INDEPENDENT AUDITOR’S REPORT

TO THE MEMBERS OF ALCHEMIST LIMITED Report on the Standalone Financial Statements

We have audited the accompanying standalone financial statements of ALCHEMIST LIMITED (“the Company”), which comprise the Balance Sheet as at 31^stMarch, 2016, the Statement of Profit and Loss, the Cash Flow Statement, and a summary of the significant accounting policies and other explanatory information for the year then ended.

Management’s Responsibility for the Standalone 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 provisions 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.

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 financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the 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 financial control relevant to the Company's preparation of the financial statements that give a true and fair view 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 financial statements.

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

Basis for Qualified Opinion

The Company has not complied with the provisions of proviso to sub section 2 of Section 55 of the Act as out of the total value of preference shares (including premium) amounting to ' 53.56 lacs redeemed during the year, ' 51.34 lacs has been redeemed otherwise than out of the profits of the Company which would otherwise be available for dividend or out of the proceeds of a fresh issue of shares made for the purpose of such redemption.

The Company has computed the Depreciation on the tangible fixed assets using straight line method based on the useful life of the assets as prescribed in Schedule II of the Companies Act, 2013 and the management estimates of useful life for tangible and intangible assets not covered by the Schedule II. However, for the assets purchased/commissioned prior to 1^st April, 2010, the purchase date of assets has been considered as 1^st April, 2010. The same is in violation of Accounting Standard 6-Depreciation Accounting as this treatment not only enhances the useful life of the assets that have already been consumed but has an effect over the depreciation computed. The loss to that extent is under/over stated and similarly the assets, the effect however could not be quantified.

The Company has not made any provision on the export receivables amounting to ' 47363.02 lacs outstanding for more than a year as at the yearend date. The loss to that extent is under stated and similarly the receivables, the effect however could not be quantified.

Qualified Opinion

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 above, 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 testate of affairs of the Company as at 31^st March, 2016, and its loss and its cash flows for the year ended on that date.

Emphasis of Matters

a. Attention is invited to note no. 14 and 32 to the standalone financial statements wherein “the entire Capital advances amounting to Rs, 796.63 lacs have been considered as good and realizable by the Company. The Company has indicated it has undertaken legal action against one party whose outstanding is Rs, 459.80 lacs”.

It is relevant to note that out of the total capital advances, advances amounting to Rs, 784.06 lacs are outstanding for a period of more than three years. No provision on such capital advances is made.

b. Attention is invited to note no. 42 to the standalone financial statements “The balances of majority of the Trade Receivables, Trade Payables and Loan & Advances made and received, are subject to confirmation and as such there balances are reflected in the Balance Sheet as appearing in the books, pending reconciliation, the net effect is unascertainable”.

c. Attention is invited to note no. 50 to the standalone financial statements “The economic downturn has impacted the international trade operations of the company. Taking cue the company has initiated many cost cutting measures including downsizing and vacation of office premises. During the year the company has vacated some office premises. Since the company had made some leasehold improvements to the same, the company had to take a write off of these leasehold improvements and accordingly has incurred a loss of Rs, 278.49 lacs reflected under Exceptional Items.”

d. Attention is invited to note no. 51 to the standalone financial statements “Company's wholly owned foreign subsidiary “Alchemist Enterprise (S) PTE Ltd.” is in the process of winding up. In the process the WOS has stopped operations and closed its bank accounts. A trade receivable of US$ 4.00 lacs standing in its books against which the payment of Rs, 265.33 lacs has been received by Alchemist Limited. Such amount received has been reflected as “Closure proceeds of WOS” under Other Current Liabilities until the process of winding up of the company is completed.”

e. Attention is invited to note no. 52 to the standalone financial statements “Cash in hand includes cash amounting to Rs, 180.54 lacs which was seized by the Income tax authorities during the search and seizure operation u/s 132 of the Income Tax Act, 1961 during the month of June, 2014.”

Our opinion is not qualified in respect of the matters as stated in the Emphasis of Matters paragraph.

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 the Annexure A, a statement on the matters specified in paragraphs 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 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) Except for the effects of the matter described in the Basis for Qualified Opinion paragraph above, in our opinion, the aforesaid 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) The matters described in the Basis for Qualified Opinion paragraph and Emphasis of Matters paragraph above, in our opinion, may have an adverse effect on the functioning of the Company.

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

(g) The qualification relating to the maintenance of accounts and other matters connected therewith are as stated in the Basis for Qualified Opinion paragraph above.

(h) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate report in “Annexure B”.

(i) 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 disclosed the impact of pending litigations on its financial position in its standalone financial statements - Refer note no.29 to the standalone financial statements.

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

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

Referred to in paragraph 1 under ‘Report on other Legal and Regulatory Requirements' section of our report of even date.

We report that:

(i) (a) In our opinion and according to the information and explanations given to us, the Company has maintained

fixed asset register however the same does not specify the quantity and exact location of the fixed assets.

(b) In our opinion and according to the information and explanations given to us, the Company has not physically verified the fixed assets during the year. In our opinion the periodicity of the physical verification is not reasonable having regard to the size of the Company and nature of its assets.

(c) In our opinion and according to the information and explanation given to us, the Company holds valid title for all the immovable properties in the books of the Company except for one land valuing Rs, 55.59 lacs, the title deed of which has not been produced before us for our verification of the same.

(ii) In our opinion and according to the information and explanations given to us, inventories have been physically verified during the year by the management at reasonable intervals except for the work in progress inventory. The material discrepancies noticed have been properly dealt with in the books of accounts.

(iii) According to the information & explanations given to us, the Company has granted loans, secured or unsecured outstanding at year end at Rs, 33.39 lacs to 10 companies covered in the register maintained under section 189 of the Act.

(a) It has been informed to us that the terms of repayment have not been defined, however, they are repayable on the mutual agreement of both the parties involved. Moreover the loans granted are unsecured and interest free, thus the terms of such loans are prejudicial to the interests of the Company

(b) All the loans made are interest free and schedule of repayment are not defined, hence the timeliness of repayment cannot be commented upon.

(c) As mentioned in the above paragraphs, since terms of repayment of loans are not documented, we are unable to comment on the overdue amount.

(iv) The Company has given loans/amount recoverable to/from three parties whose yearend outstanding balance is ' 2.62 lacs and has given corporate guarantee for Rs, 375.00 lacs for loan obtained by one party, in contravention of provisions of Section 185 of the Companies Act, 2013.

Further, the Company has given interest free loans/amount recoverable to/from 15 parties whose yearend outstanding balance is Rs, 80.81 lacs which is in contravention of sub section 7 of section 186 of the Companies Act, 2013 which requires that “No loan shall be shall be given under this section at a rate of interest lower than the prevailing yield of one year, three year, five year or ten year Government Security closest to the tenor of the loan”.

(v) The Company has not accepted deposits. Hence the provisions of Section 73 to 76 or any other relevant provisions of the Act and the rules framed there under are not applicable to the Company.

(vi) We have broadly examined the cost records maintained by the Company specified by the Central Government under sub section (1) of section 148 of the Act and are of the opinion that, prima facie, the prescribed accounts and records have been made and maintained. We have however, not made a detailed examination of the records with a view to determine whether they are accurate or complete.

(vii) (a) Based on our audit procedures and on the information and explanations given by the management, we report

that undisputed statutory dues including Provident Fund, Employees' State Insurance, Income-tax, Sales-tax, Service Tax, Custom Duty, Excise Duty, Value Added Tax, Cess and any other statutory dues, to the extent applicable, have generally been regularly deposited with the appropriate authorities, though there have been slight delays in few cases. According to the information and explanations given to us, no statutory dues were outstanding as on 31^stMarch, 2016, for a period of more than six months from the date it became payable.

(b) Details of excise duty which has not been deposited as on 31^st March, 2016 by the Company on account of dispute is given below:

(viii) Based on our audit procedures and on the information and explanations given by the management, we are of the opinion that, during the year there have been delays in repayment of dues by the Company to financial institutions, banks or debenture holders. The details of the continuing default as on 31^st March, 2016 in repayment of principle and interest is as follows:

(ix) The Company did not raise any money by way of initial public offer or further public offer (including debt instruments) and term loans during the year, therefore, the provisions of para3(ix) of the Order is not applicable to the Company.

(x) Based on the audit procedures performed and the information and explanations given to us, we report that no fraud on or by the Company has been noticed or reported during the year, nor have we been informed of such case by the management.

(xi) Based on the audit procedures performed and the information and explanations given to us, we report that the managerial remuneration has been paid or provided in accordance with requisite approvals mandated by the provisions of section 197 read with Schedule V to the Companies Act, 2013.

(xii) In our opinion and according to the information and explanations given to us, the Company is not a nidhi company, therefore, the provisions of para3(xii) of the Order is not applicable to the Company.

(xiii) According to the information and explanations given to us and based on our examination of the records of the Company, transactions with the related parties are in compliance with sections 177 and 188 of the Act where applicable and details of such transactions have been disclosed in the financial statements as required by the applicable accounting standards.

(xiv) According to the information and explanations given to us and based on our examination of the records of the Company, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year.

(xv) According to the information and explanations given to us and based on our examination of the records of the Company, the Company has not entered into non-cash transactions with directors or persons connected with him, therefore, the provisions of para3(xv) of the Order is not applicable to the Company.

(xvi) The Company is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934.

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (“the Act”)

We were engaged to audit the internal financial controls over financial reporting of Alchemist Limited (“the Company”) as of 31^st March, 2016 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date.

Management’s Responsibility for Internal Financial Controls

The Company's management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India (‘ICAI'). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to company's policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013.

Auditors’ Responsibility

Our responsibility is to express an opinion on the Company's internal financial controls over financial reporting based on our audit conducted in accordance with the Guidance Note on Audit of Internal Financial Controls over Financial Reporting (the “Guidance Note”) and the Standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the Institute of Chartered Accountants of India.

Because of matter described in Disclaimer of Opinion paragraph below, we were not able to obtain sufficient appropriate evidence to provide a basis for an audit opinion on internal financial controls system over financial reporting of the Company.

Meaning of Internal Financial Controls over Financial Reporting

A company's internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Disclaimer of Opinion

According to information and explanation given to us, the company is under the process of establishing its internal financial controls over financial reporting on criteria based on or considering the essential components of internal control stated in Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India. Because of this reason, we are unable to obtain sufficient appropriate audit evidence to provide a basis for our opinion whether the Company had adequate internal financial control over financial reporting and whether such internal financial controls were operating effectively as at March 31^st, 2016.

We have considered the disclaimer reported in determining the nature, timing and extent of audit tests applied in our audit of the standalone financial statements of the company, and the disclaimer does not affect our opinion on the standalone financial statements of the company.

for N. Kumar Chhabra & Co.

Chartered Accountants

Firm's Registration Number: 000837N

CA. Ashish Chhabra

Place of Signature: New Delhi Partner

Date:10^th May, 2016 Membership Number: 507083