Scooters India Ltd.

Report on the Financial Statements

We have audited the accompanying Ind AS financial statements of Scooters India Limited(‘the Company') which comprise the Balance Sheet as at 31st March 2018 and theStatement of Profit and Loss Account (including Other Comprehensive Income) the Cash FlowStatement and the statement of Changes in Equity for the year then ended and a summary ofSignificant Accounting Policies and other explanatory information.

Management's Responsibility for the Ind AS 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 Ind AS financial statements that give a true and fair view of thefinancial position financial performance and cash flows of the Company in accordance withthe accounting principles generally accepted in India including the Accounting Standardsspecified under Section 133 of the Act read with the Companies (Indian AccountingStandards) rules 2015 as amended and other accounting principles generally accepted inIndia.

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 of the Ind AS financial statementsthat give a true and fair view and free from material misstatement whether due to fraudor error.

Auditors' Responsibility

Our responsibility is to express an opinion on these Ind AS financial statements basedon our audit. We have taken into account the provisions of the Act the accounting andauditing standards and matters which are required to be included in the audit report underthe provisions of the Acts and Rules made there under. We conducted our audit inaccordance 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 theaudit to obtain reasonable assurance about whether the Ind AS financial statements arefree from material misstatement.

An audit involves performing to obtain audit evidence about the amounts and thedisclosures in the Ind AS financial statements. The procedures selected depend on theauditors' judgment including the assessment of the risks of material misstatement of theInd AS financial statements whether due to fraud or error. In making those riskassessments the auditor considers internal control relevant to the Company's preparationof the fair presentation of the Ind AS financial statements 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 Ind AS financial statements.

Basis of Qualified Opinion

1. Attention is invited to note 41 of ‘Significant Accounting Policies &Notes to the Financial Statement' and note 46 of ‘Significant Accounting Policies& Notes to the Financial Statement' regarding repayment of principal and interest onnon plan loan of Rs 189 lakhs received by the company from the Government of India at aninterest rate of 13.50% per annum. The company has not provided interest over it as it hasfiled an application for freezing of the interest with the Ministry of Heavy Industryhowever Ministry approval on the same is pending and has yet not been approved furthertotal interest including the penalty accrued and unpaid is Rs 171.14 lakhs. till 31^stMarch 2018 since the final outcome is still awaited the therefore the impact isunascertained.

2. Attention is invited to note 43 of ‘Significant Accounting Policies &Notes to the Financial Statement' where the company has increased its Authorised capitalfrom Rs 7500 lakhs to Rs 25000 lakhs however share issue expense with respect to paymentof fees to the Ministry of Corporate Affairs ("MCA") pursuant to rule 12 of theCompanies (Registration of Offices and Fees) Rules 2014 of Rs 131.25 Lakhs plus interesthas not been paid nor provided in the books of accounts. The MCA has so far not allowedthe increased Authorized and Paid up capital without payment of requisite fees to MCA asthe company is claiming the exemption for the fees on account of relief given by BIFR inits order dated 19th June 2013 since the final outcome is still awaited with thereforethe impact is unascertainable.

Further the Annual Returns of last four years i.e. from FY 2013-14 to FY 2016-17 andFinancial Statements for FY 2016-17 have not been filed with the MCA which is noncompliance of Section 92 & 137 respectively of Companies Act 2013 and if the companyfails to file its annual return then the company is liable to pay additional fees andfurther penalty or prosecution may be initiated.

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 Ind AS financial statements give the informationrequired by the Act in the manner so required and give a true and fair view in conformitywith the accounting principles generally accepted in India of the state of affairs of theCompany as at 31 March 2018 and its profit/loss total comprehensive income/loss itscash flows and the changes in equity for the year ended on that date.

Emphasis of Matter

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

(a) Attention is invited to Note No. 35 of ‘Significant Accounting Policies &Notes to the Financial Statement' the balances in accounts of parties contractorsGovernment Department etc including those balances appearing under current assets Loanand advances and current liabilities are subject to confirmation and reconciliation theInd AS financial Statement do not include the impact of adjustment if any which mayarise out of the confirmation and reconciliation process.

(b) Attention is invited to Note No. 42 of ‘Signicicant Accounting Policies &Notes to the Financial Statement' where the company has bot provided for the arrears tothe employees who were on the payroll of the company as on 01.04.2013 as the approval isawaited from GOI and pending outcome of the proceeding before the Central GovernmentIndustrial Tribunal Lucknow.

(c) Attention is invited to Note No. 20 of ‘Significant Accounting Policies &Notes to the Financial Statement' regarding other current liabilities which includesprovision for Payment of Bonus to employees of Rs 14.18 lakhs for the year 2014-15 and Rs14.55 lakhs for 2016-17 in line with Payment of Bonus Act however said bonus is not paidand contravenes the provision of Section 19 of the said Act.

(d) Attention is invited to Note No. 2 of ‘Significant Accounting Policies &Notes to the Financial Statement' where the company has not recognized any revenue / rentfrom land usage of Petrol Pump from HPCL in absence of any finalized agreement the impactis unascertained.

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' on the 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 Statement of Profit and Loss including other comprehensiveincome/loss statement of Cash Flow and Statement of changes in equity dealt with by thisReport are in agreement with the books of account;

(d) In our opinion the aforesaid Ind AS financial statements comply with theAccounting Standards specified under Section 133 of the Act read with relevant rulesissued there under;

(e) On the basis of the written representations received from the directors as on 31March 2018 and taken on record by the Board of Directors none of the directors isdisqualified as on March 31 2018 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'; our report expresses an unmodified opinion on theadequacy and operating effectiveness of the Company's internal financial controls overfinancial reporting.

(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 Ind AS financial statements – Refer to Note No. 32 of‘Significant Accounting Policies & Notes to the financial statements'.

ii) The Company has made provision as required under the applicable law or accountingstandards for foreseeable losses if any- refer to Note No. 7 8 11 15 and 21 of‘Significant Accounting Policies & Notes to the Financial Statements'.

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

THE COMPANY FOR THE YEAR ENDED 31ST MARCH 2018

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) In respect of Company's fixed assets:

(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 as at the Balance Sheet date.

(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 2018.

(v) According to the information and explanation given to us the company has notaccepted any deposits during the year in terms of Sections 73 to 76 or any other relevantprovisions of Companies Act 2013.

(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.

(vii) Accourding to the information and explanation given to us in respect ofstatutory dues:

(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 2018 for a period of more than six month the date ofbecoming payable except the following:

(b) The disputed statutory dues aggregating Rs. 2402.92 lakhs and indeterminateinterest that have not been deposited on account of matters pending beforeappropriateauthorities 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 anddetails of such transactions have been disclosed in the financial statements as requiredby the applicable 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 non-cashtransactions 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.