SpiceJet

1.  We have audited the attached Balance Sheet of Spicejet Limited,
 (the Company) as at March 31,2008, 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 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 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 (Auditors 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.  Without qualifying our opinion, we draw attention to Note 5 in
 Schedule XVII to the financial statements which indicate that the
 Company has suffered recurring losses from operations with net loss for
 the year ended March 31, 2008, without considering the impact of the
 matters mentioned in paragraph 5 below, amounting to Rs.  1,335.07
 million, and as of that date, the Companys accumulated losses amounted
 to Rs. 5,074.52 million, as against the Companys share capital and
 reserves of Rs. 5,354.33 million. Also, as discussed in Note 3 in
 Schedule XVII to the financial statements, realization of the carrying
 amount of certain receivable amounting to Rs. 68.82 million and
 dismissal of interest liability amounting to Rs. 240.95 million is
 dependent upon the success of the claims filed by the Company against
 some of the erstwhile directors and employees. These conditions raise
 significant doubt about the Companys ability to continue as a going
 concern. Managements plans in regard to these matters are also
 described in Note 5. The accompanying financial statements do not
 include any adjustments that might result from the outcome of these
 uncertainties and also do not include any adjustments relating to the
 recoverability and classification of asset carrying amounts or the
 amount and classification of liabilities that might be necessary should
 the Company be unable to continue as a going concern.
 
 5.  We report that:
 
 a.  As more fully explained in the note 3.1 of Schedule XVII to the
 financial statements, an amount of Rs. 360 million, given as security
 deposit towards lease of a property, is carried as recoverable under
 the head Loans and advances of which an amount of Rs. 26.82 million
 appears to be doubtful for recovery. The Company has not made provision
 for this doubtful amount in the financial statements.
 
 b.  As more fully explained in the note 3.3 of Schedule XVII to the
 financial statements, the Company has not accrued interest in respect
 of outstanding inter corporate deposits of Rs. 100 million which as at
 March 31, 2008 amounts to Rs. 240.95 million.
 
 c.  As more fully explained in the note 3.5 and 3.7 of Schedule XVII to
 the financial statements, Loans and advances includes an amount of Rs.
 36.10 million which represents net impact of unsupported deposits to,
 and withdrawals from, the bank accounts which were operated by some of
 the erstwhile Director (s) and/ or some ex-employees of the Company. In
 the absence of supporting documents/ information, this amount appears
 to be doubtful for recovery for which no provision has been made in the
 financial statements.
 
 d.  As more fully explained in the note 3.6 of Schedule XVII to the
 financial statements, balance in Sundry debtors as at March 31, 2008
 includes Rs. 5.90 million recoverable from parties in which the
 erstwhile promoters are interested. The Company has not created any
 provision against this balance though the recovery of this amount
 appears to be doubtful considering the various pending litigations with
 erstwhile promoters.
 
 We further report that had the observations made by us in paragraphs 5
 a, b, c and d above been considered, the net loss for the period would
 have been Rs. 1,644.84 million (as against the reported net loss of Rs.
 1,335.07 million), accumulated losses would have been Rs. 5,384.29
 million (as against the reported figure of Rs. 5,074.52 million), loans
 and advances would have been Rs. 1,699.17 million (as against the
 reported figure of Rs. 1,762.09 million), sundry debtors would have
 been Rs. 9.64 million (as against the reported figure of Rs. 15.54
 million) and current liabilities would have been Rs. 7,457.59 million
 (as against the reported figure of Rs. 7,216.64 million).
 
 6.  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; except to the extent stated in paragraph 5(c) above regarding
 unsupported bank transactions;
 
 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 six out of
 nine directors, as on March 31, 2008 and taken on record by the Board
 of Directors, we report that none of those six 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 Act. In
 respect of one of the director who has not provided written
 representation, based on our review of other evidences provided by the
 Company and the concerned director, we are of the opinion that he is
 not disqualified from being appointed as a director in terms of clause
 (g) of sub-section (1) of section 274 of the Act. In respect of
 remaining two directors, in the absence of written representation to
 the Company as on March 31, 2008, we are unable to comment whether they
 are 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 Act;
 
 e.  Subject to our comments in paragraph 5 above, 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 under and give the information
 required by the Act, 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
 March 31,2008; ii) the Profit and Loss Account, of the loss for the
 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
 Spicejet Limited, on the financial statements for the year ended March
 31,2008.
 
 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) A major portion of the fixed assets has been physically verified by
 the management during the year. In our opinion, the frequency of
 verification of the fixed assets is reasonable having regards to the
 size of the Company and nature of its assets. No material discrepancies
 noticed were noticed on such verification.
 
 (c) In our opinion, a substantial part of fixed assets has not been
 disposed off during the year.
 
 (ii) (a) The management has not carried out physical verification of
 inventory during the year. In our opinion the frequency of physical
 verification is not reasonable.
 
 (b) No physical verification has been carried out during the year and
 hence, we are unable to comment on reasonableness and adequacy of
 procedures followed for physical verification of inventory.
 
 (c) The Company is maintaining proper records of inventory but in the
 absence of physical verification during the year we are unable to
 comment upon discrepancies between book records and physical presence
 of inventories.
 
 (iii) (a) The Company has not granted any loan, secured or unsecured to
 companies, firms or other parties covered in the register maintained
 under section 301 of the Act. Accordingly, the provisions of clauses
 4(iii)(b) to (d) of the Order are not applicable.
 
 (b) The Company had taken loans from one company covered in the
 register maintained under section 301 of the Act. The maximum amount
 outstanding during the year was Rs 389.21 million and the year-end
 balance was Rs 344.16 million
 
 (c) In our opinion, the rate of interest and other terms and conditions
 for such loans are not, prima facie, prejudicial to the interest of the
 Company.
 
 (d) In respect of loans taken, repayment of the principal amount is as
 stipulated and 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) In our opinion the transaction made in pursuance of such contracts
 or arrangements and exceeding the value of rupees five lakhs in respect
 of any party during the year have been made at prices which are
 reasonable having regard to the prevailing market price at the relevant
 time.
 
 (vi) The Company has not accepted any deposits from the public within
 the meaning of sections 58A and 58AA of 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 generally been
 regularly deposited with the appropriate authorities, though there has
 been a slight delay in a few cases. 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 became payable.
 
 (b) The dues outstanding in respect of sales-tax, income-tax, custom
 duty, wealth-tax, excise duty, cess on account of any dispute, are as
 follows:
 
 Name of the        Name of dues          Amount
 Statute                                 (Rs. in
                                         million)
 
 Employee          Employee state          1.67
 state Insurance    Insurance dues
 Act, 1948
 
 Indian             Penalty upon delay     82.69
 Customs Act,       in payment of
 1962               custom duty
 
 Period to which the       Forum where dispute
 amount relates            is pending
 
 November 1996 to          ESIC Regional Office
 September 1997            Delhi
 
 March 1996 to             Delhi High Court
 August 1996
 
 (x) In our opinion, the Companys accumulated losses at the end of the
 financial year are more than fifty percent of its net worth. The
 Company has incurred cash losses during the year and in the immediately
 preceding financial year
 
 (xi) In our opinion, the Company has not defaulted in repayment of dues
 to a financial institution or a bank. The Company did not have any
 debentures outstanding 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) of the Order
 are not applicable.
 
 (xiii) In our opinion, the Company is not a chit fund or a 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) of the Order are not applicable.
 
 (xv) The Company has not given any guarantees for loans taken by others
 from banks or financial institutions.  Accordingly, the provisions of
 clause 4(xv) of the Order are not applicable.
 
 (xvi) In our opinion, the Company has applied the term loans for the
 purpose for which the loans were obtained.
 
 (xvii) In our opinion, 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) In respect of the Zero Coupon Foreign Currency Convertible Bonds
 (Bonds) issued by the Company and outstanding during the year, the
 securities created fully cover the amount of the Bonds.
 
 (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) The Company has not been able to recover Rs. 12.24 million of
 sales wherein travel tickets were purchased by passengers through
 unauthorized usage of credit card. This amount has been recorded as an
 expense during the period. Except for such unauthorized transactions,
 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
 
                                                       per David Jones
                                                               Partner
                                                  Membership No. 98113
 Place: New Delhi
 Date : June 30,2008