To

The Members of M/s. Panyam Cements & Mineral Industries Limited

Qualified Opinion

We have audited the financial statements of Panyam Cements & Minerals Industries Limited (the Company) which comprise the balance sheet as at 31st March 2019 the statement of profit and loss (including Other Comprehensive Income) statement of changes in equity and statement of cash flows 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 except for the effects of the matter described in the Basis for Qualified Opinion section of our report the aforesaid financial statements 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 2019 and its loss total comprehensive income the changes in equity and its cash flows for the year ended on that date.

Basis for Qualified Opinion

a) The Company has defaulted in repaying borrowings that were due during the year as mentioned in the Note14(c) the Company has been unable to conclude renegotiations or obtain replacement financing and there are arrears of statutory dues as mentioned in Annexure B to this report. Also the operational activities of the Company have been suspended from December'2018.

The above situations indicate that a material uncertainty exists that may cast significant doubt on the entity's ability to continue as a going concern and that the financial statements do not adequately disclose this matter.

b) The Company has invested 23.58% in equity share capital of M/s S.P.Y Agro Industries Ltd which is not accounted as per Ind-AS 28 Investments in Associates and Joint Ventures for the reason that there is no significant influence over M/s S.P.Y Agro Industries Ltd as disclosed under Note 4(a). We are unable to obtain sufficient appropriate audit evidence about the non-existence of the Company's significant influence over M/s S.P.Y Agro Industries Ltd. Consequently we are unable to determine whether any adjustments were necessary.

c) Based on the information and explanations given to us the Company has not provided for accrued gratuity liability on actuarial valuation as required under the Ind AS 19 Employee Benefits and the amount of gratuity liability is not ascertained by the company and it is provided/paid on cessation of employment as per the accounting policy followed by the company. We are unable to quantify the impact of the said liability on the financials of the year under report.

d) The Company has outstanding inter-corporate loans as at 31st March 2019. We were unable to obtain sufficient appropriate audit evidence about the carrying amount of inter-corporate loans as at 31st March 2019. We were unable to confirm or verify by alternative means accounts receivable against inter-corporate loans included in the Balance Sheet as at 31st March 2019. As a result of these matters we were unable to determine whether any adjustments might have been found necessary in respect of recorded or unrecorded inter-corporate loans receivable.

We conducted our audit in accordance with the Standards on Auditing (SAs) 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 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 financial statements under the provisions of the Companies Act 2013 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.

Key Audit Matters

Except for the matter described in the Basis for Qualified Opinion section we have determined that there are no other key audit matters to communicate in our report.

Other Information

The Company's management and Board of Directors are responsible for the other information. The other information comprises the information included in the Company's annual report but does not include the financial statements and our auditor's report thereon. Our opinion on the 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 financial statements our responsibility is to read the other information and in doing so consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

We were unable to obtain sufficient appropriate evidences about the matters as described in the Basis for Qualified Opinion section above. Accordingly we are unable to conclude whether or not the other information is materially misstated with respect to this matter.

Responsibilities of Management and those charged with governance for the financial statements

The Company's Board of Directors are responsible for the matters stated in Section 134(5) of the Act with respect to the preparation of these 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 accounting principles generally accepted in India including the accounting Standards 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 of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate 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 statement that give a true and fair view and are free from material misstatement whether due to fraud or error.

In preparing the financial statements the Board of Director 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.

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

Auditor's Responsibilities for the Audit of Financial Statement

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 Ind AS 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 Act 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 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 Statement of Profit and Loss including Other Comprehensive Income Statement of Changes in Equity and Cash Flow Statement dealt with by this report are in agreement with the books of account;

d) in our opinion the aforesaid IndAS Financial Statements comply with the Accounting Standards prescribed under section 133 of the Act except the IndAS 19 Employee benefits;

e) on the basis of the written representations received from the directors of the Company as on March 31 2019 taken on record by the Board of Directors none of the directors is disqualified as on March 31 2019 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 with reference to financial Statements of the Company and the operating effectiveness of such controls refer to our separate report in Annexure A. Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Company's internal financial controls with reference to financial Statements;

g) with respect to the other matters to be included in the Auditor's report in accordance with the requirements 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. The Ministry of Corporate Affairs has not prescribed other details under section 197(16) which are required to be commented upon by us.

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 in its IndAS Financial Statements - Refer Note No.27 to the Ind AS financial statements;

ii) the company did not have any long-term contracts including derivative contracts; as such there were no material foreseeable losses thereon;

iii) there are no amounts which are required to be transferred to the Investor Education and Protection Fund therefore delay in transferring such sums does not arise.

2. 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 B a statement on the matters specified in paragraphs 3 and 4 of the Order

ANNEXURE A TO THE INDEPENDENT AUDITORS' REPORT

(Referred to in paragraph 1(f) under 'Report on Other Legal and Regulatory Requirements' section of our report of even date)

Report on the Internal Financial Controls with reference to Financial Statements under Clause (i) of Subsection 3 of Section 143 of the Companies Act 2013 (the Act)

We have audited the internal financial controls with reference to financial statements of M/s. Panyam Cements & Mineral Industries Limited Nandyal (the Company) as of 31st March 2019 in conjunction with our audit of the IndAS 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 with reference to financial Statements 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.

Auditor's Responsibility

Our responsibility is to express an opinion on the internal financial controls with reference to financial statements 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 with reference to financial statements 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 with reference to financial statements and their operating effectiveness. Our audit of internal financial controls over financial statements included obtaining an understanding of internal financial controls with reference to financial statements assessing the risk that a material weakness exists and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor's judgement including the assessment of the risks of material misstatement of the IndAS 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 with reference to financial statements.

Meaning of Internal Financial Controls with reference to Financial Statements

A company's internal financial control with reference to financial Statements is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of IndAS Financial Statements for external purposes in accordance with generally accepted accounting principles. A company's internal financial control with reference to financial statements 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 IndAS Financial Statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of un authorised acquisition use or disposition of the company's assets that could have a material effect on the IndAS Financial Statements.

Limitations of Internal Financial Controls with reference to Financial Statements

Because of the inherent limitations of internal financial controls with reference to financial statements including the possibility of collusion or improper management over ride 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 with reference to financial reporting to future periods are subject to the risk that the internal financial control with reference to financial Statements 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 with reference to financial statements and such internal financial controls with reference to financial statements were operating effectively as at 31st March 2019 based on the internal control with reference to financial statements 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 of even date to the members of M/s Panyam Cements and Mineral Industries Limited) Statement on the Companies (Auditor's report) Order 2016

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

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) the Company has a program of verification to cover all the items of fixed assets in a phased manner which in our opinion is reasonable having regard to the size of the Company and the nature of its assets. Pursuant to the program certain fixed assets were physically verified by the management during the year. 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 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.

ii) in respect of Company's inventory:

the physical verification of inventory has been conducted at reasonable intervals by the management during the year and no material discrepancies were noticed on physical verification and the small discrepancies if any have been properly dealt with in the books of account;

iii) The Company has granted loans to Companies covered in the register maintained under Section 189 of the Companies Act 2013 ('the Act').

a) In our opinion and according to the information and explanations given to us and as represented by the Company in respect of loans granted by the Company there are no such agreements /arrangements having the terms and conditions for grant of such loans and therefore we are unable to report whether the terms and conditions of loans given are prejudicial to the interest of the company;

b) In our opinion and according to the information and explanations given to us and as represented by the Company there are no such agreements / arrangements stipulating the schedule of repayment of principal and interest payment and therefore we are unable to report on the regularity of repayment of principal and payment of interest;

c) In our opinion and according to the information and explanations given to us and as represented by the Company there are no such agreements / arrangements stipulating the due dates for re-payment of principal and interest payment and therefore we are unable to report the total amount of overdue for more than ninety days and no steps have been taken for recovery of the principal or interest.

iv) in our opinion and according to the information and explanations given to us the Company has complied with the provisions of Sections 185 and 186 of the Act in respect of grant of loans making investments and providing guarantees and securities as applicable;

v) the Company has not accepted deposits from public during the year and does not have any unclaimed deposits as at 31st March 2019 and therefore the provisions of the clause 3 (v) of the Order are not applicable to the Company;

vi) the maintenance of cost records has been specified by the Central Government under Section 148(1) of the Companies Act 2013. We have broadly reviewed the cost records maintained by the Company pursuant to the Companies (Cost Records and Audit) Rules 2014 as prescribed by the Central Government under sub-section (1) of Section 148 of the Companies Act 2013 and are of the opinion that prima facie the prescribed cost records have been made and maintained. We have however not made a detailed examination of the cost records with a view to determine whether they are accurate or complete;

vii) In respect of statutory dues;

a. According to the information and explanations given to us and on the basis of records of the Company examined by us the Company is not regular in depositing with appropriate authorities undisputed statutory dues including Provident Fund Income Tax Goods and Services Tax Sales Tax Value Added Tax Duty of Customs Duty of Excise Cess and other statutory dues as applicable to the company. As explained to us the Employees State Insurance provisions are not applicable to the company.

According to the information and explanations given to us the following arrears of undisputed statutory dues are outstanding as at 31st March 2019 for a period of more than six months from the date they became payable and the due dates for payment of sales tax dues for July and August 2012 considered as per the installments granted by the Department.

Statement of arrears of statutory dues outstanding as at 31 March 2019 for more than six months:

(b) According to the information and explanations given to us the following are the statutory dues which have not been deposited on account of dispute:

viii) In our opinion and according to the information and explanations given to us the Company has defaulted in repayment of loans or borrowings to Financial Institutions Banks and to debenture holders as at 31st March 2019. During the year the Company has delayed the repayment of dues to IIFL& IKF Finance Limited

(Rupees in Lakhs)

During the year the company has delayed the re - payments dues to EW India Special Assets Fund Pte Limited and E-Cap Equites Limited toward NCD's

ix) In our opinion and according to the information and explanations given to us the Company did not raise any money by way of initial public offer or further public offer (including debt instruments) and have not raised funds by way of term loans during the year;

x) According to the information and explanations given to us no material fraud by the Company or 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 and based on our examination of the records of the Company the managerial remuneration has been paid or provided in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Companies Act2013.

xii) 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 CARO 2016 is not applicable.

xiii) In our opinion and according to the information and explanations given to us and based on our examination of the records of the Company all transactions with the related parties are in compliance with sections 177 and 188 of Companies Act 2013 where applicable and the details have been disclosed in the Financial Statements as required by the applicable Accounting Standards.

xiv) In our opinion and 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 under review.

xv) In our opinion and according to the information and explanations given to us and based on our examination of the records of the Company the Company has not entered into any non-cash transactions with directors or persons connected with them. Accordingly paragraph 3 (xv) of the CARO2016 is not applicable.

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