1.  We have audited the attached Balance Sheet of STERLING BIOTECH
 LIMITED as at 31st December 2010 and also the Profit & Loss Account and
 the Cash Flow Statement for the year 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
 this financial statement based on our audit.
 
 2.  We have conducted our audit in accordance with auditing standards
 generally accepted in India. These 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, 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 in paragraph 3
 above, we state 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;
 
 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 Balance Sheet, Profit & Loss Account and Cash Flow Statement
 dealt with by this report are in agreement with the books of account;
 
 d) In our opinion, the Balance Sheet, Profit & 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.
 
 e) On the basis of the written representations received from the
 Directors as on 31st December, 2010, and taken on record by the Board
 of Directors, we report that none of the Directors of the company are
 disqualified as on 31st December, 2010 from being appointed as a
 Director in terms of Clause (g) of the sub-section (1) of section 274
 of the Companies Act, 1956.
 
 f) In our opinion and to the best of our information and according to
 the explanations given to us, the said accounts read with the other
 notes 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 principles generally accepted in India:
 
 i) In the case of the Balance Sheet, of the state of affairs of the
 company as at 31st December, 2010;
 
 ii) In the case of the Profit & Loss Account, of the Profit of the
 company for the year ended on that date; and
 
 iii) 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 TO THE
 MEMBERS OF STERLING BIOTECH LIMITED ON THE ACCOUNTS AS AT AND FOR THE
 PERIOD ENDED 31ST DECEMBER, 2010.
 
 (i) (a) The Company has maintained proper records showing full
 particulars, including quantitative details and situation of fixed
 assets.
 
 (b) Fixed assets have been physically verified by the management based
 on a phased program of verification of all the assets during the year,
 which in our opinion is reasonable having regard to the size of the
 company and the nature of its business. No material discrepancies were
 noticed on such verification.
 
 (c) As per the information and explanations given to us, during the
 year, the company has not disposed off any substantial part of fixed
 assets that would affect the going concern.
 
 (ii) (a) As explained to us inventories have been physically verified
 by the management at reasonable intervals during the year.
 
 (b) In our opinion and according to information and explanations given
 to us, the procedure of physical verification of inventories followed
 by the management is reasonable and adequate in relation to the size of
 the company and the nature of its business.
 
 (c) On the basis of our examinations of records of inventories, we are
 of the opinion that the company is maintaining proper records of the
 inventory. As explained to us, no material discrepancies have been
 noticed on physical verification of inventories as compared to Books
 records.
 
 (iii) (a) The Company has granted unsecured loan to a companies covered
 in the register maintained under section 301 of the companies Act,
 1956. The Maximum amount involved during the year was Rs. 488.84 crore
 and the year end balance of loans granted to such parties was Rs.
 396.31 crore.
 
 (b) In our opinion, terms and conditions on which loans granted to
 companies listed in the register maintained under section 301 of the
 Companies Act, 1956 are not, primafacie, prejudicial to the interest of
 the company.
 
 (c) There are no overdue amounts of Loans granted to companies listed
 in the register maintained under section 301 of the Companies Act,
 1956.
 
 (d) According to the information and explanations given to us, the
 company has not taken any unsecured loan from companies, firms and
 other parties covered in the Register maintained under section 301 of
 the Companies Act, 1956.
 
 (iv) According to 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 the purchase of inventory and
 fixed assets and sales of Goods and service. We have not observed any
 continuing failure to correct major weakness in internal controls.
 
 (v) (a) According to the information and explanations given to us, we
 are of the opinion that the particulars of contracts or arrangements
 that need to be entered in to the register maintained under section 301
 of the Companies Act, 1956 have been so entered.
 
 (b) In our opinion and according to the information and explanations
 given to us, there are no transactions of purchase of Goods and
 materials and sales of Goods, material & services made in pursuance of
 contracts or arrangements required to be entered in the register
 maintained under section 301 of the Companies Act, 1956, aggregating
 during the year to Rs.5,00,000/- or more in respect of each party.
 
 (vi) The Company has not accepted any deposits from the public and
 hence directives issued by the Reserve Bank of India and provisions of
 section 58A and 58AA or any other relevant provisions of the companies
 Act, 1956 and rules framed there under are not applicable for the year
 under audit.
 
 (vii) In our opinion, the Company has an internal audit System
 commensurate with the size and nature of its business.
 
 (viii) We have broadly reviewed the books of accounts maintained by the
 company pursuant to the rules made by the Central Government for the
 maintenance of cost records under section 209(1) (d) of the companies
 Act, 1956 and are of the opinion that primafacie, the prescribed
 accounts and records have been made and maintained.
 
 (ix) (a) According to the records of the company, the company has been
 regular in depositing with appropriate authorities, Undisputed
 statutory dues including Provident Fund, Income tax, Sales Tax / VAT,
 Wealth tax, Service Tax, Custom duty, Cess and other statutory dues.
 
 (b) According to the information and explanations given to us, no
 undisputed amounts payable in respect of such statutory dues were
 outstanding as at the 31st December 2010 for a period of more than six
 months from the date they became payable.
 
 (c) According to the information and explanations given to us, there
 are no such statutory dues which have not been deposited on account of
 any dispute.
 
 (x) The Company neither has Accumulated losses nor it has incurred any
 cash losses during the year and in the immediately preceding financial
 year.
 
 (xi) 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 the repayment of the dues to financial
 institutions or banks.
 
 (xii) According to the information and explanations given to us and
 based on the documents and records produced to us, the Company has not
 granted loans and advances on the basis of security by way of pledge of
 shares, debentures and other securities.
 
 (xiii) In our opinion, the Company is not a chit fund, a nidhi or a
 mutual benefit fund society. Therefore, the provisions of clause
 4(xiii) of the companies (Auditor''s Report) Order, 2003 are not
 applicable to the company.
 
 (xiv) In our opinion, the company is maintaining proper record and
 making timely entries in respect of shares, securities, debentures and
 other investments. Further all the investments made by the company are
 held in its own name.
 
 (xv) According to the information and explanations given to us by the
 management, the company has not given any Guarantee for loan taken by
 other from banks or financial institutions.
 
 (xvi) According to the information and explanations given to us by the
 management, the term loans were applied for the purpose for which the
 loans were obtained.
 
 (xvii) According to the information and explanations given to us and on
 an overall examination of the balance sheet of the company, we report
 that no funds raised on short term basis have been used for long term
 investments. No long term funds have been used to finance short term
 assets except permanent working capital.
 
 (xviii) According to the information and explanations given to us,
 during the year the Company has not made any preferential allotment of
 shares to the parties or companies covered in the register maintained
 under section 301 of the companies Act, 1956.
 
 (xix) During the period covered by our report, the company has not
 issued any debentures and hence clause 4(XIX) of the companies
 (Auditor''s Report) Order, 2003 is not applicable to the company.
 
 (xx) During the period covered by our report, the company has not
 raised any money by way of public issue.
 
 (xxi) According to the information and explanations given to us no
 frauds on or by the company has been noticed or reported during the
 year.
 
  For H. S. Hathi & Co.
                                                Chartered Accountants
                                               Firm Reg. No.: 103596W
 
                                                      HEMANT S. HATHI
                                                              Partner 
                                               Membership No.: 037109
 
 Place: Mumbai 
 Date : 31st May, 2011