2. 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 fnancial statements. An audit also includes assessing the accounting principles used and signifcant estimates made by management, as well as evaluating the overall fnancial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor's Report) Order, 2003 issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956 and on the basis of such checks of the books and records of the Company, as we considered appropriate and the information and explanations given to us, we enclose in the Annexure, a statement on the matter specifed in paragraphs 4 and 5 of the said order.

4. Further to our comments in the Annexure referred to above, 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 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 appears from our examination of those books;

c. The Balance Sheet, the Statement of Proft 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 Balance Sheet, the Statement of Proft and Loss and the 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;

e. On the basis of written representations received from the directors, as on 31st March, 2013, and taken on record by the Board of Directors, we report that none of the directors are disqualifed as on 31st March, 2013 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956;

f. In our opinion, and to the best of our information and according to the explanations given to us, the said accounts 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:

i. In the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2013;

ii. In the case of the Statement of Proft and Loss, of the proft for the year ended on that date; and

iii. In the case of the Cash Flow Statement, of the cash fows for the year ended on that date.

Annexure to the Auditors' Report

(Refer to in paragraph 3 of our report of even date to the Members of Ambica Agarbathies Aroma and Industries Limited for the year ended 31st March 2013)

i. In respect of its fxed assets:

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

(b) The fixed assets of the company have been physically verifed by the management during the year, which in our opinion is reasonable, having regard to the size of the Company and nature of its assets. According to the information and explanation given to us, no material discrepancies were noticed on such verifcation.

(c) In our opinion, and according to the information and explanations given to us, fxed assets disposed of during the year were not substantial, and therefore, do not affect the going concern assumption.

ii. In respect of its inventory:

(a) As explain to us, the inventories were physically verifed during the year by the Management at reasonable intervals.

(b) In our opinion and according to the information and explanations given to us, the procedures of physical verifcation of the inventory followed by the Management were reasonable and adequate in relation to the size of the company and nature of its business.

(c) In our opinion and according to the information and explanations given to us, the Company is maintaining proper records of inventory and no material discrepancies were noticed on such physical verifcation.

iii. In respect of loans, secured or unsecured, granted by the Company to companies, frms or other parties covered in the Register under Section 301 of the Companies Act, 1956. According to the information and explanations given to us:

(a) The company has granted unsecured loans to two Companies covered in the register maintained under Section 301 of the Companies Act, 1956. The maximum amount outstanding during the year is Rs. 12,49,54,981 /- and the year-end balance of the loans granted is Rs. 409,33,672/-.

(b) In our opinion, the rate of interest and other terms and conditions of such loans given by the company are not, prima facie, prejudicial to the interest of the company.

(c) In the case of loans granted to companies listed in the register maintained under section 301, the borrowers have been regular in repaying the principal amounts as stipulated and in the payment of interest.

(d) There is no overdue amount in excess of Rs.1,00,000/- in respect of loans granted by the company, to the parties listed in the register maintained under Section 301 of the Companies Act, 1956.

In respect of loans, secured or unsecured, taken by the Company from companies, frms or other parties covered in the Register maintained under Section 301 of the Companies Act, 1956, according to the information and explanations given to us:

(e) The Company has not taken any loans, secured or unsecured, by the companies, firms or other parties covered in the Register maintained under Section 301 of the Companies Act, 1956. Accordingly, the requirements of clauses (iii) (f) and (iii) (g) of paragraph 4 of the order are not applicable to the Company.

iv. In our opinion and according to the information and explanations given to us, the company has an internal control procedures, which in our view requires improvement, commensurate with the size of the Company and the nature of its business with regard to purchases of inventory and fxed assets and with regard to the sale of goods and services. Further on the basis of examination of the books and records of the company, we have not come across any instances of continuing failure to correct major weaknesses in the internal control system.

v. In respect of the contracts or arrangements referred to in Section 301 of the Companies Act, 1956:

(a) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements 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 contracts or arrangements entered in the register maintained under Section 301 of the Companies Act, 1956 and exceeding a value of Rs.5,00,000/- in respect of any party during the year have been made at prices which are prima facie reasonable having regard to the prevailing market prices at the relevant time.

vi. According to the information and explanations given to us, the Company has not accepted any deposits from the public. Therefore, the provisions of clause (vi) of the paragraph 4 of the order are not applicable to the Company.

vii. In our opinion, the internal audit system of the company needs to be strengthened commensurate with the size and nature of its business.

viii. The maintenance of the cost records is made mandatory for Agarbhati division vide notifcation no. G.S.R.429(E ) dated 3 June 2011 issued by the Ministry of Corporate affairs. We are unable to comment on the compliance of the same since the Company is in the process of complying.

ix. In respect of statutory dues:

(a) According to the information and explanations given to us and on the basis of our examination of the records of the company, amounts deducted/ accrued in the books of account in respect of undisputed statutory dues including Provident Fund, Employees' State Insurance, Income-tax, Sales-tax, Service tax and otherstatutory dues have not generally been regularly deposited during the year by the Company with the appropriate authorities. As explained to us, the Company did not have any dues on account of Wealth tax, Customs duty, Excise duty and Investor Education and Protection Fund.

(b) According to the information and explanations given to us, except in case of income tax and works contracts (tds) there are no undisputed amounts payable in respect of Provident Fund, Employees' State Insurance, Sales tax, Service tax and other statutory dues were in arrears as at 31 March 2013 for a period of more than six months from the date they became payable. As explained to us, the provisions of Wealth tax, Customs duty, Excise duty were not applicable to the Company.

Sl Particulars                          Period to which      Amount No
                                        amount relates

1  Works contracts (TDS) - Construction
   division                                2007-08           13,20,000

2  Works contracts (TDS) - Construction 
   division                                2008-09            8,85,388

3  Works contracts (TDS) - Hotel 
   division                                2011-12            3,92,312

4  Income Tax                              2010-11           59,94,834

5  Income tax                              2011-12           42,52,948

6  Income Tax                              2012-13           38,33,056

As per the information furnished to us the amounts of Rs.6,23,674 Lakhs lying with the company in unpaid dividend account which have remained unclaimed or unpaid for a period of 7 years or more have not been transferred to the account of the Central Government as required by Sec 205A (5) of the Companies Act, 1956.

(c) According to the information and explanations given to us, there are no dues of Sales tax, and Service tax which have not been deposited with the appropriate authorities on the account of any dispute. As explained to us the provisions of Wealth tax, Customs duty excise duty are not applicable to the Company. The following dues of Income-tax have not been deposited by the Company on account of disputes:

Name of the Statue     Nature of the dues           Demand (Rs.)

Income Tax Act, 1961   Asst. made                   87,75,480/-
                       r.w.s. 143(3) u/s. 147

Income Tax Act, 1961   Asst. made                   75,81,340/-
                       r.w.s. 143(3) u/s. 147

Name of the Statue     Year to which         Forum where 
                        the amount           dispute is
                         related               pending

Income Tax Act, 1961   AY 2003-04          CIT(A), Chennai,
                                           Tamil Nadu.

Income Tax Act, 1961   AY 2010-11          CIT(A), Chennai,
                                           Tamil Nadu.

x. The Company does not have any accumulated losses at the end of the fnancial year and has not incurred cash losses in the fnancial year and in the immediately preceding fnancial year

xi. In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to its bankers or to any fnancial institutions except that in the case of loans due to the banks, the installments of Rs. 7,05,59,789 were repaid with a delay ranging from 14 to 62 days. The Company did not have any outstanding debentures during the year.

xii. In our opinion, the company has not granted any loans or advances on the basis of security by way of pledge of shares, debentures and other securities.

xiii. In our opinion, the company is not in the business of chit funds or nidhi / mutual beneft fund / society. Accordingly, the provisions of clause (xiii) of paragraph 4 of the order are not applicable to the Company.

xiv. In our opinion and according to the information and explanations given to us, the Company is not dealing in shares, securities, debentures and other investments. Accordingly, the provisions of clause (xiv) of paragraph 4 of the order are not applicable to the Company.

xv In our opinion and according to the information and explanations given to us, the terms and conditions on which the company has given guarantees for loans taken by others from banks or fnancial institutions are not prejudicial to the interest of the company.

The corporate guarantee given to Indian Overseas Bank on behalf of Ambica InfraventuresPvt. Ltd., which was a subsidiary of the company at the time when the Corporate Guarantee was issued by the company and according to the information and explanation furnished to us, the process of substitution of the said Corporate Guarantee by the new management of Ambica Infraventures Pvt. Ltd., is in progress.

xvi. In our opinion and according to the information and explanations given to us, the term loans taken by the company have been applied for the purpose for which they were raised.

xvii. According to the information and explanations given to us and on an overall examination of the balance sheet of the company, we are of the opinion that the funds raised on short term basis have not been used for long term investments.

xviii. According to the information and explanations given to us, the Company has not made any preferential allotment of shares to parties and Companies covered in the register maintained under Section 301 of the Companies Act, 1956.

xix. According to the information and explanations given to us the Company did not have any outstanding debentures during the year.

xx. According to the information and explanations given to us, the Company has not raised any money by issue of shares to public during the year.

xxi. During the course of our examination of the books and records of the company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instances of fraud on or by the Company, noticed or reported during the year nor have we been informed of any such case by the management.

                                                       Sd/-

                                                   (T.S. AJAI)

                                                Chartered Accountant 

                                                Membership No.025524

Place : Hyderabad

Date : 24.08.2013