1.  We have audited the attached Balance Sheet of TRANSGENE BIOTEK
 LIMITED (the Company) as at 31 st March 2011, the Profit and Loss
 Account and also the Cash Flow Statement for the year ended on that
 date annexed thereto, which we have signed under reference to this
 report.
 
 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.
 
 2.  We conducted bur 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 basts 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(Act) and on the basis of such
 checks as we considered appropriate and according to the information
 and explanations given to us, we set out 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:
 
 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 and 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 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, to the extent applicable;
 
 e.  The Company has neither paid nor provided for the Cess payable
 under section 441A of the Companies Act,1956 since the aforesaid
 section is not yet been made effective by the Central Government of
 India;
 
 f.  On the basis of written representations received from the directors
 as on 31st March, 2011 and taken on record by the Board of Directors,
 we report that none of the directors is disqualified as on 31 st 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;
 
 g. In our opinion and to the best of our information and according to
 the explanations given to us, the said accounts together with the 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 acxepted in India:
 
 i.  in the case of the Balance Sheet, of the state of affairs of the
 Company as at 31 st March, 2011;
 
 ii. in the case of the Profit and Loss Account, of the Profit for the
 year ended on that date; and
 
 iii. in the case of Cash Flow Statement, of the cash flow for the year
 ended on that date.
 
 ANNEXURE REFERRED TO IN PARAGRAPH- 3 OF AUDIT REPORT OF EVEN DATE ON
 THE ACCOUNTS OF TRANSGENE BIOTEK LIMITED FOR THE YEAR ENDED 31 ST
 March, 2011.
 
 I a The Company is in the process of updating its records showing full
 particulars including quantitative details and situation of Fixed
 Assets.
 
 b As informed to us, the Company had carried out the physical
 verification of Fixed Assets during the year under review and such
 verification did not reveal any material discrepancies.
 
 c The Company has not disposed off any fixed assets during the year,
 which will affect the going concern status of the Company.
 
 II a As explained to us, inventories have been physically verified at
 reasonable intervals during the year by the management.
 
 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 nature of its business.
 
 c As informed to us, no material discrepancies were noticed on such
 verification of inventories as compared to book records.
 
 III a As per the information and explanations given to us, as the
 Company has not granted any loans, secured or unsecured, to Companies,
 Firms or other parties covered in the register maintained under Section
 301 of the Companies Act, 1956, the Provisions of Clause 4(iii) (a) to
 4 (iii) (d) are not applicable to the Company for the current year.
 
 b The Company has taken interest free unsecured loan from one party
 listed in the register maintained under Section 301 of the Act,
 amounting to Rs. 10,05,41,788/- and the maximum amount involved during
 the year Rs.  10,92,10,470/-.
 
 c In our opinion, the rate of interest and other terms and conditions
 of unsecured loan taken from the party listed in the register
 maintained under Section 301 of the Act, are not prima facie
 prejudicial to the interest of the Company.
 
 d The Company is regular in repayment, where applicable, of principal
 amount of loan taken from the party listed in the register maintained
 under Section 301 of the Companies Act, 1956.
 
 IV In our opinion, the adequacy of internal control systems for the
 purchase of inventory and fixed assets and for the sale of goods and
 services as compared to the size of the Company and the nature of its
 business needs to be strengthened. However, we have not come across any
 continuing major weakness in the overall internal control system
 existed in the Company during the current year.
 
 V a According to the information and explanations given to us and as
 confirmed by the Managing Director of the Company, the transactions of
 the Company which need to be entered into the register maintained under
 Section 301 of the Act, have been entered.
 
 b In our opinion and according to the information and explanations
 given to us, there are no transactions made in pursuance of contracts
 or arrangements entered in the register maintained under section 301 of
 the Act and exceeding the value of Rs.5,00,000/- in respect of each
 party during the year.
 
 VI As the Company has not accepted any deposits from public covered by
 the directives issued by the Reserve Bank of India and the provisions
 of Section 58A and 58AA or any other relevant provisions of the Act and
 rules framed there under, the provisions of Clause 4(vi) of the Order
 are not applicable to the Company for the current year.
 
 VII In our opinion, the Company does not have an internal audit system
 commensurate with its size and nature of its business.
 
 VIII According to information and -explanation given to us, the
 maintenance of cost records has not been prescribed by the Central
 Government under Clause (d) of Sub- section (1) of Section 209 of the
 Act.
 
 IX a As per the information and explanations give to us, the Company is
 generally regular in depositing undisputed statutory dues of Provident
 fund, Investor Education Fund, Employee State Insurance, Sales Tax,
 Wealth Tax, Customs Duty, Excise Duty, Cess and any other statutory
 dues with the appropriate authorities and in respect of these dues
 there are no dues outstanding for a period of more than six months from
 the date they became payable;
 
 The Company is not regular in depositing the undisputed statutory dues
 of Income Tax and Service Tax and the arrears of outstanding dues as on
 31st March,2011 outstanding for a period of more than six months from
 the date they became payable are Income Tax is Rs. 7,37,373/-, Income
 Tax in the nature of Tax Deducted at Source is Rs. 12,50,285/''- and
 Service Tax is Rs. 9,08,750/-;
 
 b As per the records and according to the information and explanations
 given to us, there are no dues of Sales Tax, Income Tax, Wealth Tax,
 Excise Duty and Cess which have not been deposited on account of any
 dispute as on 31.03.2011, except a disputed claim of Custom Duty net of
 amount paid under protest, as per the details given below:
 
 NATURE OF DUES                   AMOUNT    PERIOD   FORUM WHERE
                                    RS              DISPUTE IS PENDING
 
 Customs Duty Demand
 raised by the CESTAT,
 Chennai for non-              59.37 Lakhs   2002    CESTAT, Chennai
 fulfillment of export
 obligation
 
 X As per the information and explanation given to us and on overall
 examination of the financial statements of the Company, we report that
 the Company does not have any accumulated losses at the end of the
 Current financial year nor incurred cash losses in the current and
 immediately preceding financial year.
 
 XI The Company is not regular in repayment of term loans with in the
 
 - due date, however there are no outstanding arrears at the end of the
 year.
 
 XII As the Company had not granted any loans and advances on the basis
 of security by way of pledge of shares, debentures or other securities
 to anybody during the year, the provisions of Clause 4(xii) of the
 Order are not applicable to the Company for the current year.
 
 XIII As the Company is not a Chit Fund or a Nidhi or Mutual Fund or
 Society, the provisions of Clause 4(xiii) of the Order are not
 applicable to the Company for the current year.
 
 XIV As the Company is not dealing or trading in shares, securities,
 debentures and other investments, the provisions of Clause 4(xiv) of
 the order are not applicable to the Company for the current year.
 
 XV As the Company has not given any guarantee for loans taken by others
 from banks or financial institutions, the provision of Clause 4(xv) of
 the Order are not applicable to the Company for the current year.
 
 XVI As per records of the Company, the term loans have been applied for
 the purposes for which they 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
 investment purposes.
 
 XVIII According to the information and explanations given to us and on
 overall examination of the balance sheet of the Company, as the Company
 has not made any preferential allotment of shares to parties and
 Companies covered in the register maintained under Section 301 of the
 Act during the year, the provisions of Clause 4(xviii) of the Order are
 not applicable to the Company for the current year.
 
 XIX As the Company has not issued any debentures during the year, which
 requires creation of security or charge, the provisions of Clause
 4(xix) of the Order, are not applicable to the Company for the current
 year.
 
 XX According to the information and explanations given to us and on
 overall examination of the books of accounts of the Company, the
 Company has disclosed the end use of money raised by issue of Global
 Depositary Receipts in the Note No: 3 of Schedule XX - Notes to
 Accounts.
 
 XXI During the course of our examination of the books and records of
 the Company carried out in accordance with the generally accepted
 auditing practices in India, and as per the representation given by the
 Company and relied on by us, we have neither come across any instance
 of material fraud on or by the Company, noticed or reported during the
 year, nor have we informed of such cases
 
                                           For SARATH & ASSOCIATES,
 
                                              Firm Regn.No.005120S
 
                                             Chartered Accountants
 
                                                   P. Sarath Kumar
 
 Place : Hyderabad                                         Partner
 
 Date : 05.09.2011                           Membership No: 021755