed assets.
 According to the information and explanations given to us, most of the
 fixed assets have been physically verified by the Management during the
 year. In our opinion, the frequency of such physical verification is
 reasonable having regard to the size of the Company and the nature of
 its assets. No material discrepancies were noticed on such verification
 as compared to the available records. There was no substantial disposal
 of fixed assets during the year.
 
 2.  Physical verification of Inventory has been conducted by the
 Management at reasonable intervals. The procedures for physical
 verification of stocks followed by the Management are reasonable and
 adequate in relation to the size of the Company and nature of its
 business. The Company is maintaining proper records of inventory and no
 material discrepancies were noticed on physical verification.
 
 3.  a.  The Company has not taken any loans, secured or unsecured from
 
 companies, firms or other parties covered in the register maintained
 under Section 301 of the Companies Act, 1956.
 
 b. As informed to us, the Company any loans, secured or unsecured from
 companies, firms or other parties for which entries are required to be
 made under Section 301 of the Companies Act, 1956.
 
 4.  In our opinion and according to the information and explanation
 given to us, there is adequate internal control system 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. During the course of our audit, no major weakness has been
 noticed in the internal control system.
 
 5.  In our opinion and according to the information and explanation
 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.
 
 The transactions made in pursuance of such contracts or arrangements
 have been made at prices which are reasonable having regard to the
 prevailing market prices / Joint venture agreements at the relevant
 time.
 
 6.  The Company has not accepted any deposits from the public.
 
 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 maintained by the
 Company, pursuant to the rules made by the Central Government for the
 maintenance of the Cost Records under Section 209(1)(d) of the
 Companies Act, 1956 and are of the opinion that prima facie the
 prescribed accounts and records have been made and maintained.
 
 9.  The Company is generally regular in depositing 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 any other statutory dues
 applicable to it with the appropriate authorities.
 
 10 According to the information and explanations given to us, no
 undisputed amounts payable in respect of sales-tax, Income-Tax, Wealth
 Tax, Service Tax, Custom duty, Excise duty and Cess were outstanding at
 the year end for a period of more than six months from the date they
 became payable.
 
 11. According to the records of the Company, there are no disputed
 amounts that have not been deposited with appropriate authorities on
 account of Income Tax, Sales-Tax, Wealth Tax, Service-Tax, Custom duty,
 Excise duty and Cess except the following:
 
 Name of the Statute    Nature of    Period to which the    Amount
                         Dues        amount relates       Rs in Lacs
 
 Central Excise Act
 1944,                Excise Duty   1999-00 to 2000-01      111.95
                                    2000-01 &2001-02         37.12
                                    2004-05                 124.77
                                    2004-05                   0.55
                                    2005-06                   0.59
                                    2005-06                  91.53
                                    2005-06                  11.57
                                    2006-07                   9.36
                                    2006-07                   1.92
                                    2006-07                 223.18
                                    2006-07                 243.41
                                    2007-08                   1.64
                                    2007-08                   3.92
                                    2007-08                  12.21
                                    2007-08                 274.77
                                    2007-08                  32.19
                                    2008-09                   1.75
 
 Finance Act, 1994   Service 
                      - Tax      June 1997 to 2001-02        42.26
 (Chapter V)                        2006-07                   4.74
 
                                    2006-07                   9.24
                                    2007-08                  13.15
                                    2007-08                  10.95
                                    2007-08                  14.78
                                    2008-09                   8.04
 
 Income Tax Act, 
 1961               Income tax     AY 1997-98                53.82
                                AY 1997-98 & 98-99           68.88
                                   AY 2005-06                45.12
 
 
 
 
 
 
 
 
 
 
 
 Name of the Statute             Forum where the dispute is pending
 
 Central Excise Act             Customs, Excise and Service Tax 
  1944,                         Appellate Tribunal Chennai
                                Customs, Excise and Service Tax 
                                Appellate Tribunal Chennai
                                Commission of Central Excise, Chennai
                                Customs, Excise and Service Tax 
                                Appellate Tribunal Chennai
                                Customs, Excise and Service Tax 
                                Appellate Tribunal Chennai
                                Commissioner of Central Excise Chennai
                                Joint Commissioner of Central Excise, 
                                 Chennai
                                Joint Commissioner of Central Excise, 
                                 Chennai
                                Customs, Excise and Service Tax Appellate 
                                Tribunal Chennai
                                Commissioner of Central Excise, Chennai
                                Commissioner of Central Excise, Aurangabad
                                Commissioner of Central Excise (Appeals), 
                                Chennai
                                Commissioner of Central Excise, Chennai
                                Commissioner of Central Excise, Chennai
                                Commissioner of Central Excise, Aurangabad
                                Additional Commissioner of Central Excise, 
                                Aurangabad
                                Assistant Commissioner of Central 
                                Excise, Chennai
 
 Finance Act, 1994              Assistant Commissioner of Central Excise,
 (Chapter V)                    Chennai
                                Commissioner of Central Excise (Appeals),
                                Chennai
                                Additional Commissioner of Central Excise,
                                Chennai
                                Commissioner of Central Excise (Appeals),
                                Chennai
                                Additional Commissioner of Central Excise, 
                                Chennai
                                Assistant Commissioner of Central Excise, 
                                Chennai
                                Assistant Commissioner of Central Excise,
                                Chennai
 
 Income Tax Act, 1961           Income tax Appellate Tribunal- Chennai
                                Commisioner of Income tax, Chennai
                                Commisioner of Income tax, Chennai
 
 12.  The Company has no accumulated losses at the end of the financial
 year and it has not incurred any cash losses in the current and in the
 immediately preceding financial year.
 
 13.  Based on our audit procedures and on the information and
 explanations given by the management, the Company has defaulted in
 certain repayments of principal and interest to banks as per details
 given in Note No. 29 of Schedule Q. The Company does not have any
 borrowings by way of debentures.
 
 14.  The Company has not granted any loans and advances on the basis of
 security by way of pledge of shares, debentures and other securities.
 
 15.  In our opinion and according to the information and explanations
 given to us, the nature of activities of the Company does not attract
 any special statute applicable to chit fund and nidhi / mutual benefit
 fund/societies.
 
 16.  Based on our examination of records and the information and
 explanations given to us, the Company has not dealt / traded in any
 shares, securities, debentures and other investments during the year.
 
 17.  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.
 
 18.  The term loans obtained by the Company were applied only for the
 purposes for which the loans were obtained.
 
 19.  According to the Cash Flow Statement and other records examined by
 us and the information and explanations given to us on an over all
 basis, the funds raised on short-term basis, prima facie, have not been
 used during the year for long-term investment other than temporary
 deployment pending application.
 
 20.  The Company has made preferential allotment of 4965000 warrants,
 to promoters covered in the register maintained under Section 301 of
 the Companies Act, 1956, each warrant convertible into one equity share
 of Rs.10 each within 18 months from the date of issue. The above issue
 of warrant is in accordance with SEBI guidelines.
 
 21.  The Company did not have any outstanding debentures / bonds during
 the year for which creation of securities is required.
 
 22.  The Company has not raised any money through public issue during
 the year. The end use of the money raised through Foreign Currency
 Convertible Bonds in the earlier years has been disclosed and verified.
 
 23.  Based on the audit procedures performed and information and
 explanations given by the management, we report that no fraud on or by
 the Company has been noticed or reported during the course of our
 audit.
 
                                                For SNB Associates
                                             Chartered Accountants
                                                     B. Mahalingam
 Place: Chennai                                            Partner
 Date: June 29, 2009                         Membership No. 210408