ORG Informatics

1.  We have audited the attached Balance Sheet of ORG Informatics
 Limited (the Company) as at March 31, 2008, the Profit and Loss
 Account and also the Cash Flow Statement for the year ended on that
 date annexed thereto. These financial statements are the responsibil-
 ity 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 rea- sonable assurance about whether the
 financial state- ments are free of material misstatement. An audit in-
 cludes examining, on a test basis, evidence supporting the amounts and
 disclosures in the financial statements.  An audit also includes
 assessing the accounting prin- ciples used and significant estimates
 made by manage- ment, as well as evaluating the overall financial
 state- ment presentation. We believe that our audit provides a
 reasonable basis for our opinion.
 
 3.  As required by the Companies (Auditors Report) Or- der, 2003 (as
 amended) issued by the Central Govern- ment 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 para- graphs 4
 and 5 of the said Order.
 
 4.  Without qualifying, we draw attention to Note 7(a) of Schedule 22
 of Notes annexed to and forming part of the financial statements. The
 Companys balance of sundry debtors includes an amount of TRs 251,317
 (un- confirmed), which is stated to be on account of Liqui- dated
 Damages deducted by a customer on provisional basis. The said dues, we
 are informed, have arisen due to number of MTNL sites not being ready
 to accept de- livery besides delays in inspection of the goods prior to
 delivery in earlier years and the company, to cover such eventualities,
 had entered into back to back arrange- ment with the suppliers. We are
 informed that the said deduction is under negotiation for settlement /
 waiver with the customer. The management of the Company is confident of
 obtaining a waiver of the said liquidated damages from the customer and
 consequently, the said dues are considered good and recoverable.
 
 5.  (i) In respect of amounts recoverable from a company under the same
 management which are overdue (Refer note No. 7(b)), the management has
 con- sidered them as good of recovery requiring no pro- vision in view
 of its long term relationship with the said company. We are, however,
 unable to express any opinion in the matter.  
 
 (ii) Stocks of Stores and Spares include slow moving/ non moving stocks
 of TRs 25,560 which have been valued in terms of Accounting policy No
 8. The man- agement is of the view that these are salable stocks and
 require no provision for fall in their value. (Re- fer Note no 6(b) of
 schedule 22). We are however unable to express our opinion in the
 matter in the absence of quotations from prospective purchas- ers /
 dealers.
 
 6.  Further to our comments in the Annexure referred to in paragraph 3
 and our remarks referred to in paragraphs 4 and subject to our comments
 in paragraph 5 above, we report that:
 
 (i) We have obtained all the information and explana- tions, which to
 the best of our knowledge and be- lief 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 re- ferred to in sub-section (3C) of Section 211
 of the Companies Act, 1956;
 
 (v) On the basis of written representations received from directors as
 on March 31, 2008 and taken on record by the Board of Directors, we
 report that none of the directors is disqualified as on March 31,2008
 from being appointed as a director in terms of clause (g) of
 sub-section (1) of Section 274 of the Companies Act, 1956;
 
 (vi) Subject to our remarks in paragraphs 5 (i) and 5 (ii) above,
 relating to overdue amounts recoverable amounts from company under same
 management and slow / non moving stocks of stores and spares, the
 effect of which is unascertainable at this stage, in our opinion and to
 the best of our information and according to the explanations given to
 us, the said accounts read together with our remarks in paragraph 4
 above and accounting policies and notes attached thereto and appended
 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 prin- ciples generally accepted in India:
 
 (a) in the case of the balance sheet, of the state of affairs of the
 Company as at March 31, 2008;
 
 (b) in the case of the profit and loss account, of the profit for the
 year ended on that date; and
 
 (c) in the case of the cash flow statement, of the cash flows for the
 year ended on that date.
 
 ANNEXURE TO THE AUDITORS REPORT
 
 (Referred to in paragraph 3 of our report of even date) ORG Informatics
 Limited
 
 1.  In our opinion and according to the information and explanations
 given to us, the nature of the Companys business / activities during
 the year are such that clauses viii, xii, xiii, xiv of Companies
 (Auditors Report) Order, 2003 are not applicable to the Company.
 
 2.  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) Fixed assets (includes certain Plant & Machinery, having a WDV of
 TRs 6,842, dismantled and awaiting decision regarding alternative
 usage, hence not written off, refer Note no B-9 of schedule 22) held by
 the company were not physically verified during the year by the
 management, though in accordance with the programme of verification,
 which in our opinion provides for physical verification of all the
 fixed assets at reasonable intervals, such assets were to have been
 verified.  Consequently, we are unable to state whether there are any
 discrepancies or not.
 
 (c) The company has disposed off insignificant portion of the fixed
 assets during the year. Hence the ability of the company to continue as
 a going concern is not affected.
 
 3.  In respect of its inventories:
 
 (a) As explained to us, inventories (excluding those at customers
 sites) were physically verified at year end by the management. In
 respect of materials lying at customers sites, but under care of
 Company personnel, no such physical verification was considered
 necessary by the management since there has been no movement during the
 year.
 
 (b) In our opinion and according to the information and explanations
 given to us, the procedures of physical verification of inventories,
 except to the extent referred to above, followed by the management were
 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 were not
 material and have been adequately dealt with in the books of accounts.
 
 4.  In respect of loans, secured or unsecured, granted by the Company
 to companies, firms or other parties covered in the register maintained
 under section 301 of the Companies Act 1956, according to the
 information and explanations given to us:
 
 (a) The Company has granted (interest free)loans to two companies
 covered in the register maintained under Section 301 of the Companies
 Act 1956. As at the year-end, the outstanding balance of such loans
 granted to those companies aggregated to TRs 23,664 and the maximum
 amount involved during the year was TRs 23,883.
 
 (b) In our opinion and according to the information and explanations
 given to us, the terms and conditions of the interest free loans
 referred to above are not prima facie prejudicial to the interest of
 the Company.
 
 (c) The loans granted are repayable on demand. As informed, the company
 has not demanded repayment of the loans during the year and thus there
 is no default on the part of the parties to whom the amount is lent.
 
 (d) There are no overdue amounts remaining outstanding as at the
 year-end.
 
 (e) The Company has taken interest bearing loan from a Company and the
 outstanding balance of such loan aggregated to TRs 26,506 (including
 accrued interest) and the maximum amount involved during the year was
 TRs 28,380.
 
 (f) The rate of interest and other terms and conditions of such loan
 is, in our opinion, prima facie not prejudicial to the interest of the
 Company.
 
 (g) The payment of principal and interest in respect of such loan
 wherever stipulated is regular.
 
 5.  In our opinion and according to the information and explanations
 given to us, there are adequate internal control systems 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 and we have not observed any continuing failure to correct
 major weaknesses in such internal controls.
 
 6.  In respect of contracts or arrangements entered in the register
 maintained in pursuance of section 301 of the Companies Act 1956, to
 the best of our knowledge and belief and according to the information
 and explana- tions given to us:
 
 (a) The particulars of contracts or arrangements re- ferred to Section
 301 that needed to be entered into the register, maintained under the
 said sec- tion have been so entered.
 
 (b) According to the information and explanations given to us, where
 each of such transactions, other than interest free loans granted
 (Refer to Para 4 above), is in excess of Rs. 5 Lakhs in respect of any
 party, the transactions have been made at prices which are prima facie,
 reasonable having regard to the prevailing market prices at the
 relevant time, ex- cept that in respect of sale of services, no com-
 parison of prices could be made since similar ser- vices are not being
 rendered to any other party by the company.
 
 7.  In our opinion and according to the information and ex- planations
 given to us and as confirmed by the secre- tarial department, the
 Company has not accepted any deposits from public within the meaning of
 Section 58A and 58AA or any other relevant provisions of the Com-
 panies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975
 with regard to the deposits ac- cepted from the public.
 
 8.  The company had appointed a firm of Chartered Ac- countants to
 carry out Internal Audit functions who had covered limited areas and
 had furnished their report.  Keeping in view the nature of operations
 of the com- pany the coverage needs to be extended to cover all aspects
 of the companys working. Hence, during the year the internal audit was
 not commensurate with the size and nature of its business.
 
 9.  According to the information and explanations given to us in
 respect of Statutory dues:
 
 (a) The Company has been generally regular in depositing undisputed
 statutory dues, including Income-tax, provident fund, Employees State
 Insurance and any other material statutory dues with the appropriate
 authorities during the year except for dues in respect of taxes
 deducted at source and service tax, where delays of upto 2 months were
 observed.
 
 During the year there were no dues payable in respect of Investor
 Education and Protection Fund, Wealth Tax, Custom Duty, Excise Duty,
 Cess and other material statutory dues. In the case of Cess, the
 central government has till date not prescribed the amount of Cess
 payable under section 441A of the Companies Act, 1956
 
 (b) During the year there were no disputed dues payable in respect of
 customs duty, sales tax, wealth tax, service tax, excise duty and Cess.
 The details of disputed income tax dues which have not been deposited
 is as under:
 
 Nature of Statue       Nature of the dues              Amount
                                                        (TRs)
 
 Income Tax             Disallowance of                 18,093
                        Loss as per income
                        return for the
                        Assessment Year
                        2004-05
 
 Period to         Forum
 which the         where
 amount            dispute is
 relates           pending
 
 2003-04           Commissioner
                   of income tax
                   (Appeals)-III
                   Vadodara.
 
 10.  In our opinion and according to information and explanations given
 to us, the company does not have any accumulated losses as at the end
 of the year. The Company has not incurred cash losses during the
 financial year covered by our audit and the immediately preceding
 financial year.
 
 11.  In our opinion and according to the information and explanations
 given to us, the company has not defaulted in the repayment of dues to
 banks. In respect of FCCBs issued during the year, the date of
 repayment falls in the year 2012. In our opinion and according to the
 information and explanations given to us, the company has not obtained
 any borrowings during the year from financial institutions.
 
 12.  In our opinion and according to the information and explanations
 given to us, the Company has, other than guarantees given to a bank on
 behalf of subsidiary company, not given any guarantees for loans taken
 by others from banks and financial institutions.
 
 13.  To the best of our knowledge and belief and according to the
 information and explanations given to us, no term loans were availed by
 the Company during the financial year, hence there is no question of
 application.
 
 14.  According to the information and explanations given to us, funds
 raised by the Company on short term basis have, prima facie, not been
 used during the year for long term investment.
 
 15.  According to the information and explanation given to us and as
 evidenced by the books and records, the company has not created any
 security for FCCBs aggregating to US $ 16,000,000 issued during the
 year.
 
 16.  We have verified that the end use of money raised by issuing FCCBs
 and the details are as disclosed in notes to accounts.
 
 17.  According to the information and explanations given to us, the
 Company has not made during the year, any preferential allotment of
 shares to parties and companies covered in the Register maintained
 under Section 301 of the Companies Act, 1956.
 
 18.  To the best of our knowledge and belief and according to the
 information and explanation given to us, no fraud on or by the Company
 was noticed or reported during year.
 
                                         For Khanna and Annadhanam 
                                             Chartered Accountants
                                               K A Balasubramanian
 Place : Gurgaon                                         (Partner)
 Dated : June 30, 2008                        Membership No. 17415