We have audited the Balance Sheet of VADILAL DAIRY INTERNATIONAL
 LIMITED as at 31st March 2012 and also the annexed Profit and Loss
 Account and the Cash Flow Statement of the Company for the year ended
 on that date. 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.
 
 1.  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 presentation of the
 financial statements. We believe that our audit provides a reasonable
 basis for our opinion.
 
 2.  As required by the Companies (Auditors'' Report) Order, 2003
 issued by the Central Government of India in terms of sub section (4A)
 of section 227 of the Companies Act, 1956 and on the basis of such
 checks as we considered appropriate, and according to the information
 and explanation given to us, we enclose in the Annexure hereto a
 statement on the matters specified in paragraphs 4 and 5 of the said
 order to the extent applicable to the Company.
 
 3.  Further to our comments in the Annexure referred to in paragraph 2
 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 purpose 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 the
 books of account.
 
 c) The Balance Sheet and Profit and Loss Account and Cash Flow
 Statement dealt with by this Report are in agreement with the books of
 accounts.
 
 d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash
 Flow Statement dealt with by this report are in compliance with the
 accounting standards referred to in sub section (3c) of Section 211 of
 the Companies Act, 1956.
 
 4.  We further report that -
 
 a) The Accounts have been prepared on ''going concern'' basis.
 
 b) We are of the opinion, that to the best of our information and
 according to the explanation given to us the accounts read together
 with the accounting policies and the notes thereon, give 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.
 
 c) In the case of Balance Sheet of the State of affairs of the Company
 as at 31.3.2012 and
 
 d) In the case of the Profit and Loss Account, of the Loss for the year
 ended on that date.
 
 e) In so far as it relates to the Cash Flow Statement of the Cash Flow
 for the year ended on that date.
 
 ANNEXURE REFFERED TO IN PARAGRAPH 4 OF AUDITORS'' REPORT OF EVEN DATE
 TO THE MEMBERS OF VADILAL DAIRY INTERNATIONAL LIMITED ON THE ACCOUNTS
 FOR THE YEAR ENDED 31st MARCH 2012.  
 
 1.  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 information available.
 
 b.  According to the information and explanations given to us, the
 fixed assets have been physically verified by the management during the
 year in a phased periodic manner, which in our opinion is reasonable,
 having regard to the size of the Company and nature of the assets. No
 material discrepancies were noticed on such verification.
 
 2.  In respect of its inventories:
 
 a.  The inventory has been physically verified during the year by the
 Management. In our opinion, the frequency of verification is
 reasonable.
 
 b.  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.  The company has maintained proper records of inventory. As
 explained to us, the discrepancies noticed in physical verification of
 the stock as compared to book records were not material and the same
 have been properly dealt with in the books of accounts.
 
 3.  In respect of loans covered under Section 301 of the Companies Act,
 1956.
 
 a.  As per the information and explanation given to us and the records
 produced to us for our verification, the company had not granted loans,
 secured or unsecured, to any Company, Firms or other parties covered in
 the register maintained under section 301 of the Companies Act, 1956,
 except security deposits for the use of trademark Vadilal.
 
 b.  The Company has taken unsecured loan from parties covered in the
 register maintained under section 301 of the Companies Act, 1956, whose
 terms are not prejudicial to the interest of the company.
 
 4.  In our opinion and according to the information and explanations
 given to us, there exists an internal control system commensurate with
 the size of the Company and the nature of its business with regard to
 the purchases of inventories, fixed assets and with regard to sale of
 goods. As per the information given to us, no major weaknesses in the
 internal controls have been identified by the management or the
 internal audit department of the company during the year. During the
 course of our audit, nothing had come to our notice that may suggest a
 major weakness in the internal control systems of the company.
 
 5.  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 transactions made in pursuance of contracts or
 arrangements, that needed to be entered into 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, transactions exceeding value of Rs. 500,000/- have been
 entered into during the financial year are reasonable and for price
 justification, reliance is placed on the information and explanation
 given by the management.
 
 6.  During the year the Company has not accepted any deposits under the
 provisions of Section 58A, 58AA of the Companies Act, 1956 and the
 Rules framed there under.
 
 7.  The Company has an Internal Audit system commensurate with the size
 and nature of its business.
 
 8.  We have broadly reviewed the cost records maintained by the Company
 pursuant to the Rules made by the Central Government for maintenance of
 Cost Records under Section 209 (1)(d) of the Companies Act, 1956.
 
 9.  In respect of statutory dues:
 
 a.  According to the information and explanations given to us,
 undisputed statutory dues including provident fund, investor education
 and protection fund, income tax, wealth tax, Custom duty, excise duty,
 cess and other material statutory dues applicable to it have been
 regularly deposited with the appropriate authorities except in few
 cases.
 
 b.  According to the information and explanation given to us,
 undisputed amounts payable in respect of sales tax, income tax, wealth
 tax, customs duty, excise duty and cess were in arrears as at
 31.03.2012 for a period of more than six months from the date they
 became payable is as follows :
 
 Sr.  Name of the 
      Statute        Name of the 
                     Dues             Amount 
                                     (in Lakhs)    Period to which the
 No.                                               amounts relates
 
 1    Central 
      Sales Tax Act  Sales Tax          7.01       2002-03 
      and Sales 
      Tax Act of
      various states                   65.78       2003-04
 
                                       12.16       2004-05
 
                                        0.93       CST
 
                     MVAT             676.34       2007-12
 
 2    Professional  
      Tax            Professional 
                     Tax                2.53       2004-05
 
                                        2.30       2005-06 
 
                                        2.23       2006-07 
 
                                        2.32       2007-08 
 
                                        1.87       2008-09 
 
                                        1.42       2009-10
 
                                        1.30       2010-11 
 
                                        1.54       2011-12
 
 3    Income Tax 
      Act 1961       TDS on Salaries    0.59       2006-07
 
 4    Income Tax
      Act 1961       Fringe Benefit 
                     Tax                2.16       2008-09
 
 5    Central Excise 
      Act, 1944      Excise Duty        8.48       March 99 - June 99
 
 c.  According to the information and explanation given to us, following
 are the various disputed liabilities against which appeals are pending
 with various statutory authorities:
 
 Sr. 
 No.   Name of the Statute            Nature of dues     Amount of
                                                         Dispute (Net) 
                                                        (In Lakhs)
 
 1     Central Sales Tax Act and      Sales Tax              43.05 
       Sales Tax Act of various
       states                                                12.60
 
                                                            103.50
 
                                                             25.88
 
                                                              1.50
 
                                                              0.29
 
                                                              0.10
 
                                      Interest on           233.18
                                      MVAT Dues
 
 2     Central Excise Act 1944        Excise Duty           101.35
 
 Name of the Statute         Period to which       Forum where 
                             the amounts           dispute is 
                             relates               pending
 
 Central Sales Tax Act and
 Sales Tax Act of Various
 States                      1992-93               Maharashtra
 
                             1993-94               Sales Tax
 
                             1994-95               Tribunal and
 
                             1995-96               Bombay High
 
                             1999-00               Court.
 
                             2000-01 
 
                             2001-02
 
                             2007-12               Board for Industrial
                                                   Financial 
                                                   Reconstruction (BIFR)
 
 Central Excise Act 1944     1-4-98 to Feb''99    Refer Note 1
 
 Note 1. The Tribunal Appeal has been allowed in favour of the company.
 However the excise department may file appeal to the higher
 authorities.
 
 10.  In our opinion, the accumulated losses are more than fifty percent
 of its net worth. The company has incurred cash losses during the
 financial year covered in the audit and not in the immediately
 preceding financial year.
 
 11.  The Company has not granted any loans or advances on the basis of
 security by way of pledge of shares, debentures and other securities.
 
 12.  In our opinion, the company is not a chit fund / nidhi / mutual
 benefit fund / society therefore the provision of clause 4 (xiii) of
 the Companies (Auditor''s Report) Order, 2003 are not applicable to
 the company.
 
 13.  The Company has made investments in Shares during the year. Proper
 records have been maintained of the transactions and contracts and
 timely entries have been made therein. All the investments have been
 held in the name of the company.
 
 14.  As per the information and explanation given to us the Company has
 not given guarantees for loan taken by others from banks or financial
 institutions.
 
 15.  The Company has raised a loan of Rs.1,00,90,000/- during the year
 against security of fixed deposits of the company.
 
 16.  According to the information and explanations given to us and on
 an overall examination of the Balance Sheet of the Company, we are of
 the opinion that no funds raised on long term basis have been used for
 short term investment and funds raised on short term basis have been
 used for long term purposes except to the extent of funds invested in
 modernisation of plant for which loans were raised against fixed
 deposits with banks.
 
 17.  According to the information and explanations given to us, the
 Company has not made preferential allotment of equity and preference
 shares to companies covered in the register maintained under Section
 301 of the Companies Act 1956.
 
 18.  During the year the Company has not issued any debenture.
 
 19.  The Company has not raised any money by public issue during the
 year.
 
 20.  As per the information and explanations given to us and on the
 basis of examination of records, no material fraud on or by the company
 was noticed or reported during the year.
 
 For B. V. Shah & Associates
 
 Chartered Accountants
 
 Sd/- 
 
 Bharat V. Shah
 
 Proprietor
 
 M No. 040210
 
 Place : Mumbai
 
 Date : 01/09/2012