Report on the Financial Statements

We have audited the accompanying standalone financial statements of PRATIBHA INDUSTRIES LIMITED, (“the Company”), which comprises the Balance Sheet as at March 31, 2018, the Statement of Profit and Loss, the 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

The Company’s Board of Directors is responsible for the matters 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 the maintenance of adequate accounting records in accordance with the provision of the Act for safeguarding of the assets of the Company and for preventing and detecting the 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 internal financial control, 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 thereunder.

Because of the matters described in the Basis for Disclaimer of Opinion paragraph, however, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion.

Basis for Disclaimer of Opinion

1. The company has accumulated losses and its net worth is fully eroded. It has incurred net loss during the current year as well as previous years and it’s current liabilities exceeded its current assets as at the balance sheet date. It is unable to repay its debts, statutory obligations and pay salaries apart from other obligations/commitments. Its scheme of Strategic Debt Restructuring has failed as the lenders have not accepted its proposal. All these indicate a material uncertainity that may cast significant doubt upon the Company’s ability to continue as a Going Concern. The Management is optimistic about finding resolution and believes it will be able to continue its business, accordingly the standalone financial results are prepared on a going concern basis.

2. Inventory of Work in Progress (WIP) includes certain contractual claim amounting to Rs. 36.91 Crores. These amounts have been ascertained by the management based on their estimates. No formal submission of these claims has been made to clients. WIP also includes certain claims amounting to Rs. 170.33 Crores which are though submitted but not yet approved by respective clients. The amounts of these claims are subject to change post submission/approval from clients. In absence of any communication from clients, we cannot confirm the amount of this WIP. The consequential impact, if any, on the standalone financial statements is therefore not ascertainable.

3. The management has not provided us with the Cost to Completion and consequent profitability/ and or losses on projects which are pending execution. In absence of these details, it is not possible for us to ascertain whether the WIP has been valued and stated correctly or not. The consequential impact, if any, on the standalone financial statements is therefore not ascertainable

4. The company has not provided for interest on various loans from Banks to the extent of Rs. 220.42 Crores. To that extent interest expense, interest liability and loss for the year ended March 31, 2018 are understated. The management is of the view that since the status of all loans has become NPA, interest will be waived off by the Banks and hence no provision is required.

5. Many clients of the company have en-cashed Bank Guarantee on account of various reasons. Balance of Rs. 353.67 Crores is shown as recoverable as asset in Balance sheet and no provision against the same has been made. To that extent loss and reserves are understated and Assets are overstated. Management is of the opinion that these amounts will be recovered in due course from respective parties and there is no need for any provision.

6. Many clients of the company have withheld around Rs. 142.88 Crores on account of various reasons. The amount is outstanding since long. This is shown as refundable from Clients and no provision against the same has been made. In absence of communication with client and proper documentations, we are unable to determine any possible impact thereof on the loss for the year. Management is of the opinion that these amounts will be recovered in due course from respective parties and there is no need for any provision.

7. Many loan accounts having aggregate balance of Rs. 271.78Crores are not confirmed due to non-availability of statement / confirmation from respective Banks. In the absence of sufficient appropriate audit evidence, we are unable to determine any possible impact thereof on the loss for the year and on the balance of cash and cash equivalent and Borrowed Funds.

8. The Company has not made provision against Investment of Rs. 1 Crore and Loans given of Rs. 94.73 Crores to its wholly owned subsidiary M/s. Prime Infrapark Private Limited. The networth of the subsidiary company has fully eroded and its Concession Agreement has been terminated by DMRC.

9. The Company has not made provision against Investment of Rs. 0.01 Crore and Loans given of Rs. 73.47 crores to its subsidiary M/s. Bhopal Sanchi Tollways Private Limited. Its Concession Agreement has been terminated by NHAI. The subsidiary company has lodged claim and the matter is under arbitration.

10. The company has not provided audited financial statements of its wholly owned subsidiary M/s. Pratibha Holdings (Singapore) Pte. Ltd and associate company M/s. Saudi Pratibha Industries LLC. In absence of these details, we can not comment on any requirement for provision for diminution in value of investments.

11. Balance confirmation of trade Receivables, Loans and Advances, deposits and trade payables are not received from third parties. These balances are subject to confirmations and consequent adjustments, if required. In absence of balance confirmations, financial impact on standalone financial statements is not ascertainable.

12. As per the requirements of Rule 4 of Companies (cost records and audit) Amendment Rules, 2016, the company has not conducted cost audit of its records.

13. During the year, Company unilaterally wrote back certain liabilities amounting to Rs. 76.44 Crores. The management is of the opinion that based on their analysis of balances and due to various reasons these balances were not payable and hence written back. In absence of proper documentation, financial impact on standalone financial statements is not ascertainable.

14. The company has not made provision for Expected Credit Loss on receivables and other financial assets as required under IND AS 109.

15. There are many statutory dues amounting to Rs.94.91 Crores, which are pending to be deposited with appropriate government authorities. The company has not made provision for interest on these dues on account of delay in depositing them. Since the management has not estimated overall liability on account of interest, financial impact on standalone financial statements is not ascertainable.

16. During the year, three independent directors have resigned from the Board. As a result composition of Board of Directors, Audit Committee, Nomination & Remuneration Committee and Stakeholders Relationship Committee are not in compliance with the provisions of Section 149(4), Section 177 & Section 178 respectively.

Opinion

Because of the significance of the matters described in the Basis for Disclaimer of Opinion paragraph, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Accordingly, we do not express an opinion on the standalone financial statements.

Report on Other Legal and Regulatory Requirements

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 Companies Act, 2013, we give in the Annexure “A” a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.

As required by section 143(3) of the Act, we report that:

a. As described in the Basis for Disclaimer of Opinion paragraph, we sought but were unable to obtain all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;

b. Due to the possible effects of the matter described in the Basis for Disclaimer of Opinion paragraph, we are unable to state whether 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 Company has not appointed a person other than Companies auditor for audit of accounts of branch offices under Section 143(8); hence clause (c) of sub-section (3) of section 143 is not applicable;

d. Due to the possible effects of the matter described in the Basis for Disclaimer of Opinion paragraph, we are unable to state whether 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;

e. Due to the possible effects of the matter described in the Basis for Disclaimer of Opinion paragraph, we are unable to state whether the aforesaid financial statements comply with the Accounting Standards under Section 133 of the Act read with Rule 7 of the Companies (Accounts) Rules, 2014;

f. the matters described under the Basis for Disclaimer of Opinion paragraph, read further with para i a, iv, v, vii a, and viii of our report in Annexure “A” and para 5 & 6 of Annexure “B” attached hereto, in our opinion, may have an adverse effect on the functioning of the Company;

g. On the basis of written representations received from the directors as on 31 March, 2018, taken on record by the Board of Directors, none of the directors are disqualified as on 31 March, 2018, from being appointed as a director in terms of Section 164(2) of the Act. As per their declaration, M/s Pratibha Industries Ltd., has defaulted in repayment of Deposit received from Public. Based on legal opinion taken by them, this doesn’t attract disqualification of directors.

h. the qualification relating to the maintenance of accounts and other matters connected therewith are as stated in the Basis for Disclaimer of Opinion paragraph above.

i. with respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, we give our separate Report in “Annexure B”.

j. with respect to the other matters included in the Auditor’s Report in accordance with Rule 11 of the Companies (Audit &Auditor’s ) Rules,2014, in our opinion and to our best of our information and according to the explanations given to us :

a. As detailed in Note No. 36to the Standalone Financial Statements, the Company has disclosed the impact of pending litigations on its standalone financial position;

b. Due to the possible effects of the matter described in the Basis for Disclaimer of Opinion paragraph, we are unable to state whether the Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any,on long-term contracts including derivative contracts;

c. There has been delay of 9 days in transferring the Unpaid Dividend amounting to Rs. 53,630 of FY 2010-11.

Annexure “A” to the Independent Auditor’s Report

The Annexure referred to in our report to the members of PRATIBHA INDUSTRIES LIMITED (‘The Company’) on the standalone financial statements for the year ended 31^st March, 2018. We report that:

i. In respect of its fixed assets:

a. The Company has maintained records showing particulars including quantitative details and situation of fixed assets. However, location of assets is not updated in records.

b. As explained to us, all the fixed assets have been physically verified by the management in a phased periodical manner, which in our opinion is reasonable, having regard to the size of the Company and nature of its assets. We are informed that no material discrepancies were noticed on such physical verification.

c. According to the information and explanations given to us, the title deeds of immovable properties recorded as fixed assets in the books of account are held in the name of the company.

ii. In respect of inventories,

a. According to the information and explanation given to us, the physical verification of inventory has been conducted at reasonable intervals by the management during the year. However, we could not observe inventory verification in the absence of intimation from the management in this regard.

b. As per the information and explanation given to us, no material discrepancies between physical inventory and book records were noticed on physical verification. As regards inventory in the nature of Work in Progress, reference is invited to para 2 & 3 under Basis for Disclaimer of Opinion of our report.

iii. According to information and explanations given to us, the Company has granted unsecured loans to parties covered in the register maintained under Section 189 of the Companies Act, 2013. In respect of these loans;

a. In our opinion and as per information and explanation given to us, terms and conditions of grant of such loans are prejudicial to the company’s interest.

b. the terms of repayment of the principal amount and the payment of the interest have not been stipulated and hence we are unable to comment as to whether receipt of the principal amount and the interest are regular and

c. in the absence of stipulated terms and conditions, we are unable to comment as to whether there is any overdue amount for more than ninety days and whether reasonable steps have been taken by the Company for recovery of the principal amount and interest

iv. In our opinion and according to the information and explanations given to us, in respect of loans, investments, guarantees, and security, provisions of section 185 has been complied with. However, it has given interest free unsecured loans covered under section 186 of the Companies Act, 2013 which is in non-compliance of provisions of section 186(7).

v. The Company has accepted deposits from the public. As per our verification of records and information & explanations given to us, except the provisions of section 73(3) and 74(3),the company has complied with the provisions of sections 73 to 76 or any other relevant provisions of the Act and the rules framed there-under, where applicable. As per information & explanations given to us, as per the requirements of section 73(3),the company has failed to repay the amount of deposits & interest thereon on maturity. Furtherthe order has been passed by Company Law Board under section 74 (2) of the Companies Act 2013. As per the requirement of the order and section 74 (3) of the Act, the company has failed to repay deposits amounting to Rs. 19,91,20,000 and interest thereon amounting to Rs. 9,31,73,942. Further, directives issued by the Reserve Bank of India are not applicable to the company.

vi. We have broadly reviewed the books of accounts maintained by the Company pursuant to the rules prescribed by the Central Government under Section 148(1) of the Companies Act, 2013 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. In respect of statutory dues:

a. According to information and explanations given to us and on the basis of our examination on test check basis, undisputed statutory dues including Provident Fund, Employees’ State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, duty of Customs, Duty of Excise, Value Added Tax, Goods & Service Tax, Cess and other material statutory dues have not been regularly deposited with the appropriate authorities and there have been significant delays in payment of statutory dues.

According to the information and explanations given to us, undisputed amounts payable in respect thereof, which were outstanding as at March 31, 2018 for a period of more than six months from the date of becoming payable are as follows:

b. According to the information and explanations given to us, dues that have not been deposited by the Company on account of disputes are as follows:

viii. In our opinion and according to the information and explanations given to us, the Company has defaulted in repayment of following dues to the financial institutions and banks during the year, which were paid before the Balance Sheet date.

The Company has defaulted in repayment of following dues to the financial institutions and banks during the year, which were not paid as at the Balance Sheet date:

Further, company has not issued debentures.

ix. According to the information and explanation given to us and on the basis of our examination on test check basis, we are of the opinion that the Company has used term loans for the purposes for which they were raised. During the year, the company has not raised money by way of initial public offer or further public office (including debt instrument).

x. According to the information and explanation 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. According to the information and explanation given to us and on the basis of an overall examination of books of accounts of the Company, no managerial remuneration has been paid or provided during the year.

xii. According to the information and explanation given to us, the company is not a Nidhi Company. Therefore, provisions of clause 3(xii) of the order are not applicable to the company.

xiii. According to the information and explanation given to us, transactions entered into by the company with the related parties are in compliance with sections 177 and 188 of Companies Act, 2013 and the details have been disclosed in the Financial Statements etc., as required by the applicable accounting standards;

xiv. The company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year under review.

xv. According to the information and explanation given to us, the company has not entered into any non-cash transactions with directors or persons connected with him during the year.

xvi. According to the information and explanation given to us, the company is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934.

Annexure “B” to the Independent Auditor’s Report

[Referred to under ‘Report on Other Legal and Regulatory Requirements’ in the Independent Auditor’s Report of even date to the members of PRATIBHA INDUSTRIES LIMITED on the standalone financial statements for the year ended 31^st March 2018]

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

1. We have audited the internal financial controls over financial reporting of Pratibha Industries Limited (“the Company”) as of March 31, 2018 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date.

2. 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. 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.

3. 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 on Audit of Internal Financial Controls Over Financial Reporting (the “Guidance Note”) and the Standards on Auditing, to the extent applicable to an audit of internal financial controls, 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 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 judgement, 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 Adverse opinion on the Company’s internal financial controls system over financial reporting.

4. 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 expenditure 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.

5. 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.

A ‘material weakness’ is a deficiency, or a combination of deficiencies, in internal financial control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

According to the information and explanations given to us and based on our audit, we have identified following material weaknesses that has not been identified as a material weakness in Management’s assessment:

a) The Company did not have an appropriate internal control system for preparing debtors ageing and making provision for bad debts. This could potentially result in non booking of bad debts.

b) The Company did not have an appropriate internal control system for obtaining external balance confirmation on periodic basis. This could potentially result in inaccurate assets & liabilities disclosed in the books of accounts.

c) The Company did not have an appropriate internal control system for reviewing computation of Work in Progress (WIP), Cost to Completion and estimated profitability of all projects regularly. This could potentially result in inaccurate disclosure of WIP and consequent profitability.

d) The company did not have an appropriate internal control system for reconciling balances of foreign vendors in INR and applicable foreign currency. This could potentially result in inaccurate translation of foreign currency balance in INR balance on Balance sheet date.

e) The company did not have an appropriate internal control system over updation of accounts on timely basis. Booking of many entries are delayed on account of delayed receipt of records. There is lack of coordination between different divisions of the company. These all could potentially result in misstatement of financial statements.

f) The company did not have an appropriate internal control system of maintaining Bank FD register, tracking maturity of FDs and accounting for interest on timely basis. This could potentially result in reporting FD and interest balance on Balance sheet date.

g) The company did not have an appropriate internal control system ofchecking the interest levied by Lenders. This could potentially lead to overcharging by Lenders and increase in Finance Cost of the company.

h) The company did not have an appropriate internal control system ofcalling Quotations from more than one Vendor while placing order. This could potentially lead to inefficient procurement and increased cost.

i) The company did not have mechanism to track booking of expenses against advances paid. This could potentially lead to unauthorised payment and non-adjustment of advance against corresponding liability.

6. Opinion

In our opinion, because of the effects/possible effects of the material weaknesses described above on the achievement of the objectives of the control criteria, the Company has not maintained, in all material respects, adequate internal financial controls over financial reporting and such internal financial controls over financial reporting were not operating effectively as of March 31, 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 on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.

We have considered the material weaknesses identified and reported above in determining the nature, timing, and extent of audit tests applied in our audit of the March 31, 2018 standalone financial statements of the Company, and our aforesaid report and opinion on Internal Financial Control over Financial Reporting should be read in conjunction with our report of even date issued on the standalone financial statements of the Company.

For Ramanand & Associates

Chartered Accountants

ICAI Firm Registration Number: 117776W

Sd/-

Ramanand Gupta

Partner

Membership Number: 103975

Place: Mumbai

Date: 11^th September 2018