Scooters India Ltd.

TO THE MEMBERS OF SCOOTERS INDIA LIMITED

Report on the Financial Statements

We have audited the accompanying financial statements of Scooters India Limited(‘the Company') which comprise the Balance Sheet as at 31 March 2017 the Statementof Profit and Loss and the Cash Flow Statement for the year then ended and a summary ofsignificant accounting policies and other explanatory Information.

Management's Responsibility for the Financial Statements

The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Companies Act 2013 (‘the Act') with respect to the preparation andpresentation of these financial statements that give a true and fair view of the financialposition financial performance and cash flows of the Company in accordance with theaccounting principles generally accepted in India including the Accounting Standardsspecified under Section 133 of the Act read with Rules there under.

This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the Company andfor preventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies making judgments and estimates that are reasonable andprudent and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness ofthe accounting records relevant to the preparation and presentation of the financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.

Auditors' Responsibility

Our responsibility is to express an opinion on these financial statements based on ouraudit. We have taken into account the provisions of the Act the accounting and auditingstandards and matters which are required to be included in the audit report under theprovisions of the Act and the Rules made there under. We conducted our audit in accordancewith the Standards on Auditing specified under Section 143(10) of the Act. Those Standardsrequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether the financial statements are free from materialmisstatement. An audit involves performing procedures to obtain audit evidence about theamounts and the disclosures In the financial statements. The procedures selected depend onthe auditors' judgment including the assessment of the risks of material misstatement ofthe financial statements whether due to fraud or error. In making those risk assessmentsthe auditor considers internal financial control relevant to the Company's preparation ofthe financial statements that give a true and fair view in order to design auditprocedures that are appropriate in the circumstances. An audit also includes evaluatingthe appropriateness of the accounting policies used and the reasonableness of theaccounting estimates made by the Company's Directors as well as evaluating the overallpresentation of the financial statements.

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

Basis of Qualified Opinion

1. Attention is invited to note 40 and 46 forming part of the Financial Statementregarding repayment of principal and interest on non plan loan of f 189 lakhs received bythe company from the Government of India at an interest rate of 13.50% per annum. Thecompany has not provided interest over it as it has filed an application for freezing ofthe interest with the Ministry of Heavy Industry however Ministry approval on the same ispending and has yet not been approved further total interest including the penalty accruedand unpaid is Rs 129.86 lakhs till 31^st March 2017 since the final outcome isstill awaited therefore the impact is unascertained.

2. Attention is invited to note 42 forming part of the Financial Statement where thecompany has increased its Authorised capital from f7500 lakhs to f25000 lakhs howevershare issue expense with respect to payment of fees to the Ministry of Corporate Affairs("MCA") pursuant to rule 12 of the Companies (Registration of Offices and Fees)Rules 2014) of r 131.25 Lakhs has not been paid nor provided in the books of accountsas explained to us by the management the MCA has so far not allowed the increase inAuthorized capital without payment of fees as the company is claiming exemption for thefees on account of relief given by BIFR in its order dated 19th June 2013 since the finaloutcome is still a waited the impact is unascertainable.

Qualified Opinion

In our opinion and to the best of our information and according to the explanationsgiven to us except for the matters described in Paragraph 1 and 2 of the Basis ofQualified opinion paragraph the said financial statements give the information requiredby the Act in the manner so required and give a true and fair view in conformity with theaccounting principles generally accepted in India :

(a) In the case of Balance Sheet of the state of affairs of the Company as at March31 2017.

(b) In the case of the statement of Profit and Loss of the loss for the year ended onthat date; and

(c) In the case of the Cash Flow Statement of the cash flow for the year ended on thatdate.

Emphasis of Matter

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

(a) Attention is invited to Note No. 1 Para 7a to the financial statement where thecompany has made a 0.5% adhoc provision on the value of closing stock of raw material andcomponents stores spares and consumables for redundancy. In the absence of adequaterecord for waste and reasonable estimates of its net realisable value we are unable tocomment upon the adequacy of these provisions.

(b) Attention is invited to Note No. 34 to the financial statement the balances inaccounts

of parties contractors Government Department etc including those balances appearingunder current assets Loan and Advances and current liabilities are subject toconfirmation and reconciliation the financial Statement do not include the impact ofadjustment if any which may arise out of the confirmation and reconciliation process.

(c) Attention is invited to Note No. 41 to the financial statement where the companyhas not provided for the arrears to the employees who were on the pay roll of the companyas on 01-04-2013 as the approval is awaited from GOI and pending outcome of theproceeding before the Central Government Industrial Tribunal Lucknow

(d) Attention is invited to Note No. 9 to the financial statement regarding othercurrent liabilities which includes provision for Payment of Bonus to employees of Rs 50.97lakhs provided in line with Payment of Bonus Act however said bonus is not paid andcontravenes the provision of Section 19 of the said Act.

Our opinion is not modified in respect of these matters.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order 2016 (‘the Order')issued by the Central Government of India in terms of sub section (11) of Section 143 ofthe Act we give in the ‘Annexure-A' a statement on the matters specified in theparagraph 3 and 4 of the order.

2. We are enclosing our report in terms of Section 143 (5) of the Act on the basis ofsuch checks of the books and records of the Company as we considered appropriate andaccording to the information and explanations given to us in the ‘Annexure- B' onthe directions and sub-directions issued by Comptroller and Auditor General of India.

3. 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 bestof 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 theCompany so far as it appears from our examination of those books;

(c) the Balance Sheet the Statement of Profit and Loss and the Cash Flow Statementdealt with by this Report are in agreement with the books of account;

(d) in our opinion the aforesaid financial statements comply with the AccountingStandards specified under Section 133 of the Act read with relevant rules issued thereunder;

(e) on the basis of the written representations received from the directors as on 31March 2017 taken on record by the Board of Directors none of the directors isdisqualified as on 31 March 2017 from being appointed as a director in terms of Section164 (2) of the Act;

(f) with respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate report in ‘Annexure- C'; and

(g) with respect to the other matters to be included in the Auditors' Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand 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 financialposition in its financial statements - Refer to Note No. 31 to the financial statements;

ii) the Company has made provision as required under the applicable law or accountingstandards for material foreseeable losses if any- Refer to Note No. 6 and 10 to thefinancial statements;

iii) there has been no amount that is required to be transferred to the InvestorEducation and Protection Fund by the Company.

iv) the Company has provided requisite disclosures in its financial statements as toholdings as well as dealings in Specified Bank Notes during the period from 8 November2016 to 30 December 2016 and based on audit procedures and relying on the managementrepresentation we report that the disclosures are in accordance with books of accountmaintained by the Company and as produced to us by the Management. Refer Note No. 17 tothe financial statements.

ANNEXURE A TO INDEPENDENT AUDITORS' REPORT OF EVEN DATE TO THE MEMBERS OF SCOOTERSINDIA LIMITED LUCKNOW ON THE ACCOUNTS OF THE COMPANY FOR THE YEAR ENDED 31 ST MARCH 2017

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

(i) (a) The company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.

(b) The Company has a regular programme of physical verification of its fixed assets.In accordance with this programme fixed assets were verified during the year by anexternal Cost Management Accountants firm and no material discrepancies were noticed onsuch verification.

(c) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the title deeds of immovable properties areheld in the name of the Company.

(ii) As explained to us the company has a regular program of physical verification ofInventories the physical verification of the inventory (excluding Inventory with thirdparties) have been carried out by external Cost Management Accountants firm and nomaterial discrepancies were noticed on such verification.

(iii) According to information and explanations given to us the Company has notgranted any loan Secured or unsecured to the companies firms limited liabilitypartnerships or other parties covered in register maintained under section 189 in the Act.

(iv) In our opinion and according to the information and explanations given to us theCompany has not granted any loan investments guarantees and security covered undersection 185 or 186 of the Act accordingly clause (iv) of the order are not applicable tothe company for the year ended March 2017.

(v) The company has not accepted any deposits from the public.

(vi) The Central Government has not prescribed the maintenance of cost records undersection 148(1) of the Act for the goods manufactured by the Company.

(a) As per records the Company is regular in depositing undisputed statutory duesincluding Provident Fund Employee State Insurance Sales Tax Service Tax Customs DutyExcise Duty Value Added Tax Cess and any other statutory dues to the extent applicableto it with the appropriate authorities and as informed no undisputed amount wereoutstanding as at 31st March 2017 for a period of more than six month the date ofbecoming payable except the following:

(b) The disputed statutory dues aggregating Rs. 1546.14 lakhs and indeterminateinterest that have not been deposited on account of matters pending before appropriateauthorities are as under:

(viii) In our opinion and according to information and explanations given to us thecompany has not defaulted in repayment of dues to financial institutions or bank ordebentures holders except for the term loan provided by the Government of India which thecompany has not repaid as the matter is being taken up with the Department of HeavyIndustry for maintaining the status quo.

(ix) The company did not raise any money by way of initial public offer or furtherpublic offer (including debt instruments) and term loans during the year however thecompany has raised term loan in earlier year which has been applied for the purpose forwhich they have been raised.

(x) Based upon the audit procedures performed and information given to us we reportthat no fraud on or by the company has been noticed or reported during the year bymanagement. However as explained to us by the management that in the Financial Year2008-09 Board of Directors revealed that a commercial agreement was executed by the thenCMD without the authority of the Board and after due consideration the board decided torefer the matter to the appropriate authority for future action however no action on thesame was reported to us.

(xi) Being a Government Company pursuant to Notification No. G.S.R.463(E) dated 5thJune 2015 issued by Government of India Provisions of Section 197 of the Act are notapplicable to the company.

(xii) In our opinion and according to the information and explanations given to us theCompany is not a nidhi company. Accordingly paragraph 3(xii) of the Order is notapplicable.

(xiii) According to the information and explanations given to us and based on ourexamination of the records of the Company transactions with the related parties are notin compliance with Section 177 of the Act as the company has not formed an audit committeehowever the company has complied with Section 188 of the Act where applicable and detailsof such transactions have been disclosed in the financial statements as required by theapplicable accounting standards.

(xiv) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year.

(xv) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not entered into noncashtransactions with directors or persons connected with him. Accordingly paragraph 3(xv) ofthe Order is not applicable.

(xvi) The Company is not required to be registered under Section 45-IA of the ReserveBank of India Act 1934.

ANNEXURE B TO INDEPENDENT AUDITORS' REPORT OF EVEN DATE TO THE MEMBERS OF SCOOTERSINDIA LIMITED LUCKNOW ON THE ACCOUNTS OF THE COMPANY FOR THE YEAR ENDED 31 ST MARCH 2017

Directions under section 143(5) of Companies Act. 2013

1. Whether the Company has clear title/lease deeds for freehold and leasehold landrespectively Rs If not please state the area of freehold and leasehold for whichtitle/lease deeds are not available.

The company has clear title of lease hold land located in 16 Milestone at LucknowKanpur road ad measuring 147.50 Acres vide lease hold agreement dated 5th Oct 1974 forthe land of 125.29 acres and dated 10th August 1976 for the land of 22.209 acres with U.P.state Industrial department corporation Kanpur for a period of 90 Years.

2. Please report whether there are any cases of waiver/write off of debts/loans /interest etc. if yes the reasons there of and the amount involved.

As informed the company has not waived/written off any debts/loans /interest etc.However the company has made provisions for doubtful debt against receivables of Rs 25.24lakhs the reason for the provision as explained to us is non recovery of the said amountsfrom the respective parties and the amount is due and unrecovered since long the same isdisclosed in Note No. 27 of the Financial Statement for the year ended 31 st March 2017.

3. Whether proper records are maintained for inventories lying with third parties &assets received as gift from Gov. or other authorities.

Proper records have been maintained for such inventories of Rs 32.72 lakh which arelying with the third parties. However they are subject to adjustments if any onreconciliation as most of the balances have not been confirmed and further physicalverification for such inventory was not conducted by the company. The same has beendisclosed in Note No. 15 and 34 of the Financial Statement for the year ended 31st March2017.

Sub-Direction under section 143(5) of Companies Act. 2013- Nil

ANNEXURE C TO INDEPENDENT AUDITORS' REPORT OF EVEN DATE TO THE MEMBERS OF SCOOTERSINDIA LIMITED LUCKNOW ON THE ACCOUNTS OF THE COMPANY FOR THE YEAR ENDED 31 ST MARCH 2017

Report on the Internal Financial Controls under Clause (i) of sub-section 3 of Section143 of the Companies Act 2013 (‘the Act')

We have audited the internal financial controls over financial reporting of ScootersIndia Limited (‘the Company') as of 31 March 2017 in conjunction with our audit ofthe financial statements of the Company for the year ended on that date.

Management's Responsibility for Internal Financial Controls

The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls over Financial Reportingissued by the Institute of Chartered Accountants of India (‘ICAI'). Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to the Company's policies the safeguardingof its assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Companies Act 2013.

Auditors' Responsibility

Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls over Financial Reporting(the ‘Guidance Note') and the Standards on Auditing issued by ICAI and deemed to beprescribed under Section 143(10) of the Companies Act 2013 to the extent applicable toan audit of internal financial controls both applicable to an audit of Internal FinancialControls and both issued by the Institute of Chartered Accountants of India. ThoseStandards and the Guidance Note require that we comply with ethical requirements and planand perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls over financial reporting were established and maintained and if suchcontrols operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditors' judgment including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for our audit opinion on the Company's internal financial controls system overfinancial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that:

(1) Pertain to the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the Company;

(2) Provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the Company are being made only inaccordance with authorizations of the Management and directors of the Company; and

(3) Provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition use or disposition of the Company's assets that could have amaterial effect on the financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting

Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at 31 March 2017 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.