Report on Financial Statements

We have audited the accompanying financial statements of EASUN REYROLLE LIMITED which comprise of the Balance Sheet as at 31 March 2016, Statement of Profit & 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 Management and Board of Directors of the Company are 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 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 responsi2bility 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 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 to the circumstances, but not for the purpose of expressing an opinion on whether the company has in place an adequate internal financial controls system over financial reporting and the operating effectiveness of such controls. An audit also includes evaluating the appropriateness of 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 financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion on the financial statements.

Basis for Qualified Opinion

a) Note No. 46 to the financial statement with regard to balances due from and due by the company towards debtors and creditors including debit balances in creditor accounts and credit balances in debtors accounts, in respect of which confirmations have not been received. Pending receipt of confirmation of balances and consequent reconciliations, including differences on account of netted off of balances of certain debtors and creditors, if any and the resultant impact on the financial statements including the operating results is not ascertainable.

b) Note No. 31 to the financial statement in respect of projects under Turn-key basis undertaken by the company, we have relied upon the management’s estimates in respect of stage of completion, costs to completion including provisions made for supplies to be effected and installation activities and on the projections of revenues expected from projects and realisability of work in progress and project receivables, whether confirmed or otherwise owing to the technical nature of such estimates, on the basis of which profits / losses have been accounted.

Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matter described in the Basis for Qualified Opinion paragraph, 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 31st March 2016;and

b) in the case of the Statement of Profit and Loss, of the Loss for the year ended on that date.

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

Emphasis of Matter

Attention is drawn to the following:

a) Note No. 34 to the financial statement with regard to Liquidated Damages recovered by the customers of Turnkey projects from running bills amounting to Rs. 1224.75 lakhs, is under negotiations with customers seeking waiver of the same. Pending the outcome of the same the Liquidated Damages so levied have not been provided for.

b) Note No. 35 to the financial statements with regard to pending approval of RBI towards extension of time limit as stipulated in the FEMA Regulations in respect of dues from the foreign customers amounting to Rs. 487.52 lakhs due for more than 1 year.

c) Note No. 45 to the financial statement in respect of certain turnkey projects which have been terminated by the customers resulting in encashment of bank guarantees given by the company amounting to Rs.4603.99 lakhs (Net) has been shown recoverable from parties in respect of which negotiations with the customers are stated to be in progress. Pending the outcome of negotiations no adjustment in the financial statements has been made.

d) Note No. 44 to the financial statement in respect of value of inventory pertaining to the ‘Metering Business’ amounting to Rs. 215.41 lakhs is continued to be carried at cost even though there is no active business for considerable period, pending ascertainment of alternative markets for utilizing the inventories, the realizable value has not been ascertained, consequently the impact on the financial statements is not quantifiable.

e) Note No. 47 to the financial statements with regard to pending compliance under Foreign Exchange Management Rules in respect of extension of time limit for receipt of material on advance to Associate Enterprise to the extent of Rs. 624.19 lakhs.

f) Unpaid Statutory dues amounting to Rs. 487.07 lakhs, the consequential penalties and interest thereon are not provided for and the amount is not quantifiable.

Our opinion is not qualified in respect of this matter. for which there were any material foreseeable losses.

Report on Other Legal and Regulatory Requirements

1. 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 Act, we give in the Annexure A, a statement on the matters specified in paragraphs 3 and 4 of the Order.

2. As required by section 143(3) of the Act, we report 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 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, the 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 aforesaid financial statements comply with the Accounting Standards Specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules 2014.

(e) on the basis of written representations received from the directors as on 31 March 2016 and taken on record by the Board of Directors, there is no disqualification of directors as on 31 March 2016 from being appointed as a director in terms of Section 164(2) of the Act.

(f) with respect to the adequacy of the internal financial control over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate report in Annexure B.

(g) with respect to the other matters to be included in the Auditors Report in accordance with Rule 11 of the Companies (Audits and Auditors) Rules 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 in Note No. 29.

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

(iii) The amounts required to be transferred to the Investor Education and Protection fund by the Company have been transferred.

The Annexure referred to in Paragraph under the heading “Report on other legal and regulatory requirements” of our Report of even date to the members of EASUN REYROLLE LIMITED on the accounts of the company for the year ended 31stMarch, 2016:

On the basis of such checks as we considered appropriate and according to the information and explanations given to us during the course of our audit, we report that:

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

(b) As explained to us, these fixed assets have been physically verified by the management at regular intervals which however, in our opinion needs to be strengthened further having regard to the size of the company and nature of assets. As informed to us no material discrepancies were noticed on such verification;

(c) According to the information and explanation given to us and on the basis of our examination of the records of the Company, the title deeds of immovable properties are held in the name of the Company.

2. (a) The Stock of Finished Goods, Stores and Spare Parts and Raw Materials except stock lying with third parties for which confirmation have been sought for, have been physically verified at year end as per programme of verification drawn up by the management.

(b) In our opinion, the procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the company and nature of its business.

(c) On the basis of the records examined by us and relying on the information provided to us, in our opinion, the Company is maintaining proper records of inventories and no material discrepancies were noticed on physical verification as compared to the book record of inventories.

3. The company granted interest free advances to wholly owned overseas subsidiary and two step down subsidiaries. The outstanding balance at year end amounting to Rs. 2554.86 lakhs.

(a) The terms of advance given are not prima facie prejudicial to the interests of the company.

(b) In the absence of any specific terms as regards the term of advance and terms of repayment of the advances given, we are unable to comment on the same.

4. In our opinion and according to the information and explanations given to us, the Company has complied with the provisions of section 185 and 186 of the Act with respect to the loans and investments made.

5. The Company has not accepted any deposits from the public covered under Section 73 to 76 of the Companies Act, 2013.

6. We have broadly reviewed the books of accounts and records maintained by the Company relating to the manufacture of Electrical Machinery, pursuant to the Rules made by the Central Government for maintenance of Cost Records under sub-section (1) of Section 148 of Act and are of the opinion that prima facie, the records maintained by the company are to be augmented. We have, however, not made a detailed examination of the records with a view to determining whether they are accurate or complete.

7. (a) According to the information and explanations given to us, except for the undisputed statutory dues representing Fringe Benefit Tax of Rs.9.21 lakhs, Service Tax of Rs. 96.78 lakhs, Professional Tax of Rs.7.42 lakhs, Value Added Tax of Rs.26.98 lakhs, Employee’s Provident Fund of Rs.102.53 lakhs, Tax Deducted at Source (TDS) of Rs. 212.68 lakhs, Income Tax of Rs.59.15 lakhs (the Company requested the Income Tax department to adjust with refund of Rs.144.64 lakhs against AY 2013-14), no other statutory dues were outstanding at year end for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us, on the basis of examination of records of the Company, the following dues have not been deposited with the appropriate authorities on account of dispute:

# paid

* adjusted against refund

** Rs.3 lakhs Paid

@ unpaid

& Rs.5 Lakhs paid, Rs.14.21 Lakhs adjusted against refund and Balance not paid

8. Based on our audit procedures and on the basis of information and explanations given by the management, the company has not defaulted in repayment of dues to banks, financial institutions and debenture holders except for the loans which has been tabulated below.

9. 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.

10. During the course of our examination of the books and records of the company, carried in accordance with the auditing standards generally accepted in India, we have neither come across any instance of fraud on or by the Company noticed or reported during the course of our audit nor have we been informed of any such instance by the Management.

11. According to the information and explanations give to us and based on our examination of the records of the Company, the Company has paid / provided for managerial remuneration amounting to Rs. 51,00,000/- which is within the limits specified under section 197 of Companies Act, 2013.

12. In our opinion and 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.

13. According to the information and explanations given to us and based on our examination of the records of the Company, transactions with the 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.

14. According to the information and explanations give 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.

15. According to the information and explanations given to us and based on our examination of the records of the Company, the Company has not entered into non-cash transactions with directors or persons connected with him. Accordingly, paragraph 3(xv) of the Order is not applicable.

16. The Company is not required to be registered under section 45-IA of the Reserve Bank of India Act 1934

For BRAHMAYYA & CO., For R.SUBRAMANIAN & CO.,

Chartered Accountants Chartered Accountants

Firm Regn. No. 000511S Firm Regn. No. 004137S

N. Srikrishna K. Jayashankar

Partner Partner

Membership No. 26575 Membership No. 14156

Place : Chennai

Date : 28th May, 2016