1.  We have audited the attached Balance Sheet of Royal Orchid Hotels
 Limited, (the ''Company'') as at 31 March 2011, and also the Profit and
 Loss Account and the Cash Flow Statement for the year ended on that
 date, annexed thereto (collectively referred as the ''financial
 statements''). These financial statements are the responsibility of the
 Company''s management. Our responsibility is to express an opinion on
 these financial statements based on ouraudit.
 
 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 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 (Auditor''s Report) Order, 2003 (the
 ''Order'') (as amended), issued by the Central Government of India in
 terms of sub-section (4A) of Section 227 of the Companies Act, 1956
 (the ''Act''), we enclose in the Annexure a statement on the matters
 specified in paragraphs 4 and 5 of the 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
 ouraudit;
 
 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 financial statements dealt with by this report are in agreement
 with the books of account;
 
 d.  On the basis of written representations received from the
 Directors, as on 31 March 2011 and taken on record by the Board of
 Directors, we report that none of the directors is disqualified as on
 31 March 2011 from being appointed as a director in terms of clause (g)
 of sub-section (1) of Section 274 of the Act;
 
 e.  In our opinion and to the best of our information and according to
 the explanations given to us, the financial statements dealt with by
 this report comply with the accounting standards referred to in
 sub-section (3C) of Section 211 of the Act and the Rules framed there
 underand give the information required by theAct, in the manner so
 required and give a true and fair view in conformity with the
 accounting principles generally accepted in India, in the case of:
 
 I. the Balance Sheet, of the state of affairs of the Company as at 31
 March 2011;
 
 ii. the Profit and Loss Account, of the profit forthe year ended on
 that date; and
 
 iii. the Cash Flow Statement, of the cash flows for the year ended on
 that date.
 
 Annexure to the Auditors'' Report of even date to the members of Royal
 Orchid Hotels Limited, on the financial statements for the year ended
 31 March 2011
 
 Based on the audit procedures performed for the purpose of reporting a
 true and fair view on the financial statements of the Company and
 taking into consideration the information and explanations given to us
 and the books of account and other records examined by us in the normal
 course of audit, we report that:
 
 (i) (a) The Company has maintained proper records showing full
 particulars, including quantitative details and situation of fixed
 assets.
 
 (b) The fixed assets have not been physically verified by the
 management during the year and we are therefore unable to comment on
 the discrepancies, if any, which could have arisen on such
 verification. In our opinion, the frequency of verification of the
 fixed assets is also not reasonable having regard to the size of the
 Company and nature of its assets
 
 (c) In our opinion, a substantial part of fixed assets has not been
 disposed off during the year.
 
 (ii) (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 inventory 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 and no
 material discrepancies were noticed on physical verification.
 
 (iii) (a) There are eight wholly owned subsidiaries and two
 subsidiaries covered in the register maintained under Section 301 of
 the Act to which the Company has granted unsecured loans. The maximum
 amount outstanding during the year was f 315,945,334 and the year-end
 balance was Rs. 138,366,315.
 
 (b) In our opinion, the rate of interest and the interest free nature
 where applicable and other terms and conditions of such loans are not,
 prima facie, prejudicial to the interest of the Company.
 
 (c) The principal amounts, are repayable on demand and there is no
 repayment schedule, the payment of interest, where applicable, has been
 regular.
 
 (d) In respect of the said loans, the same are repayable on demand and
 there are no overdue amounts.
 
 (e) The Company has taken loans, secured or unsecured from companies,
 covered in the register maintained under Section 301 of the Act. The
 maximum amount outstanding during the year was Rs. 33,006,444 and the
 year-end balance was Rs. Nil
 
 (f) In ouropinion, the rate of interest and otherterms and conditions
 for such loans are not, prima facie, prejudicial to the interest of the
 Company.
 
 (g) In respect of the said loans the same are repayable on demand and
 there are no overdue amounts.  The payment of interest has been
 regular.
 
 (iv) In our opinion, there is an 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.
 
 (v) (a) In our opinion, the particulars of all contracts or
 arrangements that need to be entered into the register maintained under
 Section 301 of the Act have been so entered.
 
 (b) Owing to the unique and specialized nature of the items involved
 and in the absence of any comparable prices, we are unable to comment
 as to whether the transactions made in pursuance of such contracts or
 arrangements have been made at prevailing market prices at the relevant
 time
 
 (vi) The Company has not accepted any deposits from the public within
 the meaning of Sections 58A and 58AAof the Act and the Companies
 (Acceptance of Deposits) Rules, 1975. Accordingly, the provisions of
 clause 4(vi) of the Order are not applicable.
 
 (vii) In our opinion, the Company has an internal audit system
 commensurate with its size and the nature of its business.
 
 (viii) To the best of our knowledge and belief, the Central Government
 has not prescribed maintenance of cost records under clause (d) of
 sub-section (1) of Section 209 of the Act, in respect of the services
 rendered by the company. Accordingly, the provisions of clause 4(viii)
 of the Order are not applicable.
 
 (ix) (a) 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, as applicable, have been regularly
 deposited other than tax deducted at source and service tax which
 hasnot been regularly deposited with the appropriate authorities.
 Further, no undisputed amounts payable in respect thereof were
 outstanding at the year-end for a period of more than six months from
 the date they become payable.
 
 (b) There are no dues in respect of income tax, sales tax, wealth tax,
 service tax, customs duty, excise duty and cess that have not been
 deposited with the appropriate authorities on account of any dispute.
 
 (x) In our opinion, the Company does not have accumulated losses at the
 end of the financial year and it has not incurred cash losses in the
 current and the immediately preceding financial year.
 
 (xi) In our opinion , the Company has not defaulted in repayment of
 dues to any bank during the year. In respect of dues to banks, the
 lenders have rescheduled the repayments amounting to Rs. 151,875,000
 that were due from the Company. The said approval for rescheduling the
 repayment was obtained from the lenders before the year end. The
 Company has no dues payable to financial institutions or debenture
 holders during the year.
 
 (xii) The Company has not granted any loans and advances on the basis
 of security by way of pledge of shares, debentures and other
 securities. Accordingly, the provisions of clause 4(xii) ofthe Order
 are not applicable.
 
 (xiii) In ouropinion, the Company is nota chitfund ora nidhi/ mutual
 benefit fund/ society. Accordingly, the provisions of clause 4(xiii) of
 the Order are not applicable.
 
 (xiv) In our opinion, the Company is not dealing in or trading in
 shares, securities, debentures and other investments. Accordingly, the
 provisions of clause 4(xiv) ofthe Order are not applicable.
 
 (xv) In our opinion, the terms and conditions on which the Company has
 given guarantee for loans taken by subsidiaries and joint ventures
 ofthe company from banks are not, prima facie, prejudicial to the
 interest of the Company.
 
 (xvi) In ouropinion, the Company has applied the term loans forthe
 purpose for which the loans were obtained.
 
 (xvii) In ouropinion, no funds raised on short-term basis have been
 used for long-term investment.
 
 (xviii) The Company has not made any preferential allotment of shares
 to parties or companies covered in the register maintained under
 Section 301 of the Act. Accordingly, the provisions of clause 4(xviii)
 of the Order are not applicable.
 
 (xix) The Company has neither issued nor had any outstanding debentures
 during the year. Accordingly, the provisions of clause 4(xix) of the
 Order are not applicable.
 
 (xx) The Company has not raised any money by public issues during the
 year. Accordingly, the provisions of clause 4(xx)of the Order are not
 applicable.
 
 (xxi) No fraud on or by the Company has been noticed or reported during
 the period covered by our audit.
 
 For Walker, Chandiok& Co
 
 Chartered Accountants
 
 Firm Registration No. 001076N
 
 per Aashish Arjun Singh
 
 Partner
 
 Membership No. 210122
 
 Bengaluru
 
 30 May 2011