To,

THE MEMBERS OF

Soma textiles & industries limited

Report on the Standalone Financial Statements

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

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 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 and the Order under section 143(11) of the Act.

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 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 31^st March, 2016, and its loss and its cash flows for the year ended on that date.

Emphasis of Matters

Without qualifying our opinion, we draw attention to the following matters:

(a) With immediate effect on 14^th May 2016, the Company closed down the spinning and winding unit/department at Ahmedabad because of its high operative cost and other adverse factors. Following are the details of the block of spinning unit assets, which have been re-classified as current assets (earlier classified as fixed assets) under the head ‘Assets Held for Sale' at as 31^st March, 2016.

The above events have occurred after the balance sheet date however the event being adjusting in nature, have been shown by the company as Held for Sale as per AS-10 as at 31^st March, 2016. Quantification of fluctuation for difference of book value of such block & market value is not available and hence not made as at 31^st March, 2016.

(b) The Company has defaulted in repayment of dues to banks and financial institutions and credit accounts with The State Bank of India, Dena Bank, ICICI Bank, IDBI Bank and EXIM Bank banks have been classified as NPAs. Hence, under The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, The State Bank of India, Dena Bank and ICICI Bank and assigned their respective outstanding loans together with underlying securities thereto along with all rights towards such loan to Invent Assets Securitization & Reconstruction Private Limited (Invent ARC) during the financial year 2015-16. Whereas IDBI Bank and EXIM Bank assigned their respective outstanding loans along with all rights towards such loan to Invent ARC on 29^th April, 2016.

(c) As per the provisions of Section 23 of SICA Act, 1985 the Accumulated Losses of the company as at 31st March 2016 have resulted in erosion of more than 50% of its peak net worth during the four financial years immediately preceding the financial year ended on 31st March 2016. Consequent upon the Company had become a “Potentially Sick Company” under the said provision since FY 2013-14.

Other Matters

(a) We draw attention towards Note relating to accounts receivable of Soma Textiles FZC, an associate enterprise (currently registered in Umm Al Quwain Free Trade Zone) in the Director's Reports, relating to account receivables. Originally, the debtors had requested the Company for a cooling period of two years for clearing their dues, i.e. till March, 2016, however, their financial position has still not improved & they have once again requested for a period of five years effectively ending on 31-3-2021. Total outstanding that remains of all debtors after receiving part payments remains at AED 6,20,06,411. The Independent Auditor of Soma Textiles FZC has not commented on this matter.

(b) The Company had advanced a loan to the tune of '10,444.46 Lakhs (previous year Rs.9,852.39 Lakhs) to Soma Textiles FZC (UAE) out of GDR proceeds, classified as long term loan. This loan has been advanced by the Company as quasi equity in addition to the capital contribution to Soma Textiles FZC. When the said loan was given, the said company was a wholly owned subsidiary, however with effect from 31-03-2010, the Company's holding in this company has diluted from 100% to 40%. In the financial statement of Soma Textiles FZC ended as at 31-03-2016 the accumulated loss reflects at AED 5,53,238 as against total capital of AED 9,00,000 (Including statutory reserve). Also, Soma Textiles FZC was registered in Hamriyah Free Trade Zone - Sharjah, which now has been transferred to Soma Textiles FZC -Umm Al Quwain Free Trade Zone, which is a different free trade zone. Our opinion is not qualified in this matter.

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, and on the basis of such checks of the books and records of the company as we considered appropriate and according to the information & explanations given to us, we give in the Annexure ‘A’ 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 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 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) 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.

(f) 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’.

(g) With respect to the other matters to be included in the Auditors' 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 litigation on its financial position in its financial statement (Refer note 31 to the financial statement);

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.

ANNEXURE ‘A’ TO THE INDEPENDENT AUDITOR’S REPORT

Referred to in paragraph 1 of ‘Report on Other Legal and Regulatory Requirements' of the Independent Auditors' Report of even date to the members of Soma Textiles & Industries Limited on the standalone financial statements for the year ended March 31, 2016.

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

(b) As explained to us, the fixed assets have been physically verified by the management during the year in accordance with a phased programme of verification, which in our opinion provides for physical verification of all the fixed assets at reasonable intervals. We are informed that no material discrepancies were noticed on such verification.

(c) The title deeds of immovable properties other than self-constructed immovable property (buildings), as disclosed in fixed assets to the financial statements, are held in the name of the Company.

II. As explained to us, physical verification of inventory has been conducted at reasonable intervals by the management and the discrepancies noticed on verification between the physical stocks and the book records were not material having regard to the size of the Company, and the same have been properly dealt with in the books of account.

III. The Company has granted an unsecured interest free loan to its Associate, SOMA TEXTILE FZC. Such Associate is covered in the register maintained under section 189 of the Act. Total amount outstanding on 31^st March 2016, was Rs.10,444.46 Lakhs.

(a) There are no terms and conditions set out by the company as on date for the loan given to Soma Textile FZC, therefore we are unable to report on regularity of receipt of principal amount.

(b) As there is no stipulation of repayment of loan by the Associate, we are unable to report on regularity of repayment of principal.

(c) As there is no set terms and conditions for the repayment, there are no overdue amounts in respect of the loan granted to the Associate.

In our opinion and according to the information and explanations given to us, the Company has not advanced any loan or given any guarantee or provided any security or made any investment covered under section 185 of the Act in the current year (FY 2015-16). The Company has not advanced any loan or given guarantees or provided security or made investments covered under section 186 of the Act in the current year (FY 2015-16). When the loan was issued to SOMA TEXTILE FZC, the provision under the old Companies Act has been complied.

V. In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits from the public within the meaning of Sections 73 to 76 or any other relevant provisions of the Act and rules framed there under.

VI. We have broadly reviewed the cost records maintained by the Company as specified by the Central Government under sub-section (1) of Section 148 of the Companies Act, 2013, and are of the opinion that, prima facie, the prescribed cost records have been made and maintained. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

VII. (a) The Company is generally regular in depositing with appropriate authorities undisputed statutory dues including

Provident Fund, Employees' State Insurance, Income Tax, Wealth Tax, Sales Tax, Service Tax, Duty of Custom, Duty of Excise, Value added tax, Cess and other material statutory dues applicable to it. According to the information and explanations given to us, no undisputed amounts payable in respect of outstanding statutory dues were in arrears as at March 31, 2016 for a period of more than six months from the date they became payable.

(b) Following amount shave not been deposited as on March 31, 2016 on account of dispute are given below:

VIII. Based on our audit procedures and on the basis of information and explanation given to us by the management and in view of the restructuring package sanctioned by the CDR cell since withdrawn, we understand that the Company has defaulted in repayment of dues to banks and financial institutions. Accordingly Action has been taken under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act,2002 (SARFAESI Act,2002) by the lending banks. State Bank of India, Dena Bank and ICICI Bank and assigned their respective outstanding loans advanced together with underlying securities and all rights thereto to Invent Assets Securitization& Reconstruction Private Limited(Invent ARC) during FY 2015-16.Whereas IDBI Bank and EXIM Bank have also assigned their respective outstanding loans together with all rights thereto on 29^th April,2016 to the Invent ARC.

IX. To the best of our knowledge and belief and according to the information and explanations given to us, 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. Accordingly, paragraph 3 (ix) of the Order is not applicable.

X. To the best of our knowledge and belief and according to the information and explanations given to us, no fraud by the Company or on the Company by its officers or employees has been noticed or reported during the year.

XI. To the best of our knowledge and belief and according to the information and explanations given to us, managerial remuneration has been paid/provided in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Act.

XII. The Company is not a Nidhi Company. Consequently, requirements of clause (xii) of paragraph 3 of the order are not applicable.

XIII. To the best of our knowledge and belief and according to the information and explanations given to us, all transactions with the related parties are in compliance with section 177 and 188 of the Act where applicable and the details have been disclosed in the Financial Statements as required by the applicable accounting standards.

XIV. To the best of our knowledge and belief and according to the information and explanations given to us, the Company has not made any preferential allotment or private placement of share or fully or partly convertible debentures during the year under review. Consequently, requirements of clause (xiv) of paragraph 3 of the order are not applicable.

XV. To the best of our knowledge and belief and according to the information and explanations given to us, the Company has not entered into any non-cash transactions with directors or persons connected with him. Accordingly provisions of clause 3(XV) of the order are not applicable to the Company.

XVI. According to the nature of the business, the Company is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934. Accordingly provisions of clause 3(XVI) of the order are not applicable to the Company.

ANNEXURE ‘B’ TO THE INDEPENDENT AUDITORS’ REPORT OF EVEN DATE ON THE FINANCIAL STATEMENTS OF SOMA TEXTILES & INDUSTRIES LIMITED The Annexure referred to in paragraph 2(f) under the heading “Report on Other Legal and Regulatory Requirements”, in respect to the Internal Financial Control under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (“the Act”), for the year ended 31^st March, 2016, we report that :

We have audited the internal financial controls over financial reporting of SOMA TEXTILES & INDUSTRIES LIMITED (“the Company”) as of March 31, 2016 in conjunction with our audit of the 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 Act.

Auditor’s Responsibility

Our responsibility is to express an opinion on the Company's internal financial controls over financial reporting based on our audit. We conducted our audit 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. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established an maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. 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.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company's internal financial controls system over financial reporting.

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 of 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 dispositions of the assets of the company; (2) provide reasonable assurance that transactions 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.

Inherent Limitations of Internal Financial Control over Financial Reporting

Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatement due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods aresubject to the risk that the internal financial controls over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31, 2016, 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”.

For PIPARA & COMPANY

Chartered Accountants

Firm Regn. No. : 107929W

GYAN PIPARA

Place : Ahmedabad (Partner)

Date : 27^th May, 2016 Membership No.034289