To The Members of REI AGRO LIMITED

REPORT ON THE STANDALONE FINANCIAL STATEMENTS

We have audited the accompanying financial statements of REI AGRO LIMITED, which comprise the Balance Sheet as at March 31, 2016, 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

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 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 of 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 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 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.

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 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 on the financial statements.

BASIS FOR QUALIFIED OPINION:-

1) During the year due to sudden death of one of the Independent Director Mr. Asoke Chatterjee on 04.08.2015 and subsequently due to resignation of Dr Ing Narpinder Kumar Gupta on 23.11.2015, Number of Directors on the Board of the Company has reduced to Two {2}only which is not a Competent Board. However, the Board have finalized and approved the 3rd Quarterly Results with the existing two directors and now submitting the yearly results which is again subject to final approval by the duly constituted Board. Meanwhile the company has communicated and appraised the facts to the Regulatory Authority and also sought certain waivers and reliefs from the Hon’ble BIFR. Company being a Net Worth eroded Company, is registered under Sick Industrial Companies (Special Provisions) Act, 1985.

2) The Company’s Fixed Assets have been hypothecated / pledged with the Banks / Financial Institutions etc against various credit facilities availed by the Company and due to the accounts being classified as NPA, the Bankers / FIs have taken legal actions for recovery. Fixed Assets / Inventories are not insured.

3) The Company has not provided Interest on loans availed from Banks and Financial Institutions which has been classified as NPA. The Amount not so provided amounts to Rs. 1127.42 Crore {including Rs. 426.07 Crore for previous year} up to 31st March 2016.

4) Provision for Gratuity and Leave Encashment has been made on the basis of estimate and not as per the Actuarial Valuation, which is not in consonance with AS -15.

5) The Company had provided Corporate Guarantee to overseas lenders for the borrowings by its Subsidiary Company namely Ammalay Commodities JLT. The said subsidiary company defaulted in the repayment of the facilities provided by the lenders and the lenders to the subsidiary company had invoked the Corporate Guarantee of the Company provided to them amounting to Rs. 3105.93 Crore against which no provision has been made till the year ended 31st March 2016.

6) No balance confirmation and / or Bank Statement of the outstanding loan could be obtained, in absence of which, we are unable to confirm the correctness of the balances appearing in the financial statement.

7) The Net Worth of the company has fully eroded and the company’s reference filed before the Hon’ble BIFR was registered. The Company’s ability to continue the business as going concern is significantly dependent upon the viability of the restructuring plan as may be approved by the Hon’ble BIFR.

QUALIFIED OPINION:-

In our opinion and to the best of our information and according to the explanations given to us, except for the possible effects of the matter described in the ”basis for qualified opinion” paragraph, the aforesaid 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 principle generally accepted in India;

a. in the case of the Balance Sheet, of the state of affairs of the Company as at March 31,2016

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.

EMPHASIS OF MATTER:

We draw attention to the following matters in the Notes to the financial Statements:

1. Note 29.1 to the financial statements that describe that due to liquidity crunch being faced by the Company, it was not able to procure adequate quantum of Raw Material for last two years, which has resulted in partly operational of one its unit only at the end of the year.

2. Note 29.2 to the financial statement that the Company has defaulted in payment of obligations in respect of all the Banks/ Financial Institutions / Non Convertible Debentures holders together with interest thereon on due dates. As a result thereof 'all the Working Capital Banks , Term Lenders and NCD Holders had initiated the Corrective Action Plan (CAP) through the Joint Lenders Forum (JLF) in accordance with the RBI’s SMA Guidelines dated February 26,2014. But the same could not be approved. Some of the lender banks have initiated winding up proceedings against the Company for recovery of dues. Notices have been issued by the lenders U/s 13(4) of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.This have adverse effect on the functioning of the Company on going forward basis.

3. Note No 29.5 to the financial statement indicates that the company has accumulated losses and its net worth is fully eroded. The Company has incurred net loss during the current year and previous years and Company’s current liabilities exceeded its current assets as at the balance sheet date.

These Conditions along with other matters set out above indicates the existence of uncertainty that may cast doubt about the Company’s ability to continue as Going Concern. However the financial statements of the company have been prepared by the management on Going Concern Basis.

Our opinion is not modified in respect of these matters.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

1. As required by the Companies (Auditor’s Report) Order, 2015 (“the Order”) issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in the “Annexure A”, a statement on the matters specified in paragraphs 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 and except for the matters described in the basis for Qualified Opinion paragraph, all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;

b) Except for the possible effects of the matter described in the basis for Qualified Opinion Paragraph above, 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) Except for the possible effects of the matter described in the basis for Qualified Opinion Paragraph, in our opinion, the aforesaid standalone financial statement comply with the Accounting Standards specified under section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules,2014;

e) The matter described in the basis for Qualified Opinion paragraph above, in our opinion, may have an adverse effect on the functioning of the Company.

f) The Company has defaulted in redemption of Non Convertible Debenture {“NCD”} on due date and payment of interest due thereon and dividend on preference share and such default has continued for more the one year. In terms of Section 164 (2) of the Companies Act,2013 the Directors of the Company are not eligible to be re-appointed as directors of the Company. As per the legal opinion obtained by the company, the existing directors of the company may continue to hold their position as Directors till their reappointment date

g) With respect to the adequacy of Internal Financial Controls over Financial Reporting of the Company, and the operating effectiveness of such controls, refer to our separate report in “Annexure B”.

h) With respect to other matters to be included in the Auditor’s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rule 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 litigations on its financial position in its financial statements-Refer Note No. 28 & 29 to the financial statements.

ii) The Company did not have long-term contracts including derivative contracts for which there were any material foreseeable losses.

iii) There has been some delay in transferring amounts required to be transferred to the Investor Education & Protection Fund by the Company.

The Annexure referred to in our Independent Auditors’ Report

“annexure a” to the auditors' report

to the members of the Company on the financial statements for the year ended 31st March 2016,

We report that:

i. In respect of its Fixed Assets:

a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets.

b) It has been confirmed by the Management that three Title Deeds in respect free hold land are not in the name of the company. The Gross Block / Net Block of these Freehold Land amounts to Rs. 177.01 Crore as on 31.03.2016.

c) All the fixed assets have not been physically verified by the management during the year but there is a regular programme of verification which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification.

ii. In respect of its Inventories:

a) As explained to us the Inventories have been physically verified by the management at reasonable intervals. In our opinion the frequency of verification is reasonable.

b) The procedure of physical verification of inventories followed by the management is reasonable and adequate in relation to the size of the Company and the nature of its business.

iii) As informed to us, the Company during the year has not granted any loan, secured or unsecured to companies, firms, Limited Liability Partnership or other parties covered in register maintained under section 189 of the Companies Act, 2013. Accordingly, the provisions of sub clause (iii) (b) & (c) of the Companies (Auditors Report) order, 2013 (as amended) are not applicable.

iv) In respect of loans, investments, guarantees and security, provisions of section 185 and 186 of the Companies Act 2013 have been complied with. However, the company during the year, has not given loan or provided guarantee or security to any person or other body corporate and not made any investment.

v) The Company has not accepted any deposit from the public; therefore the provisions of clause (v) of the order are not applicable to the company.

vi) We have broadly reviewed the Books of Accounts maintained by the company in respect of generation of electricity where pursuant to the rules made by the Central Government of India, the maintenance of Cost Records have been prescribed U/s 148(1) of the Act and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. We have not, however, 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 the information and explanations given to us and on the basis of examination of records of the Company, amount deducted / accrued in the books of accounts in respect of undisputed statutory dues including Provident Fund, Employees State Insurance, Income Tax, Sales Tax, Service Tax, Duty of Customs, Duty of Excise, Value Added Tax, Cess and other material statutory dues have been regularly deposited with appropriate authorities during the year except Dividend Distribution Tax Payable as set out below. As explained to us the Company did not have any dues on account of Duty of Custom and Duty of Excise as they were not applicable.

b) According to information and explanation given to us and records of the Company examined by us, the following disputed amount of statutory dues which have not been deposited.

*** The Company is in process of filing Appeal before the Competent Authority.

viii) The company has defaulted in repayment of loans or borrowing to the financial institutions/ bank / Government and Debenture holder in respect of secured / unsecured loans. There loan have been classified as NPA, and therefore no statement of Accounts or Balance confirmation could be made available. The company has therefore not provided Interest of Rs. 1127.42 Crore, computed on the basis of last available rates. The applicable details of defaults as at

31.03.2016 are as under, exclusive of interest thereon, as stated above:

a) To Banks Rs. 4745.24 Crores

b) To Debenture Holders Rs. 524.35 Crores

c) To FCCB Holders Rs. 667.20 Crores

ix) 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) According to the information and explanations given to us, no material fraud on or by the company by its officers or employees has been noticed or reported during the course of our audit.

xi) According to the information and explanations given to us and based on our examination of the records of the Company, the company has paid / provided for managerial remuneration in accordance with the requisite approvals mandated by the provisions of Section 197 read with Schedule V to the Act.

xii) According to the information and explanations given to us, the Company is not a Nidhi Company. Accordingly; paragraph 3(xii) of the order is not applicable.

xiii) According to the information and explanations given to us and based on our examination of the records of the Company transactions with related parties are in compliance with sections 177 and 188 of the Act where applicable and details of such transactions have been disclosed in the financial statements as required by the applicable Accounting Standards.

xiv) According to the information and explanations given to us and based on our examination of the records of the Company the company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year.

xv) As per information and explanations given to us and based on our examination of the records of the Company, the company has not entered into any non cash transactions with the Directors or persons connected with him. Accordingly, Paragraph 3 (xv) of the order is not applicable.

xvi) The Company is not required to be registered U/s 45-IA of the Reserve Bank of India Act, 1934.

“annexure B”

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

We have audited the internal financial controls over financial reporting of REI Agro Ltd. (“the Company⁷’) 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 Companies Act, 2013.

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”) issued by the Institute of Chartered Accountants of India (ICAI) and the Standards on Auditing prescribed under Section 143(10) of the Companies Act, 2013, 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 qualified 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.

QUALIFIED OPINION

According to the information and explanations given to us and based on our audit, the following material weakness has been identified in the Company’s internal financial controls over financial reporting as at March 31st, 2016:

i) As required u/s 138 of the Companies Act, 2013, Internal Audit has not been conducted by the Company.

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.

OPINION

In our opinion, except for the possible effects of the material weakness described as above on the achievement of the objectives of the control criteria, the Company has maintained, in all material respects, adequate Internal Financial Controls over Financial Reporting and such Internal Financial control over financial reporting were operating effectively as of 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”(ICAI).

We have considered the material weakness identified and reported above in determining the nature, timing and extent of Audit tests applied in our Audit of the March 31, 2016 financial statements of the Company and the material weakness does not affect our opinion on the financial statements of the Company.

For P. K. LILHA & CO.

Chartered Accountants

Firm Reg. No.: 307008E

Sd/-

(CA. P. K. LILHA)

Partner

M. No. 011092

Place : Kolkata

Date : 31.05.2016