INDEPENDENT AUDITORS' REPORT

TO THE MEMBERS OF BALLARPUR INDUSTRIES LIMITED Report on the Standalone Ind AS Financial Statements

We have audited the accompanying standalone Ind AS financial statements of Ballarpur Industries Limited (the "Company"), which comprise the Balance Sheet as at 31 March 2018, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Changes in Equity and the Statement of Cash Flows for the year then ended, and a summary of the significant accounting policies and other explanatory information.

Management's Responsibility for the Standalone Ind AS Financial Statements

The Board of Directors of the Company 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 Ind AS financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, cash flows and changes in equity of the Company in accordance with the Indian Accounting Standards (Ind AS) specified under Section 133 of the Act, read with Companies (Indian Accounting Standard) Rules, 2015, as amended, and other accounting principles generally accepted in India.

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 Ind AS 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 Ind AS financial statements based on our audit.

In conducting 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 thereunder.

We conducted our audit of the standalone Ind AS financial statements 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 Ind AS 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 Ind AS financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the standalone Ind AS 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 Ind AS 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 standalone Ind AS 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 Ind AS financial statements.

Basis for Qualified Opinion

We draw reference to Note 40 accompanying the standalone Ind AS financial statements, wherein the company has not accrued the liability towards outstanding Put Options which forms the basis for our qualified opinion. The management is unable to quantity the liability with respect to the outstanding Put Options. Accordingly, we are unable to quantify the impact.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, except to the effects / possible effects of matter described in basis for qualified opinion paragraph, the aforesaid standalone Ind AS financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with Ind AS and other accounting principles generally accepted in India, of the state of affairs of the Company as at 31 March 2018, and its loss, total comprehensive income, changes in equity and its cash flows for the year ended on that date.

Emphasis of matter

We draw attention to Note 41 accompanying the standalone financial statements which contains conditions along with other matters that indicate the existence of a material uncertainty that may cast a significant doubt on the Company's ability to continue as a going concern. The management is confident that the Company will be able to continue as a going concern.

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

Other matters

The standalone Ind AS financial statements for the previous year ended 31 March 2017 was audited by the predecessor auditor who, vide their report dated 23 May 2017, expressed a modified opinion on the same.

We have audited the adjustments as described in note 38 accompanying the standalone financial statements to restate the standalone balance sheet as at 01 April 2016 and the standalone statement of profit and loss for the year ended 31 March 2017. In our opinion, the said adjustments are appropriate and have been properly applied. We further state that we were not engaged to audit or apply any procedures to the standalone financial statements of the Company for the year ended 31 March 2017 and the periods prior to that date other than with respect to the aforesaid adjustments and accordingly we do not express an opinion or any other form of assurance on the aforesaid standalone financial statements.

Our report is not modified in respect of the above matters

Report on Other Legal and Regulatory Requirements

1) As required by Section 143 (3) of the Act, we report to the extent applicable 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, expect for the effects of matter described in the Basis for Qualified Opinion paragraph above, 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) in our opinion, proper returns adequate for the purposes of our audit have been received from Unit Kamalapuram which has not been visited by us;

(d) the Balance Sheet, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Changes in Equity and the Statement of Cash Flows dealt with by this report are in agreement with the relevant books of account and returns;

(e) in our opinion, the aforesaid standalone Ind AS financial statements comply with the Indian Accounting Standards specified under Section 133 of the Act, read with Companies (Indian Accounting Standard) Rules, 2015, as amended;

(f) in our opinion, the matter described in the Basis for Qualified Opinion paragraph above may have an adverse effect on the functioning of the Company.

(g) on the basis of the written representations received from the Directors of the Company as on 31 March 2018 taken on record by the Board of Directors, none of the Directors is disqualified as on 31 March 2018 from being appointed as a Director in terms of Section 164

(2) of the Act;

(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 'A'; and

(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, as amended, 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 Ind AS financial statement - Refer Note 43 to the standalone Ind AS 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;

(iv) The reporting on disclosures related to Specified Bank Notes is not applicable to the Company for the year ended 31 March 2018

2) As required by the Companies (Auditor's Report) Order, 2016 ("the Order") issued by the Central Government of India 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.

Report on the Internal Financial Controls Over Financial Reporting under Clause

(i) of Sub-section 3 of Section 143 of the Companies Act, 2013

We have audited the internal financial controls over financial reporting of Ballarpur Industries Limited ("the Company") as at 31 March 2018 in conjunction with our audit of the standalone Ind AS financial statements of the Company as of and for the year ended on that date.

Management's Responsibility for Internal Financial Controls

The Board of Directors of the Company 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 ("the Guidance Note") 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 ("the Act").

Auditors' 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 and the Standards on Auditing prescribed under Section 143(10) of the Act, to the extent applicable to an audit of internal financial controls. 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 and 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 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.

Inherent Limitations of Internal Financial Controls 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 misstatements 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 are subject to the risk that the internal financial control 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, to the best of our information and according to the explanations given to us, 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 31 March 2018, 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.

(i) (a) The Company is maintaining proper records showing full particulars, including quantitative details and situation of property, plant and equipment.

(b) As informed to us, certain property, plant and equipment have been physically verified by the Management during the year. According to the information and explanations given to us, no material discrepancies were noticed on such verification.

(c) According to the information and explanation given to us and the records examined by us and based on the examination of the scanned copies of the title deeds of all the immovable properties deposited with the bankers, we report that the title deeds of all the immovable properties that have been pledged as security against borrowings and other facilities availed by the Company, are held in the name of the Company.

In respect of immovable property of land that have been taken on lease by the Company, we report that the lease agreements are in the name of the Company, except for land as detailed below, for which the Company is yet to register the title deeds.

(ii) As explained to us, inventories have been physically verified by the Management at reasonable intervals during the year. In our opinion, the frequency of such verification is reasonable considering the operational status of the manufacturing units of the Company. As explained to us, the discrepancies noticed on verification between the physical stocks and the book records were not material.

(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 paragraph 3 (iii) of the Order does not arise.

(iv) In our opinion and according to the information and explanations given to us, the Company has not advanced any loan, made any investment, given any guarantee or provided any security to which the provisions of Section 185 and 186 of the Companies Act, 2013 are applicable. Accordingly, reporting under paragraph 3 (iv) of the Order does not arise.

(v) According to the information and explanations given to us, the Company has not accepted any deposits during the year and does not have any unclaimed deposits as at 31 March 2018. Accordingly, reporting under paragraph 3 (v) of the Order does not arise.

(vi) The Central Government has specified maintenance of cost records under section 148(1) of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Rules, 2014 (as amended) for the operations of the Company. We have broadly reviewed the cost records maintained by the Company in respect of manufacture of paper, and are of the opinion that, prima facie, the prescribed cost records have been made and maintained. However, we have not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

(vii)(a) According to the information and explanations given to us and the records of the Company examined by us, in our opinion, except for dues in respect of service tax, the Company is not generally regular in depositing undisputed statutory dues of provident fund, employees' state insurance, income-tax, sales tax, duty of excise, value added tax, goods and service tax, cess, professional tax and welfare fund during the year with appropriate authorities and there have been serious delays in a large number of cases. According to the information and explanations given to us, statutory dues outstanding as at 31 March 2018 for a period of more than six months from the date they became payable is given below:

(b) According to the information and explanations given to us and the records of the Company examined by us, the particulars of income tax, sales tax, duty of customs, duty of excise, value added tax as at 31 March 2018 which have not been deposited on account of a dispute pending are given in Appendix 1 to this report.

According to the information and explanations given to us and the records of the Company examined by us, there are no dues of service tax as at 31 March 2018 which have not been deposited with the statutory authorities on account of a dispute.

(viii) In our opinion and according to the information and explanations given

to us and the records of the Company examined by us, the Company has defaulted in repayment of loans or borrowing to banks, financial institutions and debenture-holders, for which the lender-wise details are as follows. The Company did not have any loans or borrowing from government.

(ix) In our opinion and according to the information and explanations given to us, the Company has neither taken any term loans during the year nor has raised any money by way of initial public offer or further public offer (including debt instruments). Accordingly reporting under paragraph 3 (ix) of the Order does not arise.

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

(xi) In our opinion and according to the information and explanations given to us, the Company has not paid or provided for, managerial remuneration during the year. Accordingly reporting under paragraph 3 (xi) of the Order does not arise.

(xii) In our opinion and according to the information and explanations given to us, the Company is not a Nidhi Company. Accordingly, reporting under paragraph 3 (xii) of the Order does not arise.

(xiii)In our opinion and according to the information and explanations given to us and the records of the Company examined by us, all transactions with the related parties are in compliance with section 177 of Companies Act, 2013 where applicable and the details have been disclosed in the standalone Ind AS financial statements as required by the applicable Indian Accounting Standards.

We are informed by the Management that the transactions entered into by the Company with the related parties are in its ordinary course of business and are on arm's length basis. Accordingly, reporting on compliance of section 188 of Companies Act, 2013 does not arise.

(xiv)According to the information and explanations given to us, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year. Accordingly, reporting under paragraph 3 (xiv) of the Order does not arise.

(xv) In our opinion 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 them during the year. Accordingly, reporting under paragraph 3 (xv) of the Order does not arise.

(xvi)The Company is not engaged in the business of non-banking financial institution and is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934. Accordingly, reporting under paragraph 3 (xvi) of the Order does not arise.

Appendix 1 to Annexure B: The particulars of income tax, sales tax, duty of customs, duty of excise, value added tax as at 31 March 2018 which have not been deposited with statutory authorities on account of a dispute

Note 1: The above amounts do not include penalty and interest.

(*): With respect to the dues stated above, the Company is in the process of filing appeal with Deputy Commissioner Commercial Tax.

for SHARP & TANNAN

Chartered Accountants

(Firm's Registration No. 003792S)

V. Viswanathan

Partner

Membership No. 215565

Place: New Delhi

Date : 22 May 2018