We have audited the attached Balance Sheet of Sakthi Sugars Limited as
 at 31st March 2011, the Profit and Loss Account and also the Cash Flow
 Statement for fifteen months ended on that date annexed thereto. These
 financial statements are the responsibility of the Company''s
 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.
 
 I. As required by the Companies (Auditor''s 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 furnish below a statement on the
 matters specified in paragraphs 4 and 5 of the said Order.
 
 i.  In respect of its fixed assets:
 
 a.  The Company has maintained proper records showing full particulars
 including quantitative details and situation of fixed assets on the
 basis of available information.
 
 b.  As explained to us, the fixed assets have been physically verified
 by the management during the year at reasonable intervals and no
 material discrepancies were noticed on such physical verification.
 
 c.  The Company has not disposed off substantial part of its fixed
 assets during the year and the going concern status of the Company is
 not affected.
 
 ii.  In respect of its inventories:
 
 a.  As explained to us, inventory has been physically verified by the
 management 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 inventories
 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 has maintained proper records of inventories. As
 explained to us, there were no material discrepancies noticed on
 physical verification of inventory as compared to the book records.
 
 iii. The company has not granted any loans secured or unsecured to/from
 companies, firms or other parties covered in the register maintained
 under section 301 of the Act. Accordingly, clauses 4(iii) (a) to (g) of
 the Order are not applicable to the company.
 
 The company has taken unsecured loans totalling to Rs.18 crores from a
 company covered in the register maintained under section 301 of the
 Act. The terms and conditions of the loan are prima facie not
 prejudicial to the interest of the company.
 
 iv. In our opinion and according to the information and explanations
 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, fixed assets and also for the sale of goods and
 services. During the course of our audit, we have not observed any
 major weaknesses in the internal control system.
 
 v.  In respect of transactions covered under Section 301 of the
 Companies Act, 1956:
 
 a.  In our opinion and according to the information and explanations
 given to us, the particulars of contracts or arrangements referred to
 in section 301 of the Act have been entered in the register maintained
 under that section.
 
 b.  In our opinion and according to the information and explanations
 furnished to us, 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 at the relevant time.
 
 vi. In our opinion and according to the information and explanations
 given to us, in respect of the deposits accepted by the company from
 the public, the directives issued by the Reserve Bank of India and the
 provisions of sections 58A and 58AA of the Companies Act, 1956 and
 other relevant provisions of the Act and the rules framed thereunder,
 wherever applicable, have been complied with. No order has been passed
 by the Company Law Board or National Company Law Tribunal or Reserve
 Bank of India or any Court or any other Tribunal.
 
 vii.  In our opinion, the internal audit system of the Company is
 commensurate with its size and nature of its business.
 
 viii. The Central Government has prescribed maintenance of Cost Records
 under Section 209 (1) (d) of the Companies Act, 1956 in respect of
 certain manufacturing activities of the Company. We have broadly
 reviewed the accounts and records of the Company in this connection and
 are of the opinion, that prima facie, the prescribed accounts and
 records have been made and maintained.
 
 ix.  In respect of statutory dues:
 
 a.  According to the records of the Company, undisputed statutory dues
 such as Provident Fund, Investor Education and Protection Fund,
 Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Service
 Tax, Customs Duty, Excise Duty and Cess have been regularly deposited
 with the appropriate authorities. There are no arrears of such
 statutory dues outstanding for a period of more than six months as at
 31 st March 2011.
 
 b.  The disputed statutory dues that have not been deposited on account
 of matters pending before appropriate authorities are as under :
 
 Particulars          Period to which the matter pertains
 
 Income Tax           2008-09
 
 Sales Tax            1993-94, 2000-01 & 2001-02
 
                      1989-90 to 1992-93 
 
                      2000-01, 1990-91 to 1996-97 
 
                      2002-03 to 2004-05
 
 Excise Duty          Excise Duty:
 
                      2002-03, 2006-07 
 
                      2005-06 
 
                      2007-08 
 
                      1992 to 2005
 
                      Service Tax:
 
                      2005, 2006, 2007 & 2008
 
                      2005 to 2008
 
                      2008
 
 Water Charges        1964-65 to 1999-2000 and 1993-94 to 2011
 
                      2004-05, 2005-06
 
 State Administrative April 2004 to June 2007 
 fees
 
 
 Particulars          Forum where dispute                     Rs. in
                      is pending                              Crores
 
 Income Tax           Commissioner of Income Tax (Appeals)      1.76
 
 Sales Tax            Sales Tax Appellate Tribunal              1.63
 
                      High Court of Madras                      8.03
 
                      Addl.Commissioner (CT) (RP)               3.15
 
                      Joint Commissioner (CT), Coimbatore       0.64
 
 Excise Duty          High Court of Madras                     11.66
 
                      CESTAT, Chennai                           7.68 
 
                      Commissioner of Central Excise (Appeals)  0.04
 
                      High Court of Orissa, Cuttack             0.12
 
                      CESTAT, Chennai                           2.62
 
                      Commissioner (Appeals), Madurai           0.15
 
                      Commissioner(Appeals), Salem              0.78
 
 Water Charges        High Court of Madras                      8.10
 
                      High Court of Orissa, Cuttack             0.06
 
 State Administrative Supreme Court                             4.47
 fees
 
 x In our opinion, even considering the quantifiable effect of
 qualification cited in Para II, the accumulated losses at the end of
 the financial year are less than 50% of its net worth. The company has
 incurred cash losses during the financial year and cash profit for the
 previous year.
 
 xi According to the records of the company examined by us and the
 information and explanations given to us, the defaults by the company
 to banks and an institution is as under:
 
 From Banks
 
 Particulars     Rs. in Crores     Period of default         Since paid
                                                        (Rs. in Crores)
 
 Principal                4.31     January & February 2011         4.31
 
 Interest                12.01     January & February 2011        12.01
 
 From an Institution
 
 Particulars     Rs. in Crores    Period of default         Since paid
                                                       (Rs. in Crores)
 
 Interest                 0.69    January & February 2011         0.69
 
 There are no defaults with respect to debentures.
 
 xii In our opinion and according to the information and explanation
 given to us, no loans and advances have been granted by the Company on
 the basis of security by way of pledge of shares, debentures and other
 securities.
 
 xiii The Company is not a chit fund or a nidhi/mutual benefit
 fund/society.
 
 xiv The company is not dealing or trading in shares, securities,
 debentures and other investments.
 
 xv. The company has given guarantees for bank loans taken by
 subsidiaries and the outstanding amount of such loans as at 31st March
 2011 is Rs. 374.70 crores. Based on the Management''s Representation, we
 are of the opinion that, the terms and Conditions of the guarantees are
 not prejudicial to the interest of the company.
 
 xvi In our opinion, the term loans have been applied for the purpose
 for which they were raised.
 
 xvii According to the information and explanations given to us and on
 overall examination of the Balance Sheet of the company, we are of the
 opinion that during the period the company has not utilised funds
 raised on short term basis for long term investments.
 
 xviii During the year, the Company has not made any preferential
 allotment of shares to companies covered in the Register maintained
 under Section 301 of the Companies Act, 1956.
 
 xix In our opinion and according to the information and explanations
 given to us, the company has issued debentures and security or charge
 has been created in respect of debentures issued.
 
 xx The Company has not raised any money by way of public issue during
 the year.
 
 xxi In our opinion and according to the information and explanations
 given to us, no fraud on or by the Company has been noticed or reported
 during the year.
 
 II.  In our opinion, the Funded Interest under CDR scheme amounting to
 Rs. 80.81 Crores requires to be written off and the loss of the company
 is understated to that extent.
 
 III. Further to our comments under Para I and II 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 accounts, 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 accounts;
 
 iv. In our opinion the Balance Sheet, Profit and Loss Account and Cash
 Flow Statement dealt with by this report comply with the mandatory
 Accounting Standards, referred to in sub-section (3C) of Section 211 of
 the Companies Act, 1956;
 
 v. On the basis of written representations received from the directors
 and taken on record by the Board of Directors, we report that none of
 the directors of the Company is disqualified, as on 31st March 2011,
 from being appointed as a director in terms of clause (g) of
 sub-section (1) of section 274 of the Companies Act 1956;
 
 vi. In our opinion and to the best of our information and according to
 the explanations given to us, the said accounts read together with the
 Significant Accounting Policies and other notes thereon give the
 information required by the Companies Act, 1956, in the manner so
 required, and present a true and fair view, in conformity with the
 accounting principles generally accepted in India:
 
 a.  In so far as it relates to Balance Sheet, of the state of affairs
 of the Company as at 31st March 2011;
 
 b.  In so far as it relates to the Profit and Loss Account, of the LOSS
 of the Company for the period ended on that date; and
 
 c.  In so far as it relates to the Cash Flow Statement, of the cash
 flows of the Company for the period ended on that date.
 
                                       For P.N. RAGHAVENDRA RAO & Co.
                                                Chartered Accountants
                                        Firm Registration No. 003328S
 
                                                          P.R. VITTEL
                                                              Partner
                                                          M.No.018111
 
 Coimbatore 
 30th May 2011