1.  We have audited the attached Balance Sheet of M/s.VENKAT PHARMA
 LIMITED, as at 31st March 2011 and the profit and loss account and also
 the cash flow statement for the period 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 have 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.
 
 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 3 a
 statement of 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:
 
 (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 accounts as required by law have
 been kept by the company as far as appear from our examination of those 
 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 and loss account and cash
 flow statement dealt with by this report comply with the accounting
 standards referred to in sub section 3(C) of section 211 of the
 Companies Act, 1956;
 
 (v) On the basis of written representation received from the directors,
 as at 31st March 2011 and taken or 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 direct in terms of clause(g) of sub
 section(1)of section 274 of the Companies Act,1956;
 
 5.  Reference invited to the following notes on accounts under
 Schedule-13
 
 (i) Note No.8 regarding accounting of retirement benefits on cash
 basis, which is contrarytoAS-15
 
 (ii) Note No.4 regarding confirmation of various balances for which no
 provision has been made on non realizable portion if any.
 
 (iii) Investments are stated at cost less any diminution in their
 value, which is other than temporary.
 
 (iv) Current tax is determined as the amount of tax payable in respect
 of taxable income for the period, deferred tax is recognized subject to
 consideration of '' prudence, in timing differences, being the
 difference between taxable income and accounting income that original
 in one period and is capable of reversal in one or more subsequent
 periods.
 
 6.  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 and loss account, of the Loss 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 that date.
 Referred to in paragraph 3 of our report of even date.
 
 (a) The Company has maintained proper records showing full particulars
 including quantitative details and situation of fixed assets.
 
 (b) All the assets have not been physically verified by the management
 during the year but there is a regular programmed of verification which
 in our opinion, is reasonable having regard to the size of the company
 and the nature of its assets. No material discrepancies were noticed on
 such verification.
 
 (c) During the year, the company has not disposed off any major part of
 the plant and machinery.
 
 (ii) (a) The Inventory was not physically verified during the year by
 the management, since the same is under the custody of Commercial Tax
 Department.
 
 (b) In that contest no opinion is expression on inventory valuation by
 us.
 
 (iii) The Company has not granted/taken loans, secured or unsecured
 to/from companies, firms or other parties covered in the register
 maintained under section 301 of the Companies Act 1956. Sub clauses
 (b), (c) and (d) of Clauses (iii) of this Order not applicable as the
 company has not granted or taken any loan from such parties.
 
 (iv) In our opinion and according to the information and explanations
 given to us, there are adequate internal control procedures
 commensurate with the size of the company and the nature of its
 business with regard to purchases of inventory, fixed assets and with
 regard to the sale of goods. During the course of our audit, we have
 not observed any continuing failure to correct major weaknesses in
 internal controls.
 
 (v) (a) According to the information and explanations given to us, we
 are of the opinion that there are no transactions that need to be
 entered into the register maintained under section 301 of
 theCompaniesAct-1956.
 
 (b) In view of the above, clause v (b) is not applicable.
 
 (vi) In our opinion and according to the information and explanations
 given to us, the Company has not accepted any deposits which come under
 the provisions of sections 58A and 58AA of the Companies Act 1956 and
 the Companies (Acceptance of Deposits) Rules, 1975.
 
 (vii) In the obscene of any business the question of an internal audit
 system does not arise.
 
 (viii) As per the information and explanations furnished to us there
 are no books prescribed for the items of cost 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.
 
 (ix) (a) According to the information and explanations given to us, no
 undisputed amounts payable in respect of income tax, wealth tax,
 customs duty, excise duty and cess were in arrears, as at 31st March
 2011 for a period of more than six months from the date they became
 payable except in respect of sales tax for which the details are as
 follows.
 
 Statute  Nature    Amount       Period   Amount       Pending Before
                    involved              Deposited
                    (Rs.)                 (RS.)
 
 APGSTACT Sales Tax 23,36,091    1995-96  5,84,023       STAT
 
 -Do-     -Do-      17,59,702    1996-97  4,39,926       STAT
 
 -Do-     -Do-      34,84,643    1997-98  8,72,911       STAT
 
 -Do      -Do-      9,38,702     1998-99  2,34,676       STAT
 
 -Do-     -Do-      2,98,21,084  2001-02  NIL            STAT
 
 -Do-     -Do-      3,22,92,841  2003-04  NIL            High Court
 
 CSTACT   -Do-      6,70,863     1995-96  1,67,716       STAT
 
 -Do-     -Do-      3,77,049     1996-97  94,262         STAT
 
 -Do-     -Do-      2,18,812     1997-98  218812         STAT
 
 Income 
 Tax Act  Income    11,34,288    2003-04  NIL            Appeal Pending 
                                                         in ITAT
          Tax
 
 Income 
 Tax Act  Income    1,68,68,408  2004-05  NIL            In the process 
                                                         of filing
          Tax                                            Appeal before 
                                                         ITAT
 
 The above amounts under column 5 were deposited with Commercial Tax
 Authorities and matter is still pending at respective judicial
 departments.
 
 (x) The Company has accumulated losses. The company has incurred cash
 losses during the financial year covered by our audit.
 
 (xi) We are of the opinion that the company has not granted loans and
 advances on the basis of security by way of pledge of shares, 
 debentures and other securities.
 
 (xii) In our opinion, the company is not a chit fund or a nidh /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
 
 (xiii) 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 Companies (Auditors Report) order,
 2003 are not applicable to the company.
 
 (xiv) In our opinion the terms and conditions on which the company has
 given guarantees for loans taken by others, from banks or financial
 institutions are not prejudicial to the interest of the company.
 
 (xv) In our opinion, during the year the company has not raised any
 term loans.
 
 (xvi) According to the information and explanations given to us and on
 overall examinations of the balance sheet of the company we report 
 that the no fresh loan has been availed by the company.
 
 (xvii) According to the information and explanations given to us, the
 company has not made preferential allotment of shares to parties and
 companies covered in the register maintained under section 301
 of the Act.
 
 (xviii) According to the information and explanations given to us,
 during the period covered by our audit report, the company has not
 issued debentures. The provisions relating to relation of security in
 respect of debentures issued are not applicable to the company.
 
 (xix) The company has not raised any money by public issue during the
 year.
 
 (xx) According to the information and explanations given to us, no
 fraud on or by the company has been noticed or reported during the
 course of our audit.
 
                                          For MAHESH.VIREDNDER& SRIRAM
 
                                                 Chartered Accountants
 
                                                   Firm RegNo:F0019395
 
                                                                  Sd/-
 
                                                            R.V.CHALAM
 
                                                             (PARTNER)
 
                                                       ICAI M.NO.21423
 
 Place: HYDERABAD
 
 Date: 01.05.2011