ఆడిటర్ నివేదిక Namaste Exports Ltd.

Mar 31, 2014

1 We have audited the accompanying financial statements of Namaste Exports Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2014, and the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management''s Responsibility for the Financial Statements

2 Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards notified under the Companies Act, 1956 ("the Act") read with the General Circular 15 / 2013 dated 13th September 2013 of the Ministry of Corporate Affairs in respect of section 133 of the Companies Act, 2013. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor''s Responsibility

3 Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

4 An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company''s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

5 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

6. Basis for Qualified Opinion

Attention is invited to Note No 2.1 (f) of notes forming part of the accounts regarding treatment given to various reserves given in the scheme of amalgamation passed by the Honourable Board for Industrial and Financial Reconstruction (BIFR) which is at variance from AS-14 on Accounting for Amalgamation.

Qualified Opinion

7. In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matters described in basis for qualified opinion, the financial statements give the information required by the Act 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 March 31, 2014;

b. in the case of the Profit and Loss Account, of the profit 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.

Emphasis of Matter

8 Without qualifying our report, we draw attention to:

a. In pursuance of the scheme of amalgamation approved by the Board of Industrial and Financial Reconstruction (BIFR) dated 20th December 2013, the balance of interest free unsecured advance amounting to Rs. 1,83,76,956/- given to a party covered in the register maintained u/s 301 of the Companies Act, 1956, appearing in the books of the transferor entity have been included and grouped in the books of the Company. The advances have not been recovered / adjusted for more than 3 years (Refer Note No 2.1 (a) (i) of Notes to Accounts).

b. Pending filing of documents with Registrar of Companies, Karnataka, Bangalore, for increase in authorised capital, paid up capital, reduction in the face value of paid up capital and filing of other documents relating to amalgamation and restructuring. (refer note 2.1 (g) of Notes to Accounts)

Report on Other Legal and Regulatory Requirements

9. As required by the Companies (Auditor''s Report) Order, 2003 ("the Order") issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

10. As required by section 227(3) of the Act, 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 those books.

c. the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement dealt with by this Report are in agreement with the books of account.

d. in our opinion, except for the matters described in basis for qualified opinion, the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement comply with the Accounting Standards notified under the Companies Act, 1956 read with the General Circular 15/2013 dated 13 September 2013 of the Ministry of Corporate Affairs in respect of section 133 of the Companies Act, 2013;

e. on the basis of written representations received from the directors as on March 31, 2014, and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2014, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

ANNEXURE TO THE AUDITOR''S REPORT (AS REFERRED TO IN CLAUSE 1 OF OUR REPORT TO THE MEMBERS)

i. Fixed Assets

a. The Company has maintained records showing full particulars, including quantitative details and the situation of its fixed assets on the basis of available information. However, as explained, preparation of comprehensive fixed asset register in respect of assets acquired in amalgamation is in the process and the same will be completed after physical verification and reconciliation exercise.

b. All the assets have not been physically verified by the management during the year but there is a program of verification which, in our opinion, is reasonable having regard to the size of the company and the nature of its business. According to the information and explanation given to us, no discrepancies were noticed on such verification.

c. During the year under review, the Company has not disposed off substantial part of the assets and the going concern status of the Company is not affected.

ii. a. Inventories other than lying with third parties were physically verified during the year by the management. 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 for physical verification of inventory followed by the management were reasonable and adequate in relation to the size of the Company and the nature of its business;

c. The discrepancies between the physical stocks and the book records arrived at on an annual reconciliation, wherever applicable, as noticed on physical verification were not material and have been properly dealt with in the books of account.

iii. a. In pursuance of the scheme of amalgamation approved by the Board of Industrial and Financial Reconstruction (BIFR) dated 20th December 2013, the balance of interest free unsecured advance given amounting to Rs. 1,83,76,956/-appearing in the books of the transferor entity have been included and grouped in the books of the Company. This party is covered in the register maintained u/s 301 of the Companies Act, 1956. The Company has granted interest free loans to a party covered in the register maintained under section 301 of the Companies Act, 1956, aggregating to Rs. 178,446/- and the year end balance was Rs. 178,446/-.

b. As per the information and explanation given to us, there are no stipulations as to repayment of principal or interest. Hence we are not able to express an opinion as to whether the rate of interest and other terms and conditions on which the said loan have been granted by the Company are prima facie, prejudicial to the interest of the Company.

c. As per the information and explanation given to us, there are no stipulations as to repayment of principal or interest, we are not able to express an opinion as to whether the payment of principal and interest was regular;

d. In respect of the aforesaid loans, we are not able to express an opinion as to whether reasonable steps have been taken by the Company for recovery of principal and interest;

The Company has not taken loans from companies, firms and other parties covered in the register maintained under section 301 of the Companies Act, 1956. Hence clause 4 (iii) (e) to (g) of the Companies Auditor''s Report Order, 2003 (as amended) is not applicable to the Company for the year under review.

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 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. a According to the information and explanations given to us, we are of the opinion that the transactions that need 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, the transactions made in pursuance of such contracts and arrangements and exceeding the value of Rs. Five Lakhs in respect of any party during the year have been made at prices which are reasonable having regard to the prevailing market prices of the relevant time;

Vi The Company has not accepted any deposits from public and hence the provisions of section 58A and 58AA of the companies Act, 1956 and rules framed there under during the year under review. We have been informed that no order has been passed by the Company Law Board.

Vii In our opinion, the Company''s internal audit system is commensurate with the size and nature of its business.

viii. We have broadly reviewed the books of accounts of 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. Our examination is limited to the maintenance of records and not the correctness or completeness of the records;

ix. a. The Company has been regular in depositing with the appropriate authorities undisputed statutory dues including provident fund, employees'' state insurance, income tax, sales tax, wealth tax, customs duty and other material statutory dues applicable. b According to the information and explanations given to us, no undisputed amounts payable in respect of income tax, wealth tax, sales tax, customs duty and cess were in arrears as at March 31, 2014 for a period of more than six months from the date they became payable.

c. According to the information and explanation given to us, there are no disputed dues of income tax, wealth tax, customs duty, sales tax, excise duty and cess which have not been deposited with the relevant authorities on account of any dispute.

x. The Company did not have any accumulated losses at the end of the financial year. The Company has not incurred cash losses during the financial year covered by our audit and in the immediately preceding financial year.

xi As per the amendment / modifications in the rehabilitation scheme sanctioned by the Board of Industrial and Financial Reconstruction on August 23 2005 there is no default by the Company in repayment of dues to financial institutions / banks / debenture holders.

xii The Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities. Accordingly, clauses 4(xii) of the Companies (Auditor''s Report) Order, 2003 are not applicable to the company.

xiii. In our opinion, the Company is not a chit fund or a nidhi/ 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 not dealing in or trading in shares, securities, debentures and other investments during the year under audit. Accordingly, the provisions of clause 4(xiv) of the Companies (Auditor''s Report) Order, 2003 are not applicable to the Company.

xv. As far as we could ascertain, the Company has not given guarantees for loans taken by others from banks or financial institutions and hence the provisions of clause 4(xv) of the Companies (Auditor''s Report) Order, 2003 are not applicable to the company.

xvi. In our opinion and according to the information and explanation given to us the Company has not availed any term loans during the year under review, no term loans have been borrowed during the year.

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.

xviii. The Company has allotted 10,00,00,000 shares as fully paid pursuant to the erstwhile shareholders of Success Apparels Private Limited pursuant to the scheme of amalgamation approved by the BIFR being parties listed in the register maintained under section 301 of the Companies Act, 1956. The price at which the shares have been issued are not prejudicial to the interest of the Company.

xix According to the information and explanations given to us, there are no debentures outstanding at the end of the year. Accordingly, the provisions of clause 4(xix) of the Companies (Auditor''s Report) Order, 2003 regarding creation of securities are not applicable.

xx The Company has not raised any monies by way of public issue during the year. Accordingly, the provisions of paragraph 4(xx) of the Companies (Auditor''s Report) Order, 2003 regarding end use of money are not applicable.

xxi According to the information and explanations given to us, no frauds on or by the Company that causes material misstatements to financial statements have been noticed or reported during the year.

For Ishwar & Gopal, Chartered Accountants, Firm''s Registration Number : 001154S

Signature (K V Gopalakrishnayya) (Partner) Membership Number: 021748 Place : Bangalore Date: 30.05.2014.

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Mar 31, 2012

We have audited the attached Balance Sheet of Namaste Exports Limited as at March 31 2012 and also the Profit and 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 these financial statements based on our audit. We 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 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.

As required by the Companies (Auditor's Report) Order 2003 (the Order) 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.

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 account as required by law have been kept by the Company so far as appears 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 accounts;

(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 (3C) of Section 211 of the Companies Act 1956.

(v) On the basis of written representations received from the directors as on March 31, 2012 and taken on record by the Board of Directors, we report that none of the directors are disqualified as on March 31, 2012 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956;

(vi) The accounts of the Company have been prepared on 'going concern concept'. In view of the complete erosion of shareholders' funds the ability of the Company to continue as a going concern is dependent upon the implementation of the amended rehabilitation scheme approved by the Board of Industrial & Financial Reconstruction on August 23 2005 (refer note 1.2 of Notes to Accounts).

(vii) Subject to note no. 1.2 (vi) of Notes to Accounts regarding pending filing of documents with Registrar of Companies, Karnataka, Bangalore, for increase in authorised capital, paid up capital and reduction in the face value of paid up capital and read with the other notes and schedules thereon , in our opinion and to the best of our information and according to the explanations given to us the said accounts read with 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:

a. In the case of the Balance Sheet of the state of affairs of the Company as at 31st March 2012;

b. In the case of Profit and Loss Account of the profit for the year ended on that date; and

c. In the case of Cash Flow Statement of the cash flows for the year ended on that date. ANNEXURE TO THE AUDITOR'S REPORT

(i) Fixed Assets

(a) The Company has maintained records showing particulars including quantitative details and the situation of its fixed assets.

(b) The fixed assets have been physically verified by the management during the year according to a periodical phased program. In our opinion the frequency of verification of the fixed assets by the management is reasonable having regard to the size of the Company and the nature of its assets. According to the information and explanation given to us the discrepancies noticed on such verification which were not material have been dealt properly in the books of accounts.

(c) During the year the company has not disposed off substantial portion of its assets. We have been informed that the same does not affect the company as a going concern.

(ii) Inventory

The operations of the Company during the year do not involve any inventory. Accordingly clause 4 (ii) (a) to (c) of the Companies (Auditor's Report) Order 2003 are not applicable to the Company for the year under review.

(iii) Loans

The Company had not granted/taken any loans secured or unsecured from parties listed in the register maintained under section 301 of the Companies Act 1956. Accordingly clause 4 (iii) (a) to (g) of the Companies (Auditor's Report) Order 2003 are not applicable to the Company for the year under review.

(iv) Internal Control Procedures

In our opinion and according to the information and explanations provided to us there are internal control procedures commensurate with the size of the Company and the nature of its business with regard to purchase of inventory and fixed assets and for sale of goods and services. During the course of our audit we have neither come across nor have we been informed of any continuing failure to correct major weakness in the aforesaid internal control procedures;

(v) Related Party Transactions

(a) Based on the audit procedures applied by us and according to the information and explanations given to us we are of the opinion that the company has entered all the transactions required to be entered in the register maintained under Section 301 of the Companies Act 1956.

(b) In our opinion and according to the information and explanations given to us the transactions entered/to be entered in the registers maintained under Section 301 in respect of each party have been made at prices which are reasonable having regard to prevailing market prices at the relevant time except for items which are of special nature for which no alternative sources of supply is available or no comparison could be made of the prices in the absence of quotations/similar transaction with other parties;

(vi) The Company has not accepted any deposits from public and hence in our opinion the provisions of section 58A and 58AA of the Act and the rules framed thereunder are not applicable;

(vii) The Company has a system of internal audit commensurate with its size and nature of its business;

(viii) We have been informed that maintenance of Cost records under Section 209 (1) (d) of the Companies Act 1956 is not applicable to the Company;

(ix) Statutory Liabilities

(a) According to the records information and explanations provided to us the Company is generally regular in depositing with appropriate authorities undisputed amount of provident fund, investor education protection fund, employees' state insurance, income-tax, sales-tax, wealth-tax, customs duty, excise duty, service tax, cess and other statutory dues applicable to it.

No undisputed amounts payable were outstanding as at the date of the balance sheet for a period of more than six months from the date they became payable.

The above data has been furnished to the extent dues payable have been identified from the records of the Company pending reconciliation and analysis of certain accounts.

(b) According to the information and explanation given to us disputed dues of Wealth tax Customs Duty Service tax Sales tax Income Tax Excise Duty that have not deposited on account of any dispute are detailed below to the extent identified from the records of the Company.

(x) The Company has accumulated losses of more than 50 % of its net worth at the end of the financial year and has not incurred cash losses in the immediately preceding year.

(xi) As per the amendment/modifications in the rehabilitation scheme sanctioned by the Board of Industrial and Financial Reconstruction on August 23 2005 there is no default by the Company in repayment of dues to financial institutions/banks/ debenture holders.

(xii) Based on our examination and according to the information and explanations given 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) The Company is not a chit/nidhi/mutual benefit fund/ society and clause xiii of the Order (as amended) is not applicable.

(xiv) The Company is not dealing or trading in shares securities debentures and other investments. The investment made in Shares & Securities are held in the name of the Company.

(xv) On the basis of the information and explanations given to us the Company has not given any guarantee for loans taken by others from bank or financial institutions;

(xvi) In our opinion and according to the information and explanation given to us on an overall basis the Company has not availed any term loans during the year under review.

(xvii) On the basis of our examination of the books of accounts and the information and explanation given to us and on an overall examination of the balance sheet of the Company we report that funds raised on short-term basis have not been used for long- term investment.

(xviii) During the year the Company has not made preferential allotment of shares to parties covered in the Register maintained under Section 301 of the Act;

(xix) Since there are no debentures outstanding at the end of the year, clause 4 (ix) of the Companies (Auditor's Report) Order 2003 are not applicable to the Company for the year under review.

(xx) The Company has not raised any money by public issues during the year;

(xxi) Based on the audit procedures performed and information and explanations given to us by the management we report that no fraud on or by the Company has been noticed or reported during the course of our audit.

for Ishwar & Gopal Chartered Accountants

K V Gopalakrishnayya Partner Membership No. 21748 Firm Registration No: 001154S Place : Bangalore Date : 27th August 2012

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Mar 31, 2011

We have audited the attached Balance Sheet of Namaste Exports Limited as at March 31 2011 and also the Profit and 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 these financial statements based on our audit. 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 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 staternerit presentation. We believe that our audit provides a reasonable basis for our opinion.

As required by the Companies (Auditor's Report) Order 2003 (the Order) 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.

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 account as required by law have been kept by the Company so far as appears 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 accounts;

(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 (3C) of Section 211 of the Companies Act 1956.

(v) As per the information furnished to us the Company has earlier defaulted to redeem its debentures on due date. Hence Mr. K Narayan Bhat Mrs. Madhura N. Bhat, M. Sripad Rao and K. Vishal Bhat directors of the company are disqualified from being appointed as Director under section 274 (1) (g) of the Companies Act 1956

(vi) The accounts of the Company have been prepared on 'going concern concept'. In view of the complete erosion of shareholders' funds the ability of the Company to continue as a going concern is dependent upon the implementation of the amended rehabilitation scheme approved by the Board of Industrial & Financial Reconstruction on August 23 2005 (refer note 2 of Schedule 16 to the Accounts). (vii) Subject to note no 2 (a) (vi) of schedule 16 to the notes on accounts regarding pending filing of documents with Registrar of Companies, Karnataka, Bangalore, for increase in authorised capital, paid up capital and reduction in the face value of paid up capital and read with the other notes and schedules thereon, in our opinion and to the best of our information and according to the explanations given to usthe said accounts read with 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:

a. In the case of the Balance Sheet of the state of affairs of the Company as at 31st March 2011;

b. |n the case of Profit and Loss Account of the profit for the year ended on that date; and

c. In the case of Cash Flow Statement of the cash flows for the year ended on that date.

ANNEXURE TO THE AUDITOR'S REPORT

(i) Fixed Assets

(a) The Company has maintained records showing particulars including quantitative details and the situation of its fixed assets except cost particulars of machinery.

(b) The fixed assets have been physically verified by the management during the year according to a periodical phased program. In our opinion the frequency of verification of the fixed assets by the management is . reasonable having regard to the size of the Company and the nature of its assets. According to the information and explanation given to us the discrepancies noticed on such verification (except leather garment division) which were not material have been dealt properly in the books of accounts.

(c) During the year the company has not disposed, off substantial portion of its assets. We have been informed that the same does not affect the company as a going concern.

(ii) Inventory

(a) Inventories other than lying with third parties were physically verified during the year by the management- 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 for physical verification of inventory followed by the management were reasonable and adequate in relation to the size of the Company and the nature of its business;

(c) In our opinion the Company has maintained proper records of inventory.. The discrepancies between the physical stocks and the book records arrived at on an annual reconciliation where applicable as noticed on physical verification were not material and have been properly dealt with in the books of account;

(iii) Loans

(a) The Company has granted advances (which are in the nature of loans) to companies and other parties (one in number) listed in the register maintained under Section 301 of the Companies Act 1956 without any stipulations regarding interest / repayment of principal. The amount involved in the aforesaid transactions was Rs. 3,82,286 and the year end balance was Rs. 3,82,286.

(b) As informed to us there are no stipulations regarding rate of interest and repayment of principal in respect of the advances which are still pending; We are not able to express our opinion as to whether the terms on which the said interest free loans have been granted are prima facie prejudicial to the interest of the Company.

(c) In respect of the aforesaid loans as there are no stipulations regarding payment of principal we are unable to express our opinion as to whether the payment of principal and interest is regular.

(d) In respect of the aforesaid loans we are unable to express our opinion as to whether company has taken reasonable steps to recover the overdue advances.

(e) The Company had not taken any loans secured or unsecured from parties listed in the register maintained under section 301 of the Companies Act 1956. Accordingly clause 4 (iii) (e) to (g) of the Companies (Auditor's Report) Order 2003 are not applicable to the Company for the year under review.

(iv) Internal Control Procedures

In our opinion and according to the information and explanations provided to us there are internal control procedures commensurate with the size of the Company and the nature of its business with regard to purchase of inventory and fixed assets and for sale of goods and services. During the course of our audit we have neither come across nor have we been informed of any continuing failure to correct major weakness in the aforesaid internal control procedures;

(v) Related Party Transactions

(a) Based on the audit procedures applied by us and according to the information and explanations given to us we are of the opinion that the company has entered all the transactions required to be entered in the register maintained under Section 301 of the Companies Act 1956.

(b) In our opinion and according to the information and explanations given to us the transactions entered / to be entered in the registers maintained under Section 301 in respect of each party have been made at prices which are reasonable having regard to prevailing market prices at the relevant time except for items which are of special nature for which no alternative sources of supply is available, or no comparison could be made of the prices in the absence of quotations/similar transaction with other parties;

(vi) The Company has not accepted any deposits from public and hence in our opinion the provisions of section 58Aand 58AA of the Act and the rules framed there under are not applicable;

(vii) The Company has a system of internal audit commensurate with its size and nature of its business;

(viii) We have been informed that maintenance of Cost records under Section 209 (1) (d) of the Companies Act 1956 is not applicable to the Company;

(ix) Statutory Liabilities

(a) According to the records information and explanations provided to us the Company is generally regular in depositing with appropriate authorities undisputed amount of provident fund, investor education protection fund, employees' state insurance income-tax, sales-tax, wealth-tax, customs duty, excise duty, service tax, cess and other statutory dues applicable to it. No undisputed amounts payable were outstanding as at the date of the balance sheet for a period of more than six months from the date they became payable.

The above data has been furnished to the extent dues payable have been identified from the records of the Company pending reconciliation and analysis of certain accounts.

(b) According to the information and explanation given to us disputed dues of Wealth tax, Customs Duty, Service tax, Sales tax Income Tax and Excise Duty that have not deposited on account of any dispute are detailed below to the extent identified from the records of the Company.

(x) The Company has accumulated losses of more than 50 % of its net worth at the end of the financial year and has incurred cash losses in the immediately preceding year.

(xi) As per the amendment / modifications in the rehabilitation scheme sanctioned by the Board of Industrial and Financial Reconstruction on August 23 2005 there is no default by the Company in repayment of dues to financial institutions / banks / debenture holders.

(xii) Based on our examination and according to the information and explanations given 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) The Company is not a chit/nidhi/mutual benefit fund/ society and clause xiii of the Order (as amended) is not applicable.

(xiv) The Company is not dealing or trading in shares securities debentures and other investments. The investment made in Shares & Securities are held in the name of the Company.

(xv) On the basis of the information arid explanations given to us the Company has not given any guarantee for loans taken1 by others from bank or financial institutions;

(xvi) In our opinion and according to the information and explanation given to us on an overall basis the Company has not availed any term loans during the year under review.

(xvii) On the basis of our examination of the books of accounts and the information and explanation given to us and on an overall examination of the balance sheet of the Company we report that funds raised on short-term basis have not been used for long- term investment.

(xviii) During the year,the Company has not made preferential allotment of shares to parties covered in the Register maintained under Section 301 of the Act;

(xix) The Company has created securities in respect of debentures issued.

(xx) The Company has not raised any money by public issues during the year;

(xxi) Based on the audit procedures performed and information and explanations given to us by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.

for Ishwar & Gopal Chartered Accountants

K V Gopalakrishnayya Partner Membership No.: 21748 Firm Registration No: 001154S Place : Bangalore Date: 30th August 2011

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Mar 31, 2010

We have audited the attached Balance Sheet of Namaste Exports Limited as at March 31 2010 and also the Profit and Loss Account and the Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit. 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.

As required by the Companies (Auditors Report) Order 2003 (the Order) 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.

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 account as required by law have been kept by the Company so far as appears 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 accounts;

(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 (3C) of Section 211 of the Companies Act 1956.

(v) As per the information furnished to us the Company has earlier defaulted to redeem its debentures on due date. Hence Mr. K Narayan Bhat Mrs. Madhura N Bhat M.Sri pad Rao K Vishal Bhat directors of the company are disqualified from being appointed as Director under section 274 (1) (g) of the Companies Act 1956

(vi) The accounts of the Company have been prepared on going concern concept. In view of the complete erosion of shareholders funds the ability of the Company to continue as a going concern is dependent upon the implementation of the amended rehabilitation scheme approved by the Board of Industrial & Financial Reconstruction on August 23 2005 (refer note 2 of Schedule 16 to the Accounts). (vii) Subject to note no 2 (a) (vi) of schedule 16 to the notes on accounts regarding pending filing of documents with Registrar of Companies, Karnataka, Bangalore, for increase in authorised capital, paid up capital and reduction in the face value of paid up capital and read with the other notes and schedules thereon , in our opinion and to the best of our information and according to the explanations given to us the said accounts read with 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:

a. In the case of the Balance Sheet of the state of affairs of the Cofnpany as at 31st March 2010;

b. In the case of Profit and Loss Account of the loss for the year ended on that date; and

c. In the case of Cash Flow Statement of the cash flows for the year ended on that date.

ANNEXURE TO THE AUDITORS REPORT

(i) Fixed Assets

(a) The Company has maintained records showing particulars including quantitative details and the situation of its fixed assets except records of Leather Garment Division.

(b) The fixed assets have been physically verified by the management during the year according to a periodical phased program. In our opinion the frequency of verification of the fixed assets by the management is reasonable having regard to the size of the Company and the nature of its assets. According to the information and explanation given to us the discrepancies noticed on such verification (except leather garment division) which were not material have been dealt properly in the books of accounts.

(c) During the year the company has not disposed off substantial portion of its assets. We have been informed that the same does not affect the company as a going concern.

(ii) Inventory

(a) Inventories other than lying with third parties were physically verified during the year by the management. 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 for physical verification of inventory followed by the management were reasonable and adequate in relation to the size of the Company and the nature of its business;

(c) In our opinion the Company has maintained proper records of inventory. The discrepancies between the physical stocks and the book records arrived at on an annual reconciliation where applicable as noticed on physical verification were not material and have been properly dealt with in the books of account;

(iii) Loans

(a) The Company has granted advances (which are in the nature of loans) to companies and other parties (six in number) listed in the register maintained under Section 301 of the Companies Act 1956 without any stipulations regarding interest / repayment of principal. The amount involved in the aforesaid transactions was Rs. 15192330 out of which Rs.14877330 was written off as bad advances during the year. The year end balance was Rs. 274580.

(b) As informed to us there are no stipulations regarding rate of interest and repayment of principal in respect of the advances which are still pending. We are not able to express our opinion as to whether the terms on which the said interest free loans have been granted are prima facie prejudicial to the interest of the Company.

(c) In respect of the aforesaid loans as there are no stipulations regarding payment of principal we are unable to express our opinion as to whether the payment of principal and interest is regular.

(d) In respect of the aforesaid loans we are unable to express our opinion as to whether company has taken reasonable steps to recover the overdue advances.

(e) The Company had not taken any loans secured or unsecured from parties listed in the register maintained under section 301 of the Companies Act 1956. Accordingly clause 4 (iii) (e) to (g) of the Companies (Auditors Report) Order 2003 are not applicable to the Company for the year under review.

(iv) Internal Control Procedures

In our opinion and according to the information and explanations provided to us there are internal control procedures commensurate with the size of the Company and the nature of its business with regard to purchase of inventory and fixed assets and for sale of goods and services. During the course of our audit we have neither come across nor have we been informed of any continuing failure to correct major weakness in the aforesaid internal control procedures;

(v) Related Party Transactions

(a) Based on the audit procedures applied by us and according to the information and explanations given to us we are of the opinion that the company has entered all the transactions required to be entered in the register maintained under Section 301 of the Companies Act 1956.

(b) In our opinion and according to the information and explanations given to us the transactions entered / to be entered in the registers maintained under Section 301 in respect of each party have been made at prices which are reasonable having regard to prevailing market prices at the relevant time except for items | which are of special nature for which no alternative sources of supply is available or no comparison could be made of the prices in the absence of quotations/similar transaction with other parties;

(vi) The Company has not accepted any deposits from public and hence in our opinion the provisions of section 58A and 58AA of the Act and the rules framed there under are not applicable;

(vii) The Company has a system of internal audit the scope and frequency of which needs to be enlarged to make it commensurate with its size and nature of its business;

(viii) We have been informed that maintenance of Cost records under Section 209 (1) (d) of the Companies Act 1956 is not applicable to the Company;

(ix) Statutory Liabilities

(a) According to the records information and explanations provided to us the Company is generally regular in depositing with appropriate authorities undisputed amount of Provident Fund Investor Education Protection Fund Employees State Insurance Income-Tax Sales-Tax Wealth-Tax Customs Duty, Excise Duty, Service Tax Cess and other statutory dues applicable to it. No undisputed amounts payable were outstanding as at the date of the balance sheet for a period of more than six months from the date they becamepayable.

The above data has been furnished to the extent dues payable have been identified from the records of the Company pending reconciliation and analysis of certain accounts

(b) According to the information and explanation given to us disputed dues of Wealth tax Customs Duty, Service tax, Sales tax, Income Tax, Excise Duty that have not deposited on account of any dispute are detailed below to the extent identified from the records of the Company.

(x) The Company has accumulated losses of more than 50 % of its net worth at the end of the financial year and has incurred cash losses in the immediately preceding year.

(xi) As per the amendment / modifications in the rehabilitation scheme sanctioned by the Board of Industrial and Financial Reconstruction on August 23 2005 there is no default by the Company in repayment of dues to financial institutions / banks / debenture holders.

(xii) Based on our examination and according to the information and explanations given to us the Company has not ngranted loans and advances on the basis of security by way of pledge of shares debentures and other securities;

(xii) The Company is not a chit/nidhi/mutual benefit fund/society and clause xiii of the Order (as amended) is not applicable.

(xiv) The Company is not dealing or trading in shares securities debentures and other investments. The investment made in Shares & Securities are held in the name of the Company except in the case of 3200 equity shares of Industrial Development Bank of India Ltd and 4500 units of IDBI Mutual Fund Dividend Scheme and the physical scripts of which are not made available for our verification and hence we are unable to express our opinion.

(xv) On the basis of the information and explanations given to us the Company has not given any guarantee for loans taken by others from bank or financial institutions;

(xvi) In our opinion and according to the information and explanation given to us on an overall basis the Company has not availed any term loans during the year under review.

(xvii) On the basis of our examination of the books of accounts and the information and explanation given to us and on an overall examination of the balance sheet of the Company we report that funds raised on short-term basis have not been used for long-term investment.

(xviii) During the year the Company has not made preferential allotment of shares to parties covered in the Register maintained under Section 301 of the Act;

(xix) The Company has created securities in respect of debentures issued.

(xx) The Company has not raised any money by public issues during the year;

(xxi) Based on the audit procedures performed and information and explanations given to us by the management we report that no fraud on or by the Company has been noticed or reported during the course of our audit.



for Ishwar & Gopal Chartered Accountants

K V Gopalakrishnayya Partner

Membership No.: 21748 .

Firm Registration No: 001154S Place : Bangalore Date : 31st August 2010