We have audited the accompanying financial statements of PALCO Limited (Formerly known as Pennar Aluminium Company Limited) ("the Company"), which comprise the Balance Sheet as at March 31, 2014, and the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation of these 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 Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 ("the Act") read with the General Circular 15/2013 dated 13th September, 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013 . This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that givea 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 financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. 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 disclosures in the financial statements. The procedures selected depend on the auditor's judgement, 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 control relevant to the Company's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, 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.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the 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:

a) In the case of the Balance Sheet, of the state of affairs of the Company as at March 31,2014;

b) In the case of the Statement of Profit and Loss, of the loss for the year ended on that date; and

c) In the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

Report on Other Legal and Regularity Requirements

1. As required by the Companies (Auditor's Report) Order, 2003 ("theOrder") issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

2. As required by section 227(3) of the Act, 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 purpose 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, Statement of Profit and Loss, and Cash Flow Statement dealt with by this Report are in agreement with the books of account.

d) In our opinion, the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement comply with the Accounting Standards notified under the Act read with the General Circular 15/2013 dated 13th September, 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013.

e) On the basis of written representations received from the directors as on March 31,2014, and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2014, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

Annexure to Independent Auditor's Report

Referred to as in paragraph 1 of our report of even date.

1) In respect of its fixed assets.

All the fixed assets of the Company were sold and the Company will not be able to continue as a going concern.

2) In respect of its inventories:

The Company has no inventory during the period. Accordingly, the provisions of clause (ii) of paragraph 4(A) of the Companies (Auditor's Report) Order, 2003 as amended (the Order) in respect of inventories are not applicable to the Company.

3) In respect of loans secured or unsecured, granted or taken by the Company to/from companies, firms or others covered in the register maintained under section 301 of the Companies Act,1956:

i) Company has taken interest free unsecured loan for an amount of Rs.3,013,246/- (including loan taken during the year Rs.8,19,471/-) from parties covered in the Register maintained under section 301 of the Companies Act,1956.

ii) According to the information and explanations given to us, we are of the opinion, the terms and conditions on which loan taken by the company from such parties listed in the register maintained under section 301 of the companies act, 1956 are not, prima facie, prejudicial to the interest of the company.

iii) There is no overdue amount in-respect of loan taken from parties listed in the register maintained under section 301 of the Companies Act, 1956, the question of statement on the steps taken for payment of the Principal, and overdue amount of more than one lakh does not arise.

iv) In our opinion, the Company has not granted any loans to parties covered in the Register maintained under section 301 of the Companies Act, 1956.

4) In our opinion and according to the information and explanations given to us, there are adequateinternal control procedures commensurate with the size of the Companyand the nature of its business, for the purchase of inventory, fixedassets and for the sale of goods. During the course of our audit, based on our audit procedures applied, we have not observed any continuingfailure to correct major weaknesses in internal control.

5) a) Based on the audit procedures applied by us and according to the information and explanations provided by the management, the particulars of contracts or arrangements referred to in section 301 of the Act have been entered in the register required to be maintained under that section.

b) As per information & explanations given to us and in our opinion, the transaction entered into by the company with parties covered u/s 301 of the Act does not exceeds five lacs rupees in a financial year therefore requirement of reasonableness of transactions does not arises.

6) In our opinion and according to the information and explanations given to us, the Company hasnot accepted any deposits as defined under Section 58 A of the Companies Act, 1956.

7) In our opinion, the Company does not have an independent internal audit system commensurate with the size and nature of its business.

8) The Company does not have cost records for the year under review, as the operations were stopped due to sale of all the Fixed Assets.

9) In respect of statutory dues:

According to the books and records of the Company, and according to the explanations and information given to us, during the year under review, there are no undisputed statutory dues payable including Provident Fund, Investor education & protection fund, Income tax, Sales tax, Wealth tax, Custom duty, Excise duty, Cess and other statutory dues applicable to it. According to the information and explanations given to us, there are no disputed amounts payable in respect of such statutory dues which have remained outstanding as at 31st March, 2014 for a period exceeding six months from the date they became payable.

10) The Company has accumulated losses at the end of the year that are more than hundred percent of its net worth and incurred cash losses during the financial year covered by our audit and had incurred cash losses in the immediately preceding financial year.

11) As per the records of the Company and according to the information and explanations given to us, we are of the opinion that the company has not defaulted in repayment of dues to financial institutions, banks or debenture holders.

12) According to the information and explanations given to us, the Company has not given any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

13) The Company is not a chit fund or a nidhi / mutual benefit fund / society. Accordingly the provisions of clause 4(xiii) of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company.

14) The Company has not dealt or traded in shares, securities, and debentures and other investments during the period. Accordingly, the provisions of clause 4(xiv) of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company.

15) According to the information and explanations given to us, the Company has not given guarantees for loans taken by the others from banks or financial institutions.

16) In our opinion and according to the information and explanations given to us, during the year the Company has not raised any fresh term loans.

17) ccording to the information and explanations given to us and on an overall examination of statements and records of the Company, that the funds raised on short-term basis have, prima facie, not been used during the year for long-term investment.

18) The Company has not made any preferential allotment of shares/securities during the year to parties and companies covered in the register maintained under section 301 of the companies act, 1956.

19) No debentures have been issued by the company during the year and hence, the question of creating securities in respect thereof does not arise.

20) The Company has not raised money by way of public issue during the year.

21) On the basis of our examination and according to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the year.

                                         For RAMBABU & Co.
                                         Chartered Accountants 
                                         Firm Reg. No.002976S

                                         Ravi Rambabu 
                                         Partner
Place: Hyderabad                         M No: 018541