Pantaloon Retail

1.  We have audited the attached Balance Sheet of Pantaloon Retail
 (India) Limited as at June 30, 2008 and also the Profit and Loss
 account and the cash flow statement for the year ended on that date
 annexed thereto. 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 and the
 Companies (Auditors Report) (Ammendment) Order 2004, issued by the
 Central 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.
 
 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, 1956.
 
 v. On the basis of the written representations received from the
 directors, as on June 30, 2008, and taken on record by the Board of
 Directors, we report that none of the directors is disqualified as on
 June 30, 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. Without qualifying our opinion, we draw attention to Note No. B(4)
 in Schedule 19 to the Accounts, relating to refinement in method of
 valuation of closing stock of finished goods.
 
 vii. In our opinion and to the best of our information and according to
 the explanations given to us, the said accounts read together with
 significant accounting policies and other notes to accounts of Schedule
 19 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;
 
 a) in the case of the Balance Sheet, of the state of affairs of the
 Company as at June 30, 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 Cash Flow Statement, of the cash flows for the year
 ended on that date.
 
 Annexure referred to in paragraph 3 of our report of even date Re:
 Pantaloon Retail (India) Limited
 
 (1) (a) The Company has maintained proper records showing full
 particulars,including quantitative details and situation of fixed
 assets.
 
 (b) The Company has physically verified certain assets during the
 period in accordance with a program of verification, which in our
 opinion provides for physical verification of the fixed assets at
 reasonable intervals. According to the information and explanations
 given to us, no material discrepancies were noticed on such
 verification.
 
 (c) In our opinion and according to the information and explanations
 given to us, the Company has not made any substantial disposals during
 the year.
 
 (2) (a) The Company has conducted physical verification of inventory at
 regular intervals during the year.
 
 (b) In our opinion and according to the information and explanations
 given to us, the procedures of physical verification of inventory
 followed by the Management are reasonable and adequate in relation to
 the size of the Company and its nature of business.
 
 (c) In our opinion and according to the information and explanations
 given to us, the Company is maintaining proper records of inventory and
 no material discrepancies were noticed on physical verification.
 
 (3) The Company has not granted or taken any loan secured/unsecured
 to/from Companies, firms or parties covered in the register maintained
 under section 301 of the Companies Act, 1956.  Accordingly, clause
 (iii) of Paragraph 4 of the Companies (Auditors Report) Order, 2003
 (as ammended) is not applicable to the Company.
 
 (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
 for purchase of inventory and fixed assets and for the sale of goods
 and services. During the course of our audit, we have not observed any
 continuing major weaknesses in such internal controls.
 
 (5) In respect of particulars of contracts or arrangements and
 transactions entered in the register maintained in pursuance of section
 301 of the Companies Act, 1956.
 
 a.  To the best of our knowledge and belief and according to the
 information and explanations given to us, particulars of contracts or
 arrangements that needed to be entered into the register have been so
 entered.
 
 b.  According to the information and explanations given to us, the
 transactions made in pursuance of these contracts or arrangements
 referred to in 5(a) above and exceeding the value of Rs 5 lakhs with
 any party during the year have been made at prices which are reasonable
 having regards to prevailing market prices at the relevant time.
 
 (6) In our opinion and according to the information and explanations
 given to us, the Company has complied with the provisions of Section
 58A, 58AA and other relevant provisions of the Companies Act, 1956 and
 the rules framed there under with regard to the deposits accepted from
 public. We have been informed that no order has been passed by the
 Company Law Board or National Company Law Tribunal or Reserve Bank of
 India or any other court or tribunal in this regard.
 
 (7) In our opinion, the internal audit functions carried out during the
 year by firms of Chartered Accountants appointed by the management have
 been commensurate with the size of the Company and the nature of its
 business.
 
 (8) The Central Government has not prescribed maintenance of cost
 records under Section 209 (1) (d) of the Companies Act, 1956 for any
 products of the Company.
 
 (9) (a) According to the information and explanations given to us, the
 Company is generally regular in depositing with 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. According to the information
 and explanations given to us, no undisputed statutory dues as above
 were outstanding as at 30th June, 2008 for a period of more than 6
 months from the date, they became payable.
 
 (b) According to the information and explanation given to us, the dues
 of Sales Tax,Income Tax, Customs Duty, Wealth Tax, Excise Duty, Cess,
 Service Tax and other statutory dues which have not been deposited on
 account of any dispute and the forum where the dispute is pending are
 as under:
 
 Name of Statute: The Indian Stamp Act, 1899
 
 Nature of Dues: Stamp duty.
 
 Forum where the dispute is pending: Collector of Stamps, Kanpur.
 
 Amount : Rs 5.34 crores.
 
 (10) The Company does not have accumulated losses at the end of the
 financial year and has not incurred cash losses in the financial year
 and in the immediately preceding financial year.
 
 (11) Based on our audit procedures and as per the information and
 explanations given by the management, we are of the opinion that the
 Company has not defaulted in repayment of dues to a financial
 institution, bank or debenture holders.
 
 (12) According to the information and explanations given to us, the
 Company has not given any loans and advances on the basis of security
 by way of pledge of shares, debentures and other securities and hence
 the question of maintenance of adequate records for this purpose does
 not arise.
 
 (13) In our opinion and according to the information and explanations
 given to us, the Company is not a chit fund or a nidhi / mutual benefit
 fund / society. Therefore, the provisions of clause (xiii) of paragraph
 4 of the Companies (Auditors Report) Order, 2003 are not applicable to
 the Company.
 
 (14) The Company has maintained proper records of transactions and
 contracts in respect of dealing or trading in shares, securities,
 debentures and other investments and timely entries have been made
 therein. All shares and other investments have been held by the Company
 in its own name.
 
 (15) In our opinion and according to the explanations given to us, the
 terms and conditions of guarantees given by the Company for loans taken
 by others from banks and financial institutions, are not prima facie
 prejudicial to the interests of the Company.
 
 (16) In our opinion and according to the information and explanations
 given to us, the term loans obtained during the year have been prima
 facie applied for the purpose for which they were taken.
 
 (17) According to information and explanations given to us and on
 overall examination of the balance sheet of the Company, funds raised
 on short term basis have, prima-facie, not been used for long term
 investments.
 
 (18) According to the information and explanations given to us, the
 Company has made preferential allotments of shares to parties or
 companies covered in the register maintained under section 301 of the
 Companies Act, 1956 and the price at which shares have been issued is
 not prejudicial to the interests of the Company.
 
 (19) During the year, the Company has not issued any debentures.
 Accordingly, the provisions of paragraph 4(xix) of the Companies
 (Auditors Report) Order, 2003 are not applicable to the Company.
 
 (20) The Company has not raised any money by way of public issues
 during the year.
 
 (21) To the best of our knowledge and belief and according to the
 information and explanations given to us, no fraud by the Company was
 noticed or reported during the year, although there were some instances
 of fraud on the Company noticed by the Management, the amounts whereof
 were not material in the context of the size of the Company and the
 nature of its business and the amounts were adequately provided for.
 
                                                       For NGS & Co.
                                              Chartered Accountants
 
                                                     Navin T. Gupta   
                                                            Partner
                                               Membership No. 40334
 
 Place: Mumbai
 Dated: 20th September, 2008