Auditor Report of Kernex Microsystems (India) Ltd.

Mar 31, 2025

We have audited the accompanying Standalone Financial Statements of Kernex Microsystems (India) Limited
(the “Company”), which comprise the Balance Sheet as at March 31, 2025, and the Statement of Profit and Loss
(including Other Comprehensive Income), the Statement of Cash Flows and the Statement of Changes in Equity
for the year ended on that date, and notes to the financial statements, including material accounting policies and
other explanatory information. (hereinafter referred to as “Standalone Financial Statements”).

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 below, the aforesaid Stand¬
alone Financial Statements give the information required by the Companies Act, 2013 (the “Act”) in the manner
so required and give a true and fair view in conformity with the Indian Accounting Standards prescribed under
section 133 of the Act, (“Ind AS”) and other accounting principles generally accepted in India, of the state of affairs
of the Company as at March 31, 2025 and its profit, total comprehensive income, its cash flows and the changes
in equity for the year ended on that date.

Basis for Qualified opinion

We draw attention to the matters described below, the effect of which, individually or in aggregate, are mate¬
rial but not pervasive to the Standalone Financial Statements. The effects of matters described below, which
could be reasonably determined, are quantified and given therein.

a. The Company has a Wholly owned subsidiary namely Avant-Garde Infosystems Inc in USA which is
presently supporting the business of the Company by identifying the sources, negotiating for and pro¬
curing electronic components from outside India. The subsidiary in the past, was involved in the trading
of goods.

b. As per the latest unaudited financials of the subsidiary available as on 31^st March 2025, the accumulat¬
ed loss of the subsidary company for the period ended 31^st March 2025 is USD 1.894 million (the equiv¬
alent Indian Rupees being Rs. 1,617.84 lakhs as per prevailing exchange rate), Which is exceeding
the cost of investment made USD 1.822 million (Rs. 1,275.97 lakhs (at Cost)). As a result, the carrying
amount of the investment in the equity of subsidiary in the books of account of the Company amounting
to Rs. 1,275.97 lakhs (at Cost) stand''s impaired fully. Ind AS 36, requires the company to provide for
impairment in respect of diminution in the value of investments by charging the amount of impairment
to the Profit & Loss Account.

c. The Company made an investment of Rs. 8.00 lakhs in KERNEX TCAS JV - a controlled entity (sub¬
sidiary) formed to execute a railway safety project, in which the Company has 80% share in the profits
and losses. In addition, the Company has also provided the long-term advance of Rs. 575.89 lakhs
(Including interest amount). As per the latest audited financials of KERNEX TCAS JV as on 31^st March
2025, the JV has total assets of Rs 718.55 lakhs and outside liabilities (other than the advance due to
the company) is Rs. 442.94 lakhs. Thus, the net assets available amounting to Rs 275.61 lakhs are not
sufficient to recover the advance given to KERNEX TCAS JV which is Rs. 575.89 lakhs (Including inter¬
est amount) as on 31^st March 2025. Accordingly in our opinion the same investments and the advance
are subject to impairment in standalone financial statements to the extent of Rs 308.28 lakhs.

Since the Company has not impaired the cost of investments in the equity of subsidiary and the advance
granted to KERNEX TCAS JV to an extent of Rs. 1,584.25 lakhs (Rs. 1,275.97 lakhs on account of diminution
in the value of the investment in equity of the wholly owned subsidiary & Rs. 308.28 lakhs on account of insuf¬
ficient funds available in KERNEX TCAS JV), the profit and other Comprehensive Income for the year ended
are overstated by the said amount. The Other Equity in the balance sheet for the year ended is overstated by
Rs.1, 584.25 lakhs.

Our conclusion on the standalone financial statements is qualified in respect of the above matters.

We conducted our audit of the Standalone Financial Statements in accordance with the Standards on Audit¬
ing (SA''s) specified under section 143(10) of the Act. Our responsibilities under those Standards are further
described in the Auditor''s Responsibility for the Audit of the Standalone Financial Statements section of our
report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of
Chartered Accountants of India (“ICAI”) together with the ethical requirements that are relevant to our audit
of the Standalone Financial Statements under the provisions of the Act and the Rules thereunder and we
have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAI''s Code of
Ethics. We believe that the audit evidence obtained by us is sufficient and appropriate to provide a basis for
our opinion on the Standalone Financial Statements.

Emphasis of Matter

We draw attention to Note 12 and 14 of the Standalone Financial Statements, which describes
the company’s assessment towards the recoverability of the following financial assets which are
outstanding for long period of time:

a. Trade Receivables from customers Rs. 422.10 Lakhs (PY 418.34 Lakhs) and respective
Expected Credit Loss (ECL) provision for the CY Rs. 211.67 Lakhs (PY Rs.183.58 Lakhs). The
said receivable is outstanding for more than 3 years.

b. Margin money deposits with banks of Rs. 1,905.12 Lakhs (PY 1,513.31 Lakhs) provided for
customer guarantees of Rs. 3,521.18 Lakhs (PY 2,161.71Lakhs) and under arbitration /
negotiation.

Such assessments are based on current facts and circumstances and may not necessarily reflect
future uncertainties and events and the final recoverable amounts may vary for the reasons mentioned
therein.

Our conclusion on the statement is not qualified in respect of these matters.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit
of the Standalone Financial Statements of the current period. These matters were addressed in the context of
our audit of the Standalone Financial Statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters. We have determined the matters described below to be the key
audit matters to be communicated in our report.

Key Audit Matter	Auditor''s Response
1. Revenue recognition from Engineering,	We obtained and examined the EPC contract entered
Procurement and Construction (EPC) contracts	into with the customer and the inter se agreement
In the Financial Year 2022-23, the Company,	between the consortium partners to understand the respective scope of work and the basis for sharing
acting as the lead member of a consortium (Joint	of revenue.
and several liability) with another third-party partner, commenced execution of Engineering,	We evaluated the Company''s accounting treatment
Procurement and Construction (EPC) contracts for	under Ind AS 115 and noted that the Company has
the provision of railway safety equipment.	recognised revenue only to the extent of its own share
Although the Company, as lead member, raised the	of work as per the consortium arrangement, rather than the gross billing made to the customer, which
entire invoices to the customer, the revenues were	aligns with the principles of control and performance
shared between the consortium partners based on	obligations under the standard.
an inter se agreement that allocates scope of work and related consideration between the parties and	We reviewed the agreements and work orders entered
the consideration was deposited into an escrow	by the company with various customers and we have
account, from which funds are withdrawn by the	examined various terms and conditions relating to the
respective consortium partners based on mutual	scope of work to be executed by the company as per
approval as per the inter se agreement.	various agreements to understand the performance
In accordance with the terms of the consortium	obligations and the activities to be carried out to achieve those performance obligations. on the
arrangement, the Company recognized revenue	customer and matched them with the corresponding
only to the extent of its share of work, after excluding	invoices raised by the third-party consortium partner
the portion attributable to the other consortium	on the Company (refer Note 25 of the standalone
partner. Given the significance of these contracts to	financial statements). We also examined the basis
the Company''s operations, the complexity involved	of management''s certification of the quantum of work
in determining the appropriate revenue share,	executed by the consortium partner against agreed
and the judgment required in applying Ind AS 115	milestones and verified that the deductions made
- Revenue from Contracts with Customers, this	from gross invoicing were supported by contractual
matter was considered to be of most significance in	terms and milestone achievements.
our audit and hence identified as a Key Audit Matter.	We further verified the remittances made to the consortium partner and traced them to supporting documents and bank statements. We obtained and reconciled the balance confirmation received from the third-party consortium partner, which supported the accuracy and completeness of the amounts accounted for by the Company in respect of the consortium arrangement.

Key Audit Matter	Auditor''s Response
2. Existence and valuation of inventories As at 31st March 2025, the Company has reported inventories amounting to ?5,179.82 lakhs (Refer Note 10 of the Standalone Financial Statements), comprising raw materials and work-in-progress. Given the materiality of this balance and the complexities involved in physical verification and valuation of inventories across various locations and stages of production, this matter has been identified as a Key Audit Matter.	The physical verification of raw material stocks held in stores was conducted by the management. We reviewed the verification records and applied rollback procedures to reconcile the verified quantities to the balances as at 31st March 2025 based on inventory movement data. Inventories held at project sites and were physically verified by the respective site in-charge in coordination with the management ,we have reviewed the physical verification report and confirmation submitted by the site in-charge and reconciliation''s were made in respect of the materials delivered from Head Office to project sites and materials invoice from project site to customers Work-in-progress was examined based on the records maintained through the Company''s inventory records and related registers maintained in the accounting system . The Value of the Work - in progress is evaluated with reference to the material cost available in the accounting system and allocation of overheads with reference to the various stages of production of the items We examined the Stores records ,inventory records maintained in the accounting system and the cost allocation procedures implemented in the company to understand and assess the movement of inventory transactions, including receipts from purchases, issues for production, and stock transfers. We also evaluated the valuation methodology applied by the Company in accordance with its accounting policy and Ind AS 2 - Inventories, and performed material reconciliation procedures to verify the accuracy of the closing stock balances.
3. Balances with statutory and government authorities As at 31st March 2025, the Company has reported balances amounting to ?912.96 lakhs lying with statutory and government authorities (Refer Note 16 of the Standalone Financial Statements). Considering the materiality of the amount and the nature of regulatory compliances involved, this matter has been identified as a Key Audit Matter.	This balance primarily comprises Input Tax Credit (ITC) and GST TDS receivable, which the Company intends to avail or set off against future tax liabilities arising from sales. We have verified these balances against the returns filed by the Company under the applicable GST laws. We also corroborated the reported balances with data available on the relevant government portals (i.e. GST portal) to ensure accuracy and recoverability. Based on our procedures, we assessed the appropriateness of the recognition and presentation of these balances in the financial statements.

Information Other than the Financial Statements and Auditor''s Report Thereon (“Other Information”)

• The Company''s Board of Directors is responsible for the other information. The other information
comprises the information included in the Report of the Board of Directors including Annexures
thereto, Management Discussion and Analysis Report but does not include the Consolidated Financial
Statements, Standalone Financial Statements and our auditor''s report thereon.

• Our opinion on the Standalone Financial Statements does not cover the other information and we do
not express any form of assurance conclusion thereon.

• In connection with our audit of the Standalone Financial Statements, our responsibility is to read the
other information and, in doing so, consider whether the other information is materially inconsistent
with the Standalone Financial Statements or our knowledge obtained during the course of our audit or
otherwise appears to be materially misstated.

• If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of management and those charged with governance for the Standalone Financial
Statements

The Company''s Board of Directors is responsible for the matters stated in section 134(5) of the Act with re¬
spect to the preparation of these Standalone Financial Statements that give a true and fair view of the finan¬
cial position, financial performance including other comprehensive income, cash flows and changes in equity
of the Company in accordance with the accounting principles generally accepted in India, including Ind AS
specified under section 133 of the Act. 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.

In preparing the Standalone Financial Statements, Management and Board of Directors are responsible for
assessing the Company''s ability to continue as a going concern, disclosing, as applicable, matters related to
going concern and using the going concern basis of accounting unless the Board of Directors either intend to
liquidate the Company or to cease operations, or has no realistic alternative but to do so.

The Company''s Board of Directors is also responsible for overseeing the Company''s financial reporting pro¬
cess.

Auditor''s Responsibilities for the Audit of the Standalone Financial Statements

Our objectives are to obtain reasonable assurance about whether the Standalone Financial Statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor''s report
that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstate¬
ments can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of these Standalone

Financial Statements. As part of an audit in accordance with SAs, we exercise professional judgment and
maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the Standalone Financial Statements, whether
due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting
a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal financial controls relevant to the audit in order to design audit
procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also
responsible for expressing our opinion on whether the Company has adequate internal financial con¬
trols with reference to Standalone Financial Statements in place and the operating effectiveness of
such controls.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting esti¬
mates and related disclosures made by the Board of Directors.

• Conclude on the appropriateness of the management''s use of the going concern basis of accounting
and based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Company''s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor''s report
to the related disclosures in the financial results or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor''s
report. However, future events or conditions may cause the Company to cease to continue as a going
concern.

• Evaluate the overall presentation, structure and content of the Standalone Financial Statements,
including the disclosures, and whether the Standalone Financial Statements represents the underlying
transactions and events in a manner that achieves fair presentation.

Materiality is the magnitude of misstatements in the Standalone Financial Statements that, individually or
in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the
Standalone Financial Statements may be influenced. We consider quantitative materiality and qualitative
factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate
the effect of any identified misstatements in the Standalone Financial Statements.

We communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal financial
controls that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that
may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that
were of most significance in the audit of the Standalone Financial Statements of the current period and are
therefore the key audit matters. We describe these matters in our auditor''s report unless law or regulation
precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that

a matter should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.

Report on other legal and regulatory requirements

1. As required by Section 143(3) of the Act, based on our audit we report that:

i. 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.

ii. In our opinion, except for the matters described in the “Basis of Qualified Opinion” paragraph, proper
books of account as required by law have been kept by the Company so far as it appears from our ex¬
amination of those books.

iii. The Balance Sheet, the Statement of Profit and Loss including Other Comprehensive Income, the State¬
ment of Cash Flows and Statement of Changes in Equity dealt with by this Report are in agreement with
the relevant books of account.

iv. In our opinion, except for the matters described in the “Basis of Qualified Opinion” paragraph, the afore¬
said Standalone Financial Statements comply with the Ind AS specified under Section 133 of the Act.

v. On the basis of the written representations received from the directors as on March 31, 2025 taken on
record by the Board of Directors, none of the directors is disqualified as on March 31, 2025 from being
appointed as a director in terms of Section 164(2) of the Act.

vi. With respect to the adequacy of the internal financial controls with reference to Standalone Financial
Statements of the Company and the operating effectiveness of such controls, refer to our separate Re¬
port in “Annexure A”. Our report expresses an unmodified opinion on the adequacy and operating effec¬
tiveness of the Company''s internal financial controls with reference to Standalone Financial Statements.

vii. With respect to the other matters to be included in the Auditor''s Report in accordance with the require¬
ments of section 197(16) of the Act, as amended, in our opinion and to the best of our information and
according to the explanations given to us, the remuneration paid by the Company to its directors during
the year is in accordance with the provisions of section 197 of the Act.

viii. 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 informa¬
tion and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financial position in its Stand¬
alone 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 were no amounts which were required to be transfered to the Investor Education and Pro¬
tection Fund by the Company

iv. a. The Management has represented that, to the best of its knowledge and belief, no funds

have been advanced or loaned or invested (either from borrowed funds or share premium
or any other sources or kind of funds) by the Company to or in any other person(s) or enti-
ty(ies), including foreign entities (“Intermediaries”), with the understanding, whether record¬
ed in writing or otherwise, that the Intermediary shall, directly or indirectly lend or invest in
other persons or entities identified in any manner whatsoever by or on behalf of the Compa¬
ny

(“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ulti¬
mate Beneficiaries.

b. The Management has represented that, to the best of its knowledge and belief, no funds have
been received by the Company from any person(s) or entity(ies), including foreign entities
(“Funding Parties”), with the understanding, whether recorded in writing or otherwise, that
the Company shall, directly or indirectly, lend or invest in other persons or entities identified
in any manner whatsoever by or on behalf of the Funding Party (“Ultimate Beneficiaries”) or
provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

c. Based on the audit procedures performed that have been considered reasonable and
appropriate in the circumstances, nothing has come to our notice that has caused us to
believe that the representations under sub-clause (i) and (ii) of Rule 11(e), as provided under
(a) and (b) above, contain any material misstatement.

v. The Company has not declared or paid any dividend during the year.

vi. Based on our examination, which included test checks, the Company has used accounting software
systems for maintaining its books of account for the financial year ended March 31, 2025 which have
the feature of recording audit trail (edit log) facility and the same has operated throughout the year for
all relevant transactions recorded in the software systems. Further, during the course of our audit we did
not come across any instance of the audit trail feature being tampered with and the audit trail has been
preserved by the Company as per the statutory requirements for record retention.

2. As required by the Companies (Auditor''s Report) Order, 2020 (“the Order”) issued by the Central Govern¬
ment in terms of Section 143(11) of the Act, we give in “Annexure B” a statement on the matters specified
in paragraphs 3 and 4 of the Order.

For N S V R & Associates LLP

Chartered Accountants
FRN: 0008801S/S200060

Sd/-

V Gangadhara Rao N

Partner

Membership No. 219486
UDIN: 25219486BMIRXU8330

Place: Hyderabad
Date: May 23, 2025

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Mar 31, 2024

We have audited the accompanying standalone financial statements of Kernex Microsystems (India) Limited (“the Company”), which comprise the balance sheet as at 31 March 2024, and the statement of Profit and Loss, including the Statement of Other Comprehensive Income, the statement of cash flows and the statement of changes in equity for the year then ended, and notes to the financial statements, including a summary of material accounting policies and other explanatory information.

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 below, the aforesaid standalone Financial statements give the information required by the Companies Act, 2014, as amended (“the Act”) in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2024, its loss including other comprehensive income, its cash flows and the changes in equity for the year ended on that date.

Basis for Opinion

(a) The Company has a 100% subsidiary namely Avant Garde International Inc in USA which is presently supporting the business of the company by identifying the sources, negotiating for and procuring electronic components from outside India. The subsidiary in the past, was involved in the trading of goods.

As per the latest unaudited financials of the subsidiary available as on 31-03-2024, the net worth of the subsidiary has eroded fully and to an extent of USD 1.917 million against an investment of USD 1.821 million, the equivalent Indian Rupees being 1450.81 lakhs per prevailing exchange rate. As a result, the carrying amount of the investment by the Company in the equity of subsidiary at Rs. 1275.97 lakhs (at Cost) (Note 4) stands fully impaired. Ind AS 36 requires the company to provide for impairment in the value of investments which are accounted at Cost by providing for the amount of impairment in the Profit & Loss Account.

(b) The Company besides making an investment of Rs. 8 lakhs in TCAS JV - a joint venture partnership (Note 4) formed to execute a railway safety project, in which the Company has 80% share in the profits and losses; has further exposure by way of long-term advances of Rs. 489.70 lakhs (Note 6.1) and a trade receivable of Rs. 97.54 lakhs (ECL provided of Rs. 8.53 lakhs) (Note 3). The TCAS JV has accumulated losses Rs. 216. 23 lakhs as on 31-03-2024 and the share of Company in these losses works to Rs. 172.99 lakhs (Note 34A). In our view, the company is required to make a provision for impairment loss towards its investment, loan and trade receivables to the tune of Rs. 164.46 lakhs to account for the share of accumulated losses in the Joint venture in its stand-alone financial statements.

Since the Company has not impaired the cost of investments, the advance granted to joint venture and trade receivable to an extent of Rs. 1440.43 lakhs ( Rs. 1275.97 lakhs on account of AGI & Rs. 164.46 lakhs on account of TCAS JV) in its books, the Loss for the year and other Comprehensive Income are understated by the said amount. The Other Equity in the balance sheet is overstated by Rs. 1440.43 lakhs. Our conclusion on the statement is qualified in respect of the above matters.

We conducted our audit of standalone financial statements in accordance with the Standards on Auditing (SAs), as specified under section 143(10) of the Companies Act, 2013. Our responsibilities under those Standards are further described in the Auditor''s Responsibilities for the Audit of the Standalone Financial statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India together with the ethical requirements that are relevant to our audit of the standalone financial statements under the provisions of the Act, and the Rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on the standalone financial statements.

Emphasis of Matter

We draw attention to Note 3, 7, 10 and 33 (g) of the standalone financial statements which describes that the company has assessed the recoverability and impairment of the following financial assets:

(a) Trade Receivables from customers Rs. 532.46 lakhs (including a related party of Rs. 323.77 (PY Rs. 512.12 lakhs) net of ECL provision.

(b) MAT credit receivable of Rs. 122.56 lakhs (PY Rs. 122.56 lakhs)

(c) Margin money deposits with banks of Rs. 1513.30 lakhs (PY Rs. 1702.34 lakhs) secured for customer guarantees and under arbitration / negotiation.

Such assessments are based on current facts and circumstances and may not necessarily reflect future uncertainties and events and the final recoverable amounts may vary for the reasons mentioned therein.

Key Audit Matter

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report.

Key Audit Matter

Auditor''s Response

1. The Company (as a lead member) along with a third party as consortium partners (with joint and several liability), entered into Engineering, Procurement and Construction Contracts with a Customer in financial year 22-23 in connection with providing railway safety equipment on EPC basis. The consortium partners entered an inter se agreement to share the revenues from these customer contracts in proportion to the scope of work agreed between them, each being responsible for their share of agreed work. The Company, though as a lead member received the entire revenue, it accounted revenue to the extent of its share alone i.e., after deducting the amount per scope of work for which the other consortium partner is responsible and entitled to. The revenue from these contracts commenced in this year of audit, and being material to the Company is considered as a key audit matter.

We have examined the EPC contract with the Customer, the inter se agreement between consortium partners which detailed the scope of work for which each of them is responsible, and the proportion of contract value payable to the third-party consortium partner for its share of work under the contract. In terms of Ind AS 115 the Company accounted only for its share of revenue as the income from the contract instead of gross revenue of the contract with a corresponding adjustment to contract assets. We reviewed the invoices raised on the customer vis a vis the invoices raised by third party consortium partner on the company (Note 20). For the purposes of determining the company''s share of

Key Audit Matter	Auditor''s Response
	revenue from the EPC contract, the company''s management certified the proportion of work rendered by third party consortium partner basis contract milestones for reduction from the invoices raised on the customer. Pending confirmation of balances by the third-party consortium partner, we have verified their invoices raised on the company and the remittances made to them.
2. The Customers of the Company stipulated material amounts as liquidated damages for delays in execution of the contract, which are not accounted for.	As regards liquidated damages, we have been informed by the management that the contracts most likely would be extended on account of delays at Customer-end obviating the need to provide for liquidated damages in the financial statements. We have verified the receipts from customers during the year to confirm that no deductions were made towards liquidated damages.
3. The value of Inventories (Note No 8) at Rs. 7169.56 Lakhs comprising of Raw materials, Work in Progress and Finished goods as on 31-03-2024 is considered as a key audit matter considering the relative size of it in the financial statements.	The physical verification of raw material stocks in stores was conducted by the Internal auditors and management in April 24 & Finished goods at production department were physically verified by us in May 24; both of which have been related back to year-end numbers based on the recorded movement from year-end to the date(s) of physical verification, to ascertain corresponding book balances as on 31-032024. Finished goods and other components of Rs. 2564.79 lakhs include Rs. 1918.25 lakhs at project site not verified by us but certified by the management. Material components lying in production department under conversion to semi-finished / finished goods, valued at Rs. 1914.79 lakhs (excluding unbilled revenue of Rs. 163.47 lakhs), as per the integrated software application could not be physically verified. We have verified the integrated accounting and inventory software maintained by the Company to ascertain the receipts from purchases, issues and stock transfers; for material balancing of major items of raw materials to arrive at the closing stock of Inventories as well as the valuation thereof.

Key Audit Matter	Auditor''s Response
4. Balances lying with statutory / government authorities as on 31-03-2024 amount to Rs. 1506.93 lakhs (Note 6) is considered as a key audit matter considering the relative size of it in the financial statements.	This amount relates to Input credit and GST TDS to be availed / set off against future sales by the Company. We have verified the same with the returns filed by the Company under the Statute and the amounts recorded in the concerned authorities'' portal(s)

Information Other than the Standalone Financial Statements and Auditor''s Report Thereon

The Company''s Board of Directors is responsible for the other information. The other information comprises the information included in the Annual Report but does not include the Standalone Financial Statements and our auditor''s report thereon. The Company''s Annual Report is expected to be made available to us after the date of this auditors'' report.

Our opinion on the standalone financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon.

In connection with our audit of the standalone financial statements, our responsibility is to read the other information identified above when it becomes available, and, in doing so, consider whether such other information is materially inconsistent with the standalone Financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

Responsibilities of Management and Those Charged with Governance for the Standalone Financial Statements

The Company''s management and Board of Directors are responsible for the matters stated 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 including other comprehensive income, cash flows and changes in the equity of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards(Ind AS) specified under section 133 of the Act read with the companies (Indian Accounting Standards) Rules, 2015, as amended. 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 Standalone Financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the Standalone Financial statements, the management is responsible for assessing the Company''s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those Board of Directors are also responsible for overseeing the company''s financial reporting process.

Auditor''s Responsibilities for the Audit of the Standalone Financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor''s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from

fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone financial statements.

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Companies Act, 2013, we are also responsible for expressing our opinion on whether the company has adequate internal financial controls system in place and the operating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management''s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company''s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor''s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor''s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor''s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2020 (“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 B a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.

2. A. As required by Section 143(3) of the Act, we report that:

i. 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.

ii. In our opinion, 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 except for the matters stated in paragraph 2B below on reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014.

iii. The Standalone Balance Sheet, the Statement of Profit and Loss including the Statement of other Comprehensive Income, the Cash Flow Statement and Statement of Changes in Equity dealt with by this Report are in agreement with the books of account.

iv. In our opinion, the aforesaid standalone financial statements comply with the Accounting Standards (Ind AS) specified under Section 133 of the Act.

v. 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.

vi. On the basis of the written representations received from the directors from 01-04-2024 to 29-05-2024 and taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 2024 from being appointed as a director in terms of Section 164(2) of the Act.

vii. The qualification relating to the maintenance of accounts and other matters connected therewith are as stated in the Basis for Qualified Opinion paragraph above and in paragraph 2B.

viii. 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”.

ix. With respect to the matter to be included in the Auditor''s Report under Section 197(16) of the Act, in our opinion and according to the information and explanations given to us, the remuneration paid / payable by the Company to its directors during the current year is in accordance with the provisions of Section 197 of the Act. Remuneration of Rs. 39 lakhs to the Wholetime Directors for the period from 1st October 2023 till March 2024 approved in the Board meeting held on 12-10-2023, is subject to ratification of the members in the ensuing general meeting.

x. 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 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 were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company

iv. a) The management has represented that, to the best of its knowledge and belief, no funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the company to or in any other person or entity, including foreign entities (“Intermediaries”), with the understanding, whether recorded in writing or otherwise, that the Intermediaries shall, whether,directly or indirectly lend or invest in other person or entity identified in any manner whatsoever by or on behalf of the Company (“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;

b) The management has represented that, to the best of its knowledge and belief, no funds have been received by the company from any person or entity, including foreign entities (“Funding Parties”), with the understanding, whether recorded in writing or otherwise, that the company shall, whether, directly or indirectly, lend or invest in other person or entity identified in any manner whatsoever by or on behalf of the Funding Parties (“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries; and

c) Based on the audit procedures that were considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the representations under sub-clause (a) and (b) contain any material misstatement.

v. No dividend has been declared or paid during the year by the Company.

B. The reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014 applicable from 1 April 2023 is as follows:

Based on our examination which included test checks, except for the instances mentioned below, the Company has used accounting software for maintaining its books of account, which have a feature of recording audit trail (edit log) facility and the same has operated during the year, as under, for all relevant transactions recorded in the respective software:

a. The feature of recording audit trail has been put in place only from 03-07-2023 when the company upgraded the integrated accounting and inventory software to the edit log version.

b. The feature of recording audit trail (edit log) facility was not enabled for accounts relating to payroll, fixed asset register and consolidation process.

c. The feature of recording audit trail (edit log) was not enabled for records maintained with respect to indenting and purchase of raw material components and job works.

Further, for the periods where audit trail (edit log) facility was enabled and operated throughout the year for the respective accounting software, we did not come across any instance of the audit trail feature being tampered with. As regards audit trail preservation, since this is the first year, the requirements are not applicable.

For PRSV & Co. LLP

Chartered Accountants Firm''s Registration No. S-200016

Sd/-

Raja Praturi

Partner

^{Place: Hyderabad} Membership No. 020615

^{Date : 13 Jul}y ²⁰²⁴ UDIN: 24020615BKCQYL7616

---

Mar 31, 2023

Kernex Microsystems (India) Limited Report on the Audit of the Standalone Financial Statements Qualified

Opinion

We have audited the accompanying standalone financial statements of Kernex Microsystems (India) Limited (“the Company”), which comprise the balance sheet as at 31 March 2023, and the statement of Profit and Loss, including the Statement of Other Comprehensive Income, the statement of cash flows and the statement of changes in equity for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information.

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone Financial statements give the information required by the Companies Act, 2013, as amended (“the Act”) in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2023, its loss including other comprehensive income, its cash flows and the changes in equity for the year ended on that date.

Basis for Opinion

We conducted our audit of standalone financial statements in accordance with the Standards on Auditing (SAs), as specified under section 143(10) of the Companies Act, 2013. Our responsibilities under those Standards are further described in the Auditor''s Responsibilities for the Audit of the Standalone Financial statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India together with the ethical requirements that are relevant to our audit of the standalone Financial statements under the provisions of the Act, and the Rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on the standalone Financial statements.

Emphasis of Matter

We draw attention to Note 44 to the standalone financial statements which describes that the Company has assessed the recoverability and impairment of certain financial assets namely trade receivables including Rs. 414.57 lakhs from Related party, income tax assets and margin money /security deposits secured for customer guarantees under arbitration / negotiation. Such assessments are based on current facts and circumstances and may not necessarily reflect future uncertainties and events and the final recoverable amount may vary for the reasons mentioned there in.

Our opinion is not modified in respect of this matter.

Key Audit Matter

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report.

Key Audit Matter

Auditor''s Response

1. The Company recognizes revenue from sale of goods/services based on the terms and conditions of purchase orders / contracts received from different customers. For recognising revenue, the control of goods / services are transferred to the customer. As revenue recognition is subject to management''s assessment as to when control is transferred / services performed, we consider this as a key audit matter.

1. We have evaluated the appropriateness of the assumptions applied for assessing the revenue and tested the evidence to support the revenue recognition.

Information Other than the Standalone Financial Statements and Auditor''s Report Thereon

The Company''s Board of Directors is responsible for the other information. The other information comprises the information included in the Annual Report but does not include the Standalone Financial Statements and our auditor''s report thereon.

Our opinion on the standalone financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon.

In connection with our audit of the standalone Financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether such other information is materially inconsistent with the standalone Financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Standalone 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 standalone Financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, cash flows and changes in the equity of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards(Ind AS) specified under section 133 of the Act read with the companies (Indian Accounting Standards) Rules, 2015, as amended. 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 Standalone Financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the Standalone Financial statements, the management is responsible for assessing the Company''s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those Board of Directors are also responsible for overseeing the company''s financial reporting process.

Auditor''s Responsibilities for the Audit of the Standalone Financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor''s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from

fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone Financial statements.

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Companies Act, 2013, we are also responsible for expressing our opinion on whether the company has adequate internal financial controls system in place and the operating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management''s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company''s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor''s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor''s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor''s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2020 (“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 B 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 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, 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) The Balance Sheet, the Statement of Profit and Loss including the Statement of other Comprehensive Income, the Cash Flow Statement and Statement of Changes in Equity dealt with by this Report are in agreement with the books of account.

d) In our opinion, the aforesaid standalone 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 the written representations received from the directors as on 31 March 2023 taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 2023 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 controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in “Annexure A”.

g) In our opinion, the managerial remuneration for the year ended 31 March 2023 has been paid /provided by the Company to its directors in accordance with the provisions of section 197 read with Schedule V to the Act;

h) 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 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 were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company

iv. a) The management has represented that, to the best of its knowledge and belief, no funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the company to or in any other person or entity, including foreign entities (“Intermediaries”), with the understanding, whether recorded in writing or otherwise, that the Intermediaries shall, whether,directly or indirectly lend or invest in other person or entity identified in any manner whatsoever by or on behalf of the Company (“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;

b) The management has represented that, to the best of its knowledge and belief, no funds have been received by the company from any person or entity, including foreign entities (“Funding Parties”), with the understanding, whether recorded in writing or otherwise, that the company shall, whether, directly or indirectly, lend or invest in other person or entity identified in any manner whatsoever by or on behalf of the Funding Parties (“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries; and

c) Based on the audit procedures that were considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the representations under sub-clause (a) and (b) contain any material misstatement.

v. No dividend has been declared or paid during the year by the Company.

For PRSV & Co. LLP

Chartered Accountants

Firm''s Registration No. S-200016

Sd/-

Raja Praturi

Partner

Place: Hyderabad Membership No. 020615

^{Date : 28 Ma}y ²⁰²³ UDIN: 23020615BGYNNY7297

---

Mar 31, 2018

INDEPENDENT AUDITORS’ REPORT

To

The Members

Kernex Microsystems (India) Limited

Report on the Standalone Ind AS Financial

Statements

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

Management’s Responsibility for the Standalone 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 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) prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) 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 Ind AS standalone financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditors’ 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 and the Order issued under section 143(11) of the Act.

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

We believe that the audit evidence obtained by us is sufficient and appropriate to provide a basis for our audit opinion on the standalone Ind AS financial statements.

Basis for Qualified Opinion

- Out of the total trade receivables as per note no 9, dues outstanding for more than 6 months as on March 31, 2018 is of Rs. 32.85 crores which are subject to confirmation and reconciliation. These trade receivable are slow moving, as partly received or non-moving.

- An amount of Rs. 15.08 crores receivable from Konkan Railway Corporation Limited (KRCL) is under arbitration. Further, the Company has failed in the conciliation proceedings against KRCL for outstanding dues of Rs 5.18 crores and the Company is in the process of filing Arbitration petition. The company has not made any provision in the books of accounts.

- Other financial assets under non-current assets as per note no 5 amounting to Rs. 6.00 is subject to confirmation from parties.

- No provision has been made for slow/nonmoving stocks lying as on March 31, 2018.

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 matters described in the Basis for Qualified Opinion, the aforesaid Ind AS standalone 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, of the state of affairs of the Company as at March 31, 2018, its loss including other comprehensive loss, its cash flows and the changes in equity for the year ended on that date.

Report on Other Legal and Regulatory

Requirements

1. As required by Section 143(3) of the Act, based on our audit 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 purposes of our audit.

b) In our opinion, 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) The Balance Sheet, the Statement of Profit and Loss including of Other Comprehensive Income, Statement of Cash Flow and Statement of Changes in Equity dealt with by this Report are in agreement with the books of account.

d) In our opinion, the aforesaid standalone Ind AS financial statements comply with the Indian Accounting Standards prescribed under section 133 of the Act, read with Companies (Indian Accounting Standards) Rules 2015, as amended.

e) On the basis of the written representations received from the directors of the Company as on March 31, 2018 and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2018 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 controls over financial reporting of the Company with reference to these standalone Ind AS financial statements and the operating effectiveness of such controls, refer to our separate Report in "Annexure A to this report”.

g) 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 statements.

ii. 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.

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

2. As required by the Companies (Auditor’s Report) Order, 2016 ("the Order”) issued by the Central Government in terms of Section 143(11) of the Act, we give in "Annexure B” a statement on the matters specified in paragraphs 3 and 4 of the Order.

ANNEXURE “A” TO THE INDEPENDENT AUDITORS’ REPORT OF EVEN DATE ON THE STANDALONE IND AS FINANCIAL STATEMENTS

(Referred to in paragraph 1(f) under ‘Report on Other Legal and Regulatory Requirements’ section of our report to the Members of Kernex Microsystems (I) Limited of even date)

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

We have audited the internal financial controls over financial reporting of KERNEX MICROSYSTEMS (INDIA) LIMITED ("the Company”) as of March 31, 2018 in conjunction with our audit of the standalone Ind AS financial statements of the Company 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 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, 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.

Auditors’ Responsibility

Our responsibility is to express an opinion on the internal financial controls over financial reporting of the Company 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 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 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 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.

ANNEXURE ‘B’ TO THE INDEPENDENT AUDITORS’ REPORT

(Referred to in paragraph 2 under ‘Report on Other Legal and Regulatory Requirements’ section of our report to the Members of Kernex Microsystems (I) Limited of even date)

I. In respect of the Company’s fixed assets:

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

(b) All the fixed assets have not been physically verified by the management during the year but there is regular program of verification which in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. According to the information and explanations given to us, no material discrepancies were noticed on such verification.

(c) According to the information and explanations given to us, the title deeds of immovable properties included in property, plant and equipment are held in the name of the Company.

ii. As explained to us, the management has conducted physical verification of inventory at reasonable intervals during the year and no material discrepancies were observed in the inventories.

iii. According to the information and explanations given to us, the Company has not granted any unsecured loans to companies, firms, limited liability partnerships or other parties covered in the register maintained under section 189 of the Companies Act, 2013, Accordingly, the provisions of clause 3 (iii) (b), (c) and (d) are not applicable to the Company.

iv. In our opinion and according to the information and explanations given to us, the Company has

not advanced loans to director/ to a Company in which the Director is interested to which provisions of section 185 of the Companies Act, 2013 apply. In our opinion and according to the information and explanations given to us, the Company has made investments and given guarantees/provided security which is in compliance with the provisions of Sections 186 of the Companies Act, 2013.

v. The Company has not accepted deposits during the year within the meaning of Sections 73 to 76 of the Act and the Companies (Acceptance of Deposits) Rules, 2014 (as amended). Therefore, the provisions of the clause 3 (v) of the Order are not applicable to the Company.

vi. The maintenance of cost records has not been specified by the Central Government under section 148(1) of the Companies Act, 2013 for the business activities carried out by the Company. Thus, reporting under clause 3(vi) of the order is not applicable to the Company.

vii. (a) According to the books and records as

produced and examined by us and also based on management representations, undisputed statutory dues in respect of Provident fund, Employees’ State Insurance, Income Tax, Sales Tax, Service Tax, Value Added Tax, Goods and Service Tax, Customs Duty, Excise Duty, Cess and other material statutory dues have not been regularly deposited by the Company during the year with appropriate authorities and the outstanding statutory dues outstanding for more than 6 months as at the end of the financial year are as follows.

Nature of Statutory Dues	Amount (Rs. In Lakhs)
Service Tax	69.72
CST against ''C'' Forms	22.07
Total	91.79

(b) According to information and explanations given to us, disputed amounts payable in respect of Income Tax, Sales Tax, Provident fund were outstanding as at March 31, 2018 are as follows:

Name of the Statute			Period to which the amount relates	Amount ? in Lakhs
The Income Tax Act, 1961	Income Tax	High Court of judicature at Hyderabad for the state of Telangana and state of Andhra Pradesh	A.Y. 1998-99	8.00
APGST Act, 1957	Sales Tax and Interest	Sales Tax Appellate Tribunal	F.Y. 2002-03	4.13
The Employee Provident Act, 1952	Provident Fund	PF Department	F.Y 2017-18	51.64

viii. In our Opinion and according to the information and explanations given by the management, the company has not defaulted in repayment of loans or borrowings to banks or government. There are no dues which are payable to financial institutions. The Company did not have any debenture holders during the year.

ix. According the information and explanations given by the management, the Company has not raised any moneys by way of initial public offer/further public offer/ debt instruments and term loans and hence reporting under clause 3 (ix) of the Order is not applicable to the Company.

x. Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and according to the information and explanations given by the management, we report that no fraud by the Company or 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 paid/provided managerial remuneration in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Act.

xii. The Company is not a Nidhi Company and hence reporting under clause 3 (xii) of the Order is not applicable to the Company.

xiii. In our opinion and according to the information and explanations given to us by the management, the Company is in compliance with Section 177 and 188 of the Companies Act, 2013 where applicable, for all transactions with the related parties and the details of related party transactions have been disclosed in the notes to the financial statements as required by the applicable accounting standards.

xiv. According the information and explanations given to us, the Company has not made any preferential allotment or private placement of shares or fully or partly paid convertible debentures during the year under review and hence reporting under clause 3 (xiv) of the Order is not applicable to the Company.

xv. According to the information and explanations given to us, the Company has not entered into any non-cash transactions with its Directors or persons connected to its directors as referred to in section 192 of the Companies Act, 2013 during the year under review and hence provisions of section 192 of the Companies Act, 2013 are not applicable to the Company.

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

For PRSV & Co. LLP

Chartered Accountants

Firm Registration No: S-200016

Y. Venkateswarlu

Partner

Membership No: 222068

Place: Hyderabad

Date: 27th May, 2018

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Mar 31, 2016

INDEPENDENT AUDITOR''S REPORT

To

The Members of

Kernex Microsystems (India) Limited

1. Report on the Financial Statements

We have audited the accompanying financial statements of KERNEX MICROSYSTEMS (INDIA) LIMITED, (“The Company”), which comprise the Balance Sheet as at March 31, 2016, 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.

2. 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 standalone financial statements that give a true and fair view of the financial position, financial performance and 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.

3. 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 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 audit opinion on the financial statements.

4. 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, of the state of affairs of the Company as at 31st March, 2016 and its loss and its cash flows for the year ended on that date.

5. Other Matters

We did not audit the financial statements/ information of Egypt Branch included in the standalone financial statements of the Company whose financial statements/information reflect total assets of Rs.12,65,92,013 as at 31st March, 2016 and total revenues of Rs.3,23,67,138 for the year ended on that date, as considered in the standalone financial statements. The financial statements/information of this foreign branch have been audited by the branch auditors whose reports have been furnished to us, and our opinion in so far as it relates to the amounts and disclosures included in respect of this branch, is based solely on the report of such branch auditors and the returns submitted at the branch.

The outstanding debtors amount of Rs.24.06 crores from Konkan Railway Corporation Limited is subject to confirmation and reconciliation.

Our opinion is not modified in respect of this matter.

6. 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 the paragraph 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 purposes 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 the 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 31st March,2016 and taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2016 from being appointed to act as a director in terms of Section 164(2) of the Act;

(f) 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 the “Annexure B” and

(g) With respect to other matters to be included in the Auditor''s Report in accordance with Rule 11 of the Companies (Audit 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- Refer Note No. 27 to the financial statements;

ii. 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-Refer Note 27 to the financial statements;

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

1. a) The Company has maintained requisite records showing required particulars including quantitative details and situation of its fixed assets.

b) According to the information and explanation given to us by the management, most of the fixed assets of the company have been physically verified by the management during the year and the intervals of such verification had also been reasonable.

c) According to the information and explanations 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. As explained to us by the management and as observed by us, the inventory of raw material, finished goods stores and spares etc. has been physically verified during the year and specifically at the year-end by the management and no material discrepancies were observed in the inventories.

3. Based on our scrutiny and as per information and explanations provided to us by the management, the company has not granted any loans during the period under review covered in the registers maintained under section 189 of the Companies Act, 2013. Since there are no loans granted sub-clauses b, c and d are not applicable.

4. Based on our scrutiny and as per the information provided by the management, the company does not have any transactions in respect of loans, investments, guarantees and securities granted, to be complied with the provisions of Sections 185 and 186 of the Companies Act, 2013.

Name of the Statute	Amount (Rs. In lakhs)	Period to which the amount relates	Forum where dispute is pending
Income Tax Act, 1961	8.00	F.Y. 1997-98	A.Y. 1998-99High Court of Judicature at Hyderabad for the state of Telangana and State of Andhra Pradesh
APGST Act, 1957	4.13	F.Y. 2002-03	Sales Tax Appellate Tribunal

5. Based on our scrutiny and as per the information provided by the management, the company has not accepted any deposits during the year under review attracting the sections 73 to 76 of the Companies Act, 2013 and rules made there under.

6. According to the information and explanations given, the maintenance of cost records as specified under sub-section (1) of section 148 of the Companies Act, 2013 are not applicable for the year under review.

7. a) According to the books and records as

produced and examined by us in accordance with Generally Accepted Auditing Practices in India and also based on management representations, undisputed statutory dues in respect of provident fund, employee state insurance, income tax, service tax, sales tax, value added tax, excise duty, cess and other material statutory dues have not been regularly deposited by the company during the year with the appropriate authorities and the outstanding statutory dues as at the end of the financial year outstanding for more than 6 months are as follows :

Nature of Statutory Dues	Amount (Rs. in Lakhs)
Provident Fund Employees State Insurance Tax Deducted at Source Service Tax Professional Tax Works Contract Tax TOTAL	42.25 3.22 24.18 190.78 0.49 9.69 270.61

b) According to information and explanations given to us, disputed amounts payable in respect of Income Tax and Sales Tax were outstanding as on 31st March, 2016 are as follows:

8. As observed by us and as per the information and explanations given by the management, we are of the opinion that the company has not defaulted in repayment of dues to its financial institution or bank during the year under audit.

9. As observed by us, the company has not availed any Term Loans from Banks during the year. The company has not raised any monies by way of IPO or FPO during the year under review.

10. Based upon the audit procedures performed and information and explanations given by the management, we report that no material fraud on or by the company by its officers or employees has been noticed or reported during the course of our audit.

11. According to the information and explanations given to us and based on our examination of the records of the company, the managerial remuneration paid/provided during the year by the company is as per the provisions of section 197 read with Schedule V of the 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 related parties are in compliance with section 177 and 188 of the Act wherever 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 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.

15. As observed by us and as per the information and explanations given by the management, the company has not entered into any non-cash transactions with the directors or persons connected with him, during the period under review.

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

For GMK ASSOCIATES,

Chartered Accountants

Firm Regn No.006945S

G. Satyanarayana Murty

Partner

Membership No: 29919

Place: Hyderabad

Date: 28th May, 2016

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Mar 31, 2015

We have audited the accompanying standalone financial statements of KERNEX MICROSYSTEMS (INDIA) LIMITED ('the Company'), which comprise the Balance Sheet as at 31 March 2015, the statement of profit and loss and 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 Standalone 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 and presentation 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 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 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 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, 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 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 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 financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone 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, of the state of affairs of the Company as at 31 March 2015 and its Loss and its cash flows for the year ended on that date

Other Matter

We did not audit the financial statements/information of Egypt branch included in the standalone financial statements of the Company whose financial statements/ information reflect total assets of Rs.14,64,52,805 as at 31st March,2015 and total revenues of Rs. 4,27,34,800 for the year ended on that date, as considered in the standalone financial statements. The financial statements/information of these foreign branch have been audited by the branch auditors whose reports have been furnished to us, and our opinion in so far as it relates to the amounts and disclosures included in respect of these branch, is based solely on the report of such branch auditors.

The outstanding Debtors amount of Rs 18.18 Crores from Konkan Railway Corporation Limited are subject to confirmation and reconciliation.

Our opinion is not modified in respect of this matter.

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 statement on the matters specified in the paragraph 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 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 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. The reports on the accounts of the foreign branch office of the Company audited under the provisions of Egyptian Laws by branch auditors have been sent to us and have been properly dealt with by us in preparing this report;

d. the balance sheet, the statement of profit and loss and the cash flow statement dealt with by this Report are in agreement with the books of account;

e. in our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014;

f. on the basis of the written representations received from the Directors as on 31 March 2015 taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 2015 from being appointed as a director in terms of Section 164 (2) of the Act; and

g. 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, 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 26 to the 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.

Annexure to the Independent Auditors' Report

The Annexure referred to in our Independent Auditors' Report to the members of the Company on the standalone financial statements for the year ended 31 March 2015, we report that:

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

(b) As per information and explanations given to us by the management, physical verification of Fixed Assets has been carried out during the year and no material discrepancies are noticed.

(II) (a) The Inventory has been physically verified by the management at reasonable intervals.

(b) In our opinion and according to the information and explanations given to us, the procedures for physical verification of inventory followed by the management were reasonable and adequate in relation to the size of the Company and the nature of its business;

(c) On the basis of our examination of the inventory records, in our opinion, the company has maintained proper records of inventory. The discrepancies noticed on physical verification of inventory as compared to book records were not material.

(III) During the year, the Company has not granted any loans, secured or unsecured, to the companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 2013.

Hence Clauses (iii) (a) & (b) of the Order are not applicable.

(IV) In our opinion and according to the information and explanations provided to us there are adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchase of inventory, fixed assets and for sale of goods and services. During the course of our audit, no major weakness has been noticed in the internal control.

(V) The Company has not accepted any deposits from the public during the year under review falls under section 73 to 76 of the Companies Act 2013;

(VI) Books of account to be maintained by the Company, pursuant to the Rules made by the Central Government of India for the maintenance of cost records, is not applicable for this company for the year under review.

(VII)(a) There have been delays in depositing undisputed statutory dues including Provident Fund, Employees State Insurance, Income Tax and Service Tax with appropriate authorities during the year. According to the records, information and explanations provided to us, there are undisputed amounts payable in respect of Provident Fund Rs 10,52,071/-, TDS Rs1852602/-, and Corporate Dividend Tax Rs 20,27,757 were outstanding at the yearend for a period of more than six months from the date they become payable ;

(b) According to the information and explanations provided to us, particulars of out-standing dues of Income tax and Sales tax have not been deposited on account of any dispute are given below:

Name of Statute Nature of the Period to Dues which the amount relates

Income Tax Act Income Tax A.Y 1998-99

APGST Sales Tax A.Y 2003-04

Name of Statute Amount Forum where (Rupees in Lakhs) dispute is pending

Income Tax Act 8.00 High Court

APGST 4.13 STAT



(VIII) The Company does not have any accumulated losses at the end of the financial year and has incurred a cash loss of Rs 5,51,64,254 during the year covered by our audit and has not incurred any cash loss in the immediately preceding financial year.

(IX) Based on our audit procedures and on the information and explanations given by the management, the Company has not defaulted in repayment of dues to any financial institution or bank;

(X) On the basis of our examination of the books of accounts and the information and explanation given to us the Company has not given any guarantee for loans by others from bank or financial institutions ;

(XI) According to the information and explanations given to us, the company has not availed any term loans during the year under review.

(XII) Based on the audit procedures performed and information and explanations given to us by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.

For GMK Associates Chartered Accountants Firm Regn No. 006945S

(G. Satyanarayana Murty) Place: Hyderabad Partner Date: 24th May, 2015 Membership No. 029919

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Mar 31, 2014

We have audited the accompanying financial statements of KERNEX MICROSYSTEMS (INDIA) LIMTED("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 and in accordance with the accounting principles generally accepted in India. This responsibility includes the design, implementation and maintenance of internal control 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 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 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 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. 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 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 Statement of Profit and Loss, of the profit for the year ended on that date.

(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 Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order ,2003 ("the Order") 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. 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 and Statement of Profit and Loss 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 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 31st March 2014, and taken on record by the Board of Directors, none of the directors is disqualified as on March 31st, 2014 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act,1956.

f. Since the Central Government has not issued any notification as to the rate at which the cess is to be paid under section 441A of the Companies Act, 1956 nor has it issued any Rules the under the said section, prescribing the manner in which such cess is to be paid, no cess is due and payable by the Company.

Annexure to the Auditor''s report of even date to the Members of Kernex Microsystems (India) Limited

(I) (a) The Company''s fixed assets register showing full particulars including Quantitative details and the situation of its fixed assets is to be updated.

(b) As per the explanations given to us by the management, physical verification of Fixed Assets has been carried out during the year and no material discrepancies are noticed.

(c) None of the major fixed assets of the Company are disposed off during the year.

(II) (a) The Inventory has been physically verified by the management at reasonable intervals.

(b) In our opinion and according to the information and explanations given to us, the procedures for physical verification of inventory followed by the management were reasonable and adequate in relation to the size of the Company and the nature of its business;

(c) On the basis of our examination of the inventory records, in our opinion, the company has maintained proper records of inventory. The discrepancies noticed on physical verification of inventory as compared to book records were not material.

(III) (a) During the year, the Company has not granted any loans, secured or unsecured, to the companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Hence Clauses (iii) (b), (c) & (d) of the Order are not applicable.

(b) The Company has taken short term loans of Rs 485.85 Lakhs from 4 Directors during the year and the maximum and outstanding balance is Rs 485.85 Lakhs from other parties covered in the register maintained under Section 301 of the Companies Act, 1956. The Terms and conditions are not prejudicial to the interest of the company.

(IV) In our opinion and according to the information and explanations provided to us there are adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchase of inventory, fixed assets and for sale of goods and services. During the course of our audit, no major weakness has been noticed in the internal control.

(V) Based on the audit procedures applied by us and according to the information and explanations provided by the management, we are of the opinion that there have been no transactions that need to be entered into the register maintained under Section 301;

(VI) The Company has not accepted any deposits from the public during the year under review falls under section 58A and 58AA of the Companies Act 1956;

(VII) The Company has an in-house internal audit department, which, in our opinion the scope is commensurate with the size and nature of the business of the company;

(VIII) We have broadly reviewed the books of account maintained by the Company in respect of the products where, pursuant to the Rules made by the Central Government of India, the maintenance of cost records has been prescribed under clause (d) of Section 209 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.

(IX) (a) There have been delays in depositing undisputed statutory dues including Provident Fund, Employees State Insurance, Income Tax and Service Tax with appropriate authorities during the year. According to the records, information and explanations provided to us, there are undisputed amounts payable in respect of Provident Fund Rs 28,35,064/- Employees State Insurance Rs. 5,78,862, TDS Rs 52,57,692/-,and Corporate Dividend Tax Rs 20,27,757/-were outstanding at the yearend for a period of more than six months from the date they become payable ;

(b) According to the information and explanations provided to us, particulars of out standing dues of Income tax and Sales tax have not been deposited on account of any dispute are given below:

Name of Statute Nature of the Period to which Amount(Rupees in Dues the amounts relates Lakhs)

Income Tax Act Income Tax A.Y 1998-99 8.00

APGST Sales Tax A.Y 2003-04 4.13 Name of Statute Forum dispute is pending

Income Tax Act High Court

APGST STAT

(X) The Company does not have any accumulated losses at the end of the financial year and has not incurred any cash loss during the year covered by our audit and also in the immediately preceding financial year.

(XI) Based on our audit procedures and on the information and explanations given by the management, the Company has not defaulted in repayment of dues to any financial institution or bank;

(XII) Based on our examination and according to the information and explanations given to us , the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities ;

(XIII) In our opinion, the Company is not a Chit Fund / Nidhi / Mutual Benefit Fund/ Society and Clause 4 (xiii) of the Order are not applicable to this company.

(XIV) In our opinion, the Company is not dealing or trading in shares, securities, debentures and other investments. Accordingly, the provisions of Clause 4(xiv) of the Order not applicable to the Company.

(XV) On the basis of our examination of the books of accounts and the information and explanation given to us the Company has not given any guarantee for loans by others from bank or financial institutions ;

(XVI) According to the information and explanations given to us, the company has not availed any term loans during the year under review.

(XVII) On the basis of our examinations of the books of accounts and the information and explanation given to us, in our opinion, the funds raised on short-term basis have not been used for long-term investment.

(XVIII) During the year, the Company has not made any preferential allotment of shares to parties and companies covered in the Register maintained under Section 301 of the Act ;

(XIX) The Company has not made any issue of debentures during the year;

(XX) During the year covered by our audit report the Company has not raised any money by way of Public Issue.

(XXI) Based on the audit procedures performed and information and explanations given to us by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.

For GMK Associates Chartered Accountants Firm Regn No. 006945S

(G. Satyanarayana Murty) Partner Membership No. 029919

Place: Hyderabad Date: 24.05.2014

---

Mar 31, 2013

Report on the Financial Statements

We have audited the accompanying financial statements of KERNEX MICROSYSTEMS (INDIA) LIMTED(‘''the Company''''), which comprise the Balance Sheet as at March 31, 2013 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''''). This responsibility includes the design, implementation and maintenance of internal control 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 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 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 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. 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, 2013

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

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 Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order ,2003 ("the Order") 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 and Statement of Profit and Loss 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 comply with the accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956.

e. On the basis of written representations received from the directors as on 31st March,2013, and taken on record by the Board of Directors, none of the directors is disqualified as on March 31st, 2013 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act,1956.

f. Since the Central Government has not issued any notification as to the rate at which the cess is to be paid under section 441A of the Companies Act, 1956 nor has it issued any Rules under the said section, prescribing the manner in which such cess is to be paid, no cess is due and payable by the Company.

Annexure to the Auditor''s report of even date to the Members of Kernex Microsystems (India) Limited

(I) (a) The Company is in the process of updating the records showing full particulars including Quantitative details and the situation of its fixed assets.

(b) As per the explanations given to us by the management, physical verification of Fixed Assets has been carried out during the year and no material discrepancies are noticed.

(c) None of the major fixed assets of the Company are disposed off during the year.

(II) (a) The Inventory has been physically verified by the management at reasonable intervals.

(b) In our opinion and according to the information and explanations given to us, the procedures for physical verification of inventory followed by the management were reasonable and adequate in relation to the size of the Company and the nature of its business;

(c) On the basis of our examination of the inventory records, in our opinion, the company has maintained proper records of inventory. The discrepancies noticed on physical verification of inventory as compared to book records were not material.

(III) (a) During the year, the Company has not granted any loans, secured or unsecured, to the companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act,1956. Hence Clauses (iii) (b), (c) & (d) of the Order are not applicable.

(b) The Company has not taken any loans, secured or unsecured, from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Hence Clauses (iii) (f) & (g) of the Order are not applicable.

(IV) In our opinion and according to the information and explanations provided to us there are adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchase of inventory, fixed assets and for sale of goods and services. During the course of our audit, no major weakness has been noticed in the internal control.

(V) Based on the audit procedures applied by us and according to the information and explanations provided by the management, we are of the opinion that there have been no transactions that need to be entered into the register maintained under Section 301;

(VI) The Company has not accepted any deposits from the public during the year under review falls under section 58A and 58AA of the Companies Act 1956;

(VII) The Company has an in-house internal audit department, which, in our opinion the scope is commensurate with the size and nature of the business of the company;

(VIII) We have broadly reviewed the books of account maintained by the Company in respect of the products where, pursuant to the Rules made by the Central Government of India, the maintenance of cost records has been prescribed under clause (d) of Section 209 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.

(IX) (a) There have been delays in depositing undisputed statutory dues including Provident Fund, Employees State Insurance, Income Tax and Service Tax with appropriate authorities during the year. According to the records, information and explanations provided to us, there are undisputed amounts payable in respect of Provident Fund Rs. 3,56,951/-, Employees State Insurance Rs. 6,64,147, TDS Rs 22,54,681/-,and Corporate Dividend Tax Rs. 20,27,757/- outstanding at the year end for a period of more than six months from the date they become payable ;

(X) The Company does not have any accumulated losses at the end of the financial year and has not incurred any cash loss during the year covered by our audit and also in the immediately preceding financial year.

(XI) Based on our audit procedures and on the information and explanations given by the management, the Company has not defaulted in repayment of dues to any financial institution or bank;

(XII) Based on our examination and according to the information and explanations given to us , the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities ;

(XIII) In our opinion, the Company is not a Chit Fund / Nidhi / Mutual Benefit Fund/ Society and Clause 4 (xiii) of the Order are not applicable to this company.

(XIV) In our opinion, the Company is not dealing or trading in shares, securities, debentures and other investments. Accordingly, the provisions of Clause 4(xiv) of the Order not applicable to the Company.

(XV) On the basis of our examination of the books of accounts and the information and explanation given to us the Company has not given any guarantee for loans by others from bank or financial institutions ;

(XVI) According to the information and explanations given to us, the company has not availed any term loans during the year under review.

(XVII) On the basis of our examinations of the books of accounts and the information and explanation given to us, in our opinion, the funds raised on short-term basis have not been used for long-term investment.

(XVIII) During the year, the Company has not made any preferential allotment of shares to parties and companies covered in the Register maintained under Section 301 of the Act ;

(XIX) The Company has not made any issue of debentures during the year;

(XX) During the year covered by our audit report the Company has not raised any money by way of Public Issue.

(XXI) Based on the audit procedures performed and information and explanations given to us by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.

For GMK ASSOCIATES., Chartered Accountants

(Firm Regn No.006945S)

G.Satyanarayana Murty

Partner

Membership No.:29919

Place: Hyderabad

Date: 25th May, 2013

---

Mar 31, 2012

We have audited the attached Balance Sheet of Kernex Microsystems (India ) Limited, as at 31st March, 2012 and also the Statement of Profit and Loss and Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An Audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An Audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

As required by the Companies (Auditor's Report) Order,2003,( the Order ) issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

Further to our comments in the Annexure referred to above, we report that:

(i) 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;

(ii) 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;

(iii) The Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt with by this report are in agreement with the books of accounts.

(iv) In our opinion , the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt with by this report comply with the accounting

standards referred to in sub-section (3C) of Section 211 of the Companies Act,1956 ;

(v) On the basis of written representations received from the directors as on 31st March, 2012 and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March, 2012 from being appointed as a director in terms of Clause (g) of sub-section (1) of Section 274 of the Companies Act,1956;

(vi) In our opinion and to the best of our information and according to the explanations given to us , they said accounts give the information required by the Companies Act,1956, 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 Balance Sheet, of the state of affairs of the Company as at 31st March, 2012;

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

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

Annexure to the Auditor's report of even date to the Members of Kernex Microsystems (India) Limited

(I) (a) The Company is in the process of updating

the records showing full particulars including Quantitative details and the situation of its fixed assets.

(b) As per the explanations given to us by the management, physical verification of Fixed Assets has been carried out during the year and no material discrepancies are noticed.

(c) None of the major fixed assets of the Company are disposed off during the year.

(II) (a) The Inventory has been physically verified by the management at reasonable intervals.

(b) In our opinion and according to the information and explanations given to us, the procedures for physical verification of inventory followed by the management were reasonable and adequate in relation to the size of the Company and the nature of its business;

(c) On the basis of our examination of the inventory records, in our opinion, the company has maintained proper records of inventory. The discrepancies noticed on physical verification of inventory as compared to book records were not material.

(III) (a) During the year, the Company has not

granted any loans, secured or unsecured, to the companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act,1956. Hence Clauses (iii) (b), (c) & (d) of the Order are not applicable.

(b) The Company has not taken any loans, secured or unsecured, from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Hence Clauses (iii) (f) & (g) of the Order are not applicable.

(IV) In our opinion and according to the information and explanations provided to us there are adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchase of inventory, fixed assets and for sale of goods and services. During the course of our audit, no major weakness has been noticed in the internal control.

(V) Based on the audit procedures applied by us and according to the information and explanations provided by the management, we are of the opinion that there have been no transactions that need to be entered into the register maintained under Section 301;

(VI) The Company has not accepted any deposits from the public during the year under review falls under section 58A and 58AA of the Companies Act 1956;

(VII) The Company has an in-house internal audit department, which, in our opinion the scope is commensurate with the size and nature of the business of the company;

(VIII) We have broadly reviewed the books of account maintained by the Company in respect of the products where, pursuant to the Rules made by the Central Government of India, the maintenance of cost records has been prescribed under clause (d) of Section 209 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.

(IX) (a) There have been delays in depositing

undisputed statutory dues including Provident Fund, Employees State Insurance, Income Tax and Service Tax with appropriate authorities during the year. According to the records, information and explanations provided to us, there are undisputed amounts payable in respect of TDS Rs 7,20,600/-, Excise Duty Rs 5,31,388/- and Corporate Dividend Tax Rs 20,76,036/-were outstanding at the yearend for a period of more than six months from the date they become payable ;

(b) According to the information and explanations provided to us, particulars of outstanding dues of Income tax and Sales tax have not been deposited on account of any dispute are given below:

Name of statute Nature of the Period to which the Amount (Rupees Forum where Dues amounts relates in Lakhs) dispute is pending

Income Tax Act Income Tax A.Y 1998-99 8.00 High Court

APGST Sales Tax A.Y 2003-04 4.13 STAT

(X) The Company has no accumulated losses at the end of the financial year ended 31.03.2012 and it has not incurred cash loss during the year covered by our audit and also in the immediately preceding financial year.

(XI) Based on our audit procedures and on the information and explanations given by the management, the Company has not defaulted in repayment of dues to any financial institution or bank;

(XII) Based on our examination and according to the information and explanations given to us , the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities ;

(XIII) In our opinion, the Company is not a Chit Fund / Nidhi / Mutual Benefit Fund/ Society and Clause 4 (xiii) of the Order are not applicable to this company.

(XIV) In our opinion, the Company is not dealing or trading in shares, securities, debentures and other investments. Accordingly, the provisions of Clause 4(xiv) of the Order not applicable to the Company.

(XV) On the basis of our examination of the books of accounts and the information and explanation given to us the Company has not given any guarantee for loans by others from bank or financial institutions ;

(XVI) According to the information and explanations given to us, the company has not availed any term loans during the year under review.

(XVII) On the basis of our examinations of the books of accounts and the information and explanation given to us, in our opinion, the funds raised on short-term basis have not been used for long-term investment.

(XVIII) During the year, the Company has not made any preferential allotment of shares to parties and companies covered in the Register maintained under Section 301 of the Act ;

(XIX) The Company has not made any issue of debentures during the year;

(XX) During the year covered by our audit report the Company has not raised any money by way of Public Issue.

(XXI) Based on the audit procedures performed and information and explanations given to us by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.

For GMK ASSOCIATES.,

Chartered Accountants

(Firm Regn No.006945S)

G. Satyanarayana Murty

Partner

Place: Hyderabad Membership No.:29919

Date: 28th May,2012

---

Mar 31, 2011

We have audited the attached Balance Sheet of Kernex Microsystems (India) Limited, as at 31st March, 2011 and also the Profit and Loss Account and Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An Audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An Audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

As required by the Companies (Auditor's Report) Order,2003, (the Order) issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

Further to our comments in the Annexure referred to above, we report that:

(i) 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;

(ii) 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;

(iii) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of accounts;

(iv) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act,1956 ;

(v) On the basis of written representations received from the directors as on 31st March, 2011 and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March, 2011 from being appointed as a director in terms of Clause (g) of sub-section (1) of Section 274 of the Companies Act,1956;

(vi) In our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Companies Act,1956, 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 Balance Sheet, of the state of affairs of the Company as at 31st March, 2011;

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

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

Annexure to the Auditor's report of even date to the Members of Kernex Microsystems (India) Limited

(I) (a) The Company is in the process of updating the records showing full particulars including Quantitative details and the situation of its fixed assets.

(b) As per the explanations given to us by the management, physical verification of Fixed Assets has not been carried out during the year.

(c) None of the major fixed assets of the Company are disposed off during the year.

(II) (a) The Inventory has been physically verified by the management at reasonable intervals.

(b) In our opinion and according to the information and explanations given to us, the procedures for physical verification of inventory followed by the management were reasonable and adequate in relation to the size of the Company and the nature of its business;

(c) On the basis of our examination of the inventory records, in our opinion, the company has maintained proper records of inventory. The discrepancies noticed on physical verification of inventory as compared to book records were not material.

(III) (a) During the year, the Company has not granted any loans, secured or unsecured, to the companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act,1956. Hence Clauses (iii) (b), (c) & (d) of the Order are not applicable.

(b) The Company has not taken any loans, secured or unsecured, from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Hence Clauses (iii) (f) & (g) of the Order are not applicable.

(IV) In our opinion and according to the information and explanations provided to us there are adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchase of inventory, fixed assets and for sale of goods and services. During the course of our audit, no major weakness has been noticed in the internal control.

(V) Based on the audit procedures applied by us and according to the information and explanations provided by the management, we are of the opinion that there have been no transactions that need to be entered into the register maintained under Section 301;

(VI) The Company has not accepted any deposits from the public during the year under review falls under section 58A and 58AA of the Companies Act 1956;

(VII) The Company has an in-house internal audit department, which, in our opinion the scope is commensurate with the size and nature of the business of the company;

(VIII) We have broadly reviewed the books of account maintained by the Company in respect of the products where, pursuant to the Rules made by the Central Government of India, the maintenance of cost records has been prescribed under clause (d) of Section 209 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.

(IX) (a) There have been minor delays in depositing undisputed statutory dues including Provident Fund, Employees State Insurance, Income Tax and Service Tax with appropriate authorities during the year. According to the records, information and explanations provided to us, there are no undisputed amounts payable in respect of Provident Fund, Investor Education and Protection Fund, Employee's State Insurance, Income-Tax, Sales-Tax, Wealth-Tax, Service Tax, Customs Duty, Excise Duty, Cess and other statutory dues which were outstanding at the year end for a period of more than six months from the date they became payable ;

(b) According to the information and explanations provided to us, particulars of out standing dues of Income tax and Sales tax have not been deposited on account of any dispute are given below:

Name of Statute Nature of the Period to Amount Forum where Dues which the (Rupees in Lakhs) dispute is amount relates pending

Income Tax Act Income Tax A.Y 1998-99 8.00 High Court

APGST Sales Tax A.Y 2003-04 4.13 STAT

(X) The Company has no accumulated losses at the end of the financial year ended 31.03.2011 and it has not incurred cash loss during the year covered by our audit. However the company has incurred a cash loss of Rs.9,17,54,483/- in the immediately preceding financial year ;

(XI) Based on our audit procedures and on the information and explanations given by the management, the Company has not defaulted in repayment of dues to any financial institution or bank;

(XII) Based on our examination and according to the information and explanations given to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities ;

(XIII) In our opinion, the Company is not a Chit Fund / Nidhi / Mutual Benefit Fund/ Society and Clause 4 (xiii) of the Order are not applicable to this company.

(XIV) In our opinion, the Company is not dealing or trading in shares, securities, debentures and other investments. Accordingly, the provisions of Clause 4(xiv) of the Order not applicable to the Company.

(XV) On the basis of our examination of the books of accounts and the information and explanation given to us the Company has not given any guarantee for loans by others from bank or financial institutions ;

(XVI) According to the information and explanations given to us, the company has not availed any term loans during the year under review.

(XVII) On the basis of our examinations of the books of accounts and the information and explanation given to us, in our opinion, the funds raised on short-term basis have not been used for long-term investment.

(XVIII)During the year, the Company has not made any preferential allotment of shares to parties and companies covered in the Register maintained under Section 301 of the Act ;

(XIX) The Company has not made any issue of debentures during the year;

(XX) During the year covered by our audit report the Company has not raised any money by way of Public Issue.

(XXI) Based on the audit procedures performed and information and explanations given to us by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.

For GMK ASSOCIATES.,

Chartered Accountants

(Registration No.006945S)

G Satyanarayana Murty

Place: Hyderabad Partner

Date : 13th August, 2011. Membership No.:29919

---

Mar 31, 2010

We have audited the attached Balance Sheet of Kernex Microsystems (India ) Limited, as at March,31, 2010 and also the Profit and Loss Account and Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An Audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An Audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

As required by the Companies (Auditors Report) Order,2003,( the Order ) issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Companies Act,1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

Further to our comments in the Annexure referred to above, we report that:

(i) 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;

(ii) 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;

(iii) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of accounts;

(iv) In our opinion , the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act,1956;

(v) On the basis of written representations received from the directors as on March 31,2010 and taken on record by the Board of Directors , we report that none of the directors is disqualified as on March 31 , 2010 from being appointed as a director in terms of Clause (g) of sub-section (1) of Section 274 of the Companies Act,1956;

(vi) In our opinion and to the best of our information and according to the explanations given to us , the said accounts give the information required by the Companies Act,1956, 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 Balance Sheet, of the state of affairs of the Company as at 31st March, 2010;

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

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

Annexure to the Auditors report of even date to the Members of Kernx Microsystems (India) Limited

(I) (a) The Company is in the process of updating

the records showing full particulars including Quantitative details and the situation of its fixed assets.

(b) The fixed Assets are physically verified by the management according to a phased programme designed to cover all the items over a period of three years, which in our opinion, is reasonable having regard to the size of the company and nature of its assets. Pursuant to the programme, a portion of the fixed assets has been physically verified by the management during the year and no material discrepancies between the book records and the physical inventory have been noticed.

(c) None of the major fixed assets of the Company are disposed off during the year.

(II) (a) The Inventory has been physically verified by the management at reasonable intervals;

(b) In our opinion and according to the information and explanations given to us, the procedures for physical verification of inventory followed by the management were reasonable and adequate in relation to the size of the Company and the nature of its business;

(c) On the basis of our examination of the inventory records, in our opinion, the company has maintained proper records of inventory. The discrepancies noticed on physical verification of inventory as compared to book records were not material.

(III) (a) During the year, the Company has not granted any loans, secured or unsecured, to the companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act,1956. Hence Clauses (iii) (b), (c) & (d) of the Order are not applicable.

(b) The Company has not taken any loans, secured or unsecured, from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Hence Clauses (iii) (f) & (g) of the Order are not applicable.

(IV) In our opinion and according to the information and explanations provided to us there are adequate internal control systems commensurate with the size of the Company and the nature of its business with regard to purchase of inventory, fixed assets and for sale of goods and services. During the course of our audit, no major weakness has been noticed in the internal control.

(V) Based on the audit procedures applied by us and according to the information and explanations provided by the management, we are of the opinion that the transactions that need to be entered into the register maintained under Section 301 have been entered and the transactions are made at prices which are reasonable with regard to the prevailing market prices at the relevant time;

(VI) The Company has not accepted any deposits from the public during the year under review which falls under section 58A and 58AA of the Companies Act 1956;

(VII) The Company has an internal audit conducted by external auditors , which, in our opinion is commensurate with the size and nature of the business of the company;

(VIII) We have broadly reviewed the books of account maintained by the Company in respect of the products where, pursuant to the Rules made by the Central Government of India, the maintenance of cost records has been prescribed under clause (d) of Section 209 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.

(IX) (a) According to the records, information and explanations provided to us, the Company is generally regular in depositing with appropriate authorities undisputed amount of Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income-Tax, Sales-Tax, Wealth-Tax, Service Tax, Customs Duty, Excise Duty, Cess and other statutory dues applicable to it and no undisputed amounts payable were outstanding as at 31st March,2010 for a period of more than six months from the date they became payable ;

(b) According to the information and explanations provided to us, particulars of out standing dues of Income tax have not been deposited on account of any dispute are given below:

Name of Statute Nature of the Period to Amount Forum where Dues which the (Rupees in Lakhs) dispute is amount relates pending

Income Tax Act Income Tax A.Y 1998-99 8.00 High Court



(X) The Company has no accumulated losses at the end of the financial year and has incurred a cash loss of Rs. 9.18 Crores during the financial year covered by our audit, and no cash losses incurred in the immediately preceding financial year ;

(XI) Based on our audit procedures and on the information and explanations given by the management, the Company has not defaulted in repayment of dues to any financial institution or bank;

(XII) Based on our examination and according to the information and explanations given to us , the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities ;

(XIII) In our opinion, the Company is not a Chit Fund / Nidhi / Mutual Benefit Fund/ Society and Clause 4 (xiii) of the Order are not applicable to this company.

(XIV) In our opinion, the Company is not dealing or trading in shares, securities, debentures and other investments. Accordingly, the provisions of Clause 4(xiv) of the Order not applicable to the Company.

(XV) On the basis of our examination of the books of accounts and the information and explanation given to us the Company has not given any guarantee for loans taken by others from bank or financial institutions ;

(XVI) According to the information and explanations given to us, the company has not availed any term loans during the year under review.

(XVII) On the basis of our examinations of the books of accounts and the information and explanation given to us, in our opinion, the funds raised on short-term basis have not been used for long-term investment.

(XVIII) During the year, the Company has not made any preferential allotment of shares to parties and companies covered in the Register maintained under Section 301 of the Act ;

(XIX) The Company has not made any issue of debentures during the year;

(XX) During the year covered by our audit report the Company has not raised any money by way of Public Issue.

(XXI) Based on the audit procedures performed and information and explanations given to us by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.

For GMK ASSOCIATES.,

Chartered Accountants

(Registration No.006945S)

G Satyanarayana Murty

Place: Hyderabad Partner

Date : 29th May, 2010 Membership No.:29919