Report on Financial Statements

We have audited the accompanying financial statements of M/s. Empee Distilleries Limited (“the Company”), which comprise the Balance Sheet as at 31^st March, 2016and the Statement of Profit and Loss, the Cash Flow statement for the year ended from 01/04/2015 to 31/03/2016, and a summary of the significant accounting policies and other explanatory information for the year then ended.

Management’s Responsibility for the Financial Statements

The Company’s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (“the Act”) with respect to the preparation of these standalone 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 principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies(Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the preparation of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, 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.

Auditors’ Responsibility

Our responsibility is to express an opinion on these standalone financial statements based on our audit.

We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under.

We conducted our audit in accordance with the Standards on Auditing specified under section 143(10) of the companies Act 2013. 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.

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. 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.

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

Basis for Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone 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 except :-

a. The company has made an investment of Rs. 1.59 Crores and given share application money of Rs. 140.36 Crores to its subsidiary Empee Sugars and Chemicals Limited towards promoters share. The subsidiary company Empee Sugars and Chemicals Limited is incurring losses and has been registered under BIFR as a sick company. This may result in diminution in the value of investments for which no provision is considered.

b. Other Loans and advances amounting to 28.80 Crores out of37.25 Crores under the head Other Current assets, Sundry debtors amounting to Rs. 13.49 Crores and Sundry creditors amounting to Rs. 35.34 Crores are subject to confirmation and reconciliation. The impact on profitability is not ascertainable.

Qualified Opinion :-

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

Without Qualification we also draw attention to note 4.1 .C relating to Punjab National Bank invoking guarantee and the same being disputed by the Company and hence not provided for.

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matter described in the Basis for Qualified Opinion paragraph, 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 for as at March 31, 2016;

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.

Report on Other Legal and Regulatory Requirements :-

1. As required by the Companies (Auditor’s Report) Order, 2016(“ the Order”) issued by the Central Government of India in terms of sub section (11) of section 143 of the Act, we give in Annexure I a statement on the matters specified in the paragraph 3 and 4 of the Order, to the extent applicable.

2. As required by section 143(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, the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement comply with the Accounting Standards notified under the Companies Act, 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, 2013except for the effects of the matter described in the Basis for Qualified Opinion paragraph.

e) On the basis of written representations received from the directors as on March 31, 2016, and taken on record by the Board of Directors, none of the directors are disqualified as on March 31, 2016, from being appointed as a director in terms of sub-section (2) of section 164 of the Companies Act, 2013.

f) The company has adequate internal financial controls system in place and these controls are operating effectively.

g) With respect to the other matters to be included in the Auditor’s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us :

i. The company has the following pending litigations which would impact its financial position.

ii. The company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses;

iii. There were no amounts which were required to be transferred to the Investor Education and Protection fund by the company.

(Referred to in paragraph 1 under the heading of “Report on other Legal and Regulatory Requirements” of our Report of even date)

1. As required by the Companies (Auditor’s Report) Order, 2016 issued by the Central Government in terms of section 143 (11) of the Companies Act, 2013 and on the basis of such checks of the books and records of the Company, as we considered appropriate and according to the information and explanations given to us during the course of the audit, we report that,

a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets on the basis of available information.

b) As explained to us, all the fixed assets have been physically verified by the management in a phased periodical manner, 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 physical verification.

c) As per information provided to us, the title deeds of immovable properties are held in the name of the company.

2. In our opinion and according to the information and explanations given to us, the inventories have been physically verified during the year by the management and no material discrepancies were noticed during the physical verification.

3. The company has granted loans to related parties amounting to Rs.24.88 crores without stipulation as to the repayment of principal and interest.

a) In the light of above, we do not comment on terms and conditions of grant of such loans.

b) In the light of above, we do not comment on repayment of the principal amount and interest and other conditions.

c) In the light of above, we do not comment on the reasonable steps have been taken by thecompany for recovery of the principal and interest.

4. According to the information and explanations given to us, in respect of Loans, investments, guarantees and security the provisions of sections 185 and 186 of Companies Act 2013were complied with:

5. According to the information and explanations given to us, the Company has not accepted any deposits from the public. Therefore the provisions of section 73 to section 76 the Companies Act 2013 and rules framed there under are not applicable.

6. In our opinion and according to the explanations given to us, maintenance of cost records has been specified by the Central Government under sub-section (1) of section 148 of the companies Act,2013. We, however not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

7. a) According to the information and explanation given to us and according to the books and records as produced and examined by us, in our opinion, the Company has been depositing undisputed statutory dues such as Provident fund, income tax, sales tax, customs duty, cess and other statutory dues with some delay, Income tax of Rs. 8.28 Crores for the FY 2011-12, Rs 1.77 Crore for the FY 2012-13, has not been paid as on date.

b) According to the records of the Company and according to the information and explanations given to us, except the following there are no dues of Income tax, Wealth tax, Sales tax, Excise duty and cess which have not been deposited on account of any dispute except as stated here under:-

8. Based on our audit procedures and according to the information and explanations given to us, except in the following two cases the company has not defaulted in repayment of dues to financial institutions and banks after restructuring of the loans.

(Amount in Lacs)

9. In our Opinion and according to the information and explanations given to us, the company has not issued shares to the public during the year. In respect of the term loans the company has not obtained any term loans. Hence, comments under the clause are not called for.

10. In our Opinion and according to information and explanations furnished to us no fraud on or by the Company has been noticed or reported during the year.

11. According to the records of the company provided to us managerial remuneration is within requisite approvals mandated by the provisions of section 197 read with schedule V of Companies Act 2013.

12. The company is not a Nidhi company, we do not comment on Net Owned Funds to Deposits ratio and unencumbered term deposits as specified in Nidhi Rules 2014.

13. In our opinion the Company has complied with the provisions of sections 177 and 188 of the Companies Act 2013 for all the transactions with related parties and the details have been disclosed as required by the applicable accounting standards.

14. The Company has not made any preferential allotment or Private placement of shares or fully or partly convertible debentures during the year. Hence we do not comment on Compliance of section 42 of Companies Act 2013.

15. According to the information and explanations given to us, the Company has not entered into any noncash transactions with directors or persons connected with him. Hence we do not comment on Compliance of Section 192 of Companies Act 2013.

16. The Company is not required to be registered under 45-IA of the Reserve bank of India Act, 1934.

For Venkatesh& Co.,

Chartered Accountants

F.R.No.004636S

CA Dasaraty V

Place : Chennai M.No.026336

Date : 30.05.2016 Partner