Independent Auditors' Report

To

The Members of

Nagarjuna Oil Refinery Limited

Report on the Standalone Financial Statements

We have audited the accompanying Standalone Financial Statements of Nagarjuna Oil Refinery Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2016, the Statement of Profit and Loss and the Cash Flow Statement for the year then ended and a summary of the significant accounting policies and other explanatory information (here in referred to as "the Standalone Financial Statements"). Management's responsibility for the Standalone Financial Statements The Company's Board of Directors is responsible for the matters stated insertion 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 provisions of the Act for safeguarding the assets of the Company andforpreventinganddetectingfraudsandotherirregularities;selectionandapplication 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 Standalone Financial Statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor's 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 Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the Standalone Financial Statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the standalone financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the Standalone Financial Statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company's preparation of the Standalone Financial Statements that give a true and Fairview in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company's Directors, as well as evaluating the overall presentation of the Standalone 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.

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, of the state of affairs of the Company as at March 31,2016 and its loss and its cash flows for the year ended on that date. Emphasis of Matter

We draw attention to Note 11.1 to the standalone financial statements regarding provision made towards diminution in the value of the investment in Nagarjuna Oil Corporation Limited and its adequacy as on March 31,2016 based on the management assessment, for the reasons stated in the said note.

Our opinion is not modified in respect of the above matter.

Report on Other Legal and Regulatory Requirements

1. As required by Section 143 (3) of the Act, we report that:

(a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.

(b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books.

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

(d) In our opinion, the afore said Standalone Financial Statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

(e) On the basis of the written representations received from the directors as on March 31,2016 taken on record by the Board of Directors, none of the directors is disqualified as on March 31,2016 from being appointed as a director in terms of Section 164 (2) of the Act.

(f) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, we give our separate Report in "Annexure A".

(g) With respect to the other matters to be included in the Auditor's Report in accordance with Rule ll 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 disclosed the impact of all pending litigations on its financial position in its Standalone Financial Statements - refer Note 21.1 to the Standalone Financial Statements.

ii. The Company did not, as at March 31,2016, have any material foreseeable losses relating to long-term contracts including derivative contracts.

iii. There are no amounts which are required to be transferred to the Investor Education and Protection Fund by the Company.

2. As required by the Companies (Auditors Report) Order, 2016 ("the Order") issued by the Central Government in terms of Section 143(11) of the Act, we give in the "Annexure B", a statement on the matters specified in paragraphs 3 and 4 of the Order.

Annexure B to the Independent Auditors' Report

(Referred to in paragraph 2 under ‘Report on Other Legal and Regulatory Requirements' section of our report of even date)

(i) In respect of its fixed assets:

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

(b) According to the information and explanation given to us, the fixed assets have been physically verified by the Management during the year. In our opinion, the frequency of verification is reasonable having regard to the size of the Company and the nature of the assets. According to the information and explanations given to us, no discrepancies were noticed on such verification.

(c) According to the information and explanations furnished to us, and based on our review, title deeds of its immovable properties are in the name of the Company.

(ii) As the Company has no inventory, re porting under paragraph 3(ii) of the Order does not arise.

(iii) According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured, to companies, firms. Limited Liability Partnerships or other parties covered in the Register maintained under Section 189 of the Companies Act, 2013. Accordingly, reporting under clauses (a), (b) and (c) of paragraph 3(iii) of the Order does not arise.

(iv) According to the information and explanations furnished to us, the Company has not granted any loans, nor made any investments or given any guarantees or securities during the year to any of the parties specified in Sections 185 and 186 of the Companies Act, 2013. Hence, reporting under provisions of paragraph 3(iv) of the Order does not arise.

(v) In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits. Accordingly, reporting under provisions of paragraph 3(v) of the Order does not arise.

(vi) In our opinion and according to the information and explanations given to us, the Central Government has not prescribed maintenance of cost records under Section 148(1) of the Companies Act, 2013 for the activities of the Company.

(vii) According to the information and explanations given to us, in respect of statutory dues:

(a) The Company has been generally regular in depositing undisputed statutory dues, including Provident Fund, Employees' State Insurance, Income-tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, Value Added Tax, Cess and other material statutory dues applicable to it with the appropriate authorities, and there were no amounts payable in respect of the aforesaid undisputed statutory dues in arrears, as at March 31,2016, for a period of more than six months from the date they became payable.

(b) There were no amounts payable in respect of Provident Fund, Employees' State Insurance, Sales Tax, Income-tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, Value Added Tax, Cess and other material statutory dues as at March 31,2016 which have not been deposited on account of dispute.

(viii) According to the information and explanations given to us, the Company has not availed any loans from financial institutions, banks, government or from debenture holders. Accordingly, reporting under provisions of paragraph 3(viii) of the Order does not arise.

(ix) According to the information and explanations furnished to us, the Company has, during the year under report, not raised any monies through initial public offer or further public offer of any of its securities or term loans. Hence, reporting under provisions of paragraph 3(ix) of the Order does not arise.

(x) According to the information and explanations furnished to us, no fraud by the Company, nor any fraud on the Company by any of its officers or its employees has been noticed or reported during the year under report.

(xi) According to the information and explanations furnished to us by the Company, the Company has, during the year under report, paid / provided for managerial remuneration in accordance with Section 197 read with Schedule V of the Companies Act 2013.

(xii) lnouropinion,reportingrequirementunderParagraph3(xii)oftheorderdoesnot arise since, according to the information and explanations furnished to us, the Company is not a Nidhi Company

(xiii) According to the information and explanations furnished to us, the transactions entered into by the Company with its related parties are in compliance with the requirements of the provisions of Sections 177 and 188 of the provisions of the Companies Act 2013.

(xiv) According to the information and explanations furnished to us, the Company has not made any preferential allotment or private placement of its shares or fully or partly convertible debentures during the year under report.

(xv) According to the information and explanations furnished to us, the Company has not entered into any agreements for acquisition of assets from or for transferring its assets to its directors, or the directors of its subsidiary companies or persons connected with such directors, for a consideration other than cash, during the year underreport.

(xvi) According to the information and explanations furnished to us, the Company submitted its application for registration under Section 45-IA of the Reserve Bank of India Act 1934 which is pending clearance by Reserve Bank of India.

for M. Bhaskara Rao & Co

Chartered Accountants

Firm Registration No. 000459S

Hyderabad, D.Bapu Raghavendra

May 28, 2016 Partner

Membership No. 213274