1.  We have audited the attached balance sheet of Vadilal Industries
 Limited as at March 31, 2011, the profit & loss account and also 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 these
 financial statements based on our audit.
 
 2.  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.
 
 3.  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, 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 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 account as required by law have
 been kept by the company so far as appears from our examination of the
 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
 account.
 
 (iv) In our opinion, the balance sheet, profit & loss account and cash
 flow statement dealt with by this report comply with accounting
 standards referred to in sub-section (3C) of section 211 of the
 Companies Act, 1956.
 
 (v) On the basis of the written representations received from
 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
 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, on
 the said date.
 
 (vi) In our opinion and to the best of our information and according to
 the explanations given to us, the said accounts 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:
 
 (a) in the case of the balance sheet, of the state of affairs of the
 company as at 31st March, 2011;
 
 (b) in the case of the profit & loss account, of the ''Profit'' of the
 company for the year ended on that date;
 
 and
 
 (c) in the case of the cash flow statement, of the cash flows for the
 year ended on that date.
 
 ANNEXURE TO THE AUDITORS'' REPORT TO THE MEMBERS OF VADILAL INDUSTRIES
 LIMITED, ON THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST MARCH,
 2011.
 
 (i) (a) The company has maintained separate records showing particulars
 about quantitative details and situation of fixed assets in respect of
 plant and machinery and in respect of other fixed assets for addition
 made from August 2009, on the basis of available information.
 
 (b) As explained to us, the company has not conducted physical
 verification of fixed assets except plant and machinery during the
 year. In absence of physical verification of fixed assets except plant
 and machinery, material discrepancies if any could not be ascertained.
 In respect of plant and machinery reconciliation of physical
 verification with book records is under progress.
 
 (c) The company has not disposed off substantial part of fixed assets
 during the year.
 
 (ii) (a) As explained to us, the inventory have been physically
 verified during the year by the management. In respect of inventory
 lying with third parties, inventory have been confirmed by them. In our
 opinion, the frequency of verification is reasonable.
 
 (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) In our opinion and according to the information and explanations
 given to us, the company has maintained proper records of inventory and
 the discrepancies noticed on such physical verification between
 physical stocks and book records have been adequately dealt with in the
 books of account.
 
 (iii) In respect of loans, secured or unsecured, granted or taken by
 the company to or from companies, firms or other parties covered in the
 register maintained under section 301 of the Companies Act, 1956 :
 
 [a] The company has granted interest free loan to subsidiary company.
 The maximum amount involved during the year and year end balance of
 loan granted is Rs. 70.85 lacs.
 
 [b] In our opinion other terms and conditions of such loans are not
 prima facie prejudicial to the interest of the company.
 
 [c] In respect of loans given by the company, principal amount is
 repayable on demand and therefore the question of overdue amount does
 not arise.
 
 [d] The company has taken unsecured loan from two companies. The year
 end and maximum outstanding balance of loan taken from such parties is
 Rs. 14.05 lacs and Rs. 170.47 lacs respectively.
 
 [e] In our opinion, the rate of interest and other terms and conditions
 of such loan is not prima facie prejudicial to the interest of the
 company.
 
 [f] In respect of loan taken by the company, the interest payments are
 regular and the principal amount is repayable on demand.
 
 (iv) In our opinion and according to the information and explanations
 given to us, having regard to the explanation that some of the items
 purchased are of a special nature and suitable alternative sources do
 not exist for obtaining comparable quotations, there are adequate
 internal control procedures commensurate with the size of the company
 and the nature of its business with regard to purchase of inventory,
 fixed assets and for the sale of goods and services. During the course
 of our audit, we have not observed any continuing failure to correct
 major weaknesses in internal controls.
 
 (v) In respect of contracts or arrangements referred to in 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 required
 to be maintained under that section.
 
 [b] According to the information and explanations given to us,
 transactions made in pursuance of contracts or arrangements entered in
 the register maintained under section 301 of the Companies Act, 1956
 and aggregating during the year to Rupees five lakhs or more in respect
 of any party, have been made at the prices which are prima facie
 reasonable having regard to prevailing market prices at the relevant
 time. In respect of ice cream, sales are made at predetermined prices,
 which in our opinion are prima facie reasonable.
 
 (vi) In our opinion and according to the information and explanations
 given to us, the company has complied with the provisions of section 58
 A and 58AA or any other relevant provisions of the Companies Act, 1956
 and the rules framed there under with regard to the deposits accepted
 from the public.
 
 We are informed that 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 company has an internal audit system
 commensurate with the size of the company and the nature of its
 business.
 
 (viii) We are informed that Central Government has not prescribed under
 section 209 [1][d] of the Companies Act, 1956, maintenance of cost
 records for the products manufactured by the company.
 
 (ix) (a) The company is generally regular in depositing undisputed
 provident fund, investor education & protection fund, employees state
 insurance, income tax, sales tax, wealth tax, service tax, custom duty,
 excise duty, cess and other material statutory dues to appropriate
 authorities.
 
 Further, since the Central Government has till date not prescribed the
 amount of cess payable under section 441A of the Companies Act, 1956,
 we are not in a position to comment upon the regularity or otherwise of
 the company in depositing the same.
 
 (b) According to the information and explanations given to us, no
 undisputed amount in respect of aforesaid statutory dues were
 outstanding as at 31st March, 2011 for the period of more than six
 months from the date they become payable except sales tax of Rs.18.33
 lakhs which remains outstanding for a period of more than six months
 from the date it became payable.
 
 (c) The details of disputed statutory dues as at March 31, 2011 that
 have not been deposited by the company, are as under:
 
                                          (Rs. in lakhs)
 
 Sr.  Dispute      Amount     Period to     Forum where
 No.  under:       (net of    which the     dispute
                   deposit)   amount        is pending
                   (Rs.)      relates
 
 (i)  Central       23.24     1998-99       - High Court
 
      Sales         12.49     2000-01       - Jt. Commissioner
 
      Tax Act       15.74     2000-01       - Dy Commissioner
 
      and            1.55     2001-02       - Dy Commissioner
 
      Sales          0.60     2002-03       - Tribunal
 
      Tax Act        2.39     2003-04       - Jt. Commissioner
 
      of various     0.46     2003-04       - Jt. Commissioner
 
      states         3.67     2004-05       - Tribunal
 
 (ii) Income         3.16     1996-97       - Tribunal   
 
      Tax Act,       3.12     1999-00       - High Court
 
      1961           1.37     2006-07       - A.O
 
                     2.45     2006-07       - CIT Appeals
 
 (iii)Central        1.16     2006-07       - Asst.
      Excise                                  Commissioner 
      Act
 
 The following matters, which have been excluded from the above table,
 have been decided in favour of the company but the department has
 preferred appeals at higher levels. The details are as under:
 
 
                                          (Rs. in lakhs)
 
 Sr.  Dispute      Amount     Period to     Forum where
 No.  under:       (net of    which the     department has
                   deposit)   amount        preferred 
                   (Rs.)      relates       appeals
 
 (i)  Central         4.58    1988-89       - Asst. Comm. of
 
      Excise                                  Central Excise
 
      Act,            4.28    2003-04       - Asst. Comm. of
 
      1944                                    Central Excise
 
                      9.17    2000-01       - High Court, Hyderabad
 
 (ii) Income         50.46    1992-93       - Tribunal
 
      Tax Act,       31.10    1993-94       - Tribunal
 
      1961            7.84    1994-95       - High Court
 
                     14.06    1995-96       - High Court
 
                     16.03    1996-97       - High Court
 
                      0.51    2001-02       - High Court
 
                      5.10    2002-03       - High Court
 
                     41.55    1997-98       - High Court
 
 (x) The company has no accumulated losses and has not incurred any cash
 losses during the current financial year or for immediately preceding
 financial year.
 
 (xi) In our opinion and according to the information and explanations
 given to us, the company has not defaulted in repayment of dues to
 financial institution or banks. The company has not obtained any
 borrowings by way of debentures.
 
 (xii) In our opinion and according to the information and explanation
 given to us, no loans and advances have been granted on the basis of
 security by way of pledge of shares, debentures and other securities.
 
 (xiii) The company has given guarantee for loans taken by others from
 banks or financial institutions. In our opinion and based on the
 information and explanations given to us, the terms and conditions are
 considered not prejudicial to the interest of the company.
 
 (xiv)To the best of our knowledge and belief and according to the
 information and explanations given to us, in our opinion, the term
 loans raised during the year were prima facie been used for the purpose
 for which they were raised. The term loans outstanding at the beginning
 of the year were applied for the purpose for which they were obtained.
 
 (xv) 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.
 
 (xvi)During the year, the company has not made any preferential
 allotment of shares to parties and companies covered in the register
 maintained under section 301 of the Companies Act, 1956.
 
 (xvii)According to the information and explanations given to us, the
 company has not issued any debentures during the year.
 
 (xviii)The company has not raised any money by way of public issue
 during the year.
 
 (xix)To the best of our knowledge and belief and according to the
 information and explanations given to us, no fraud on or by the company
 was noticed or reported during the year.
 
 (xx) In our opinion and according to the information and explanations
 given to us, the nature of the company''s business/activities during the
 year are such that clause;
 
 4(xiii) provisions of any special statute applicable to chit fund,
 
 4(xiv) dealing or trading in shares, securities, debentures and other
 investments of Company (Auditors'' Report) Order, 2003 are not
 applicable to the company.
 
                                            For KANTILAL PATEL & CO.,
                                                Chartered Accountants
                                        Firm Registration No. 104744W
 
                                                       Mayank S. Shah
                                                              Partner
                                                Membership No.: 44922
 
 Place : Ahmedabad 
 Date  : July 18, 2011