March 8, 2010 : “In respect of the Scheme of Amalgamation of the erstwhile DQ Entertainment Limited(“Transferor Company”) with our Company (“Transferee Company”), the accounting was not in strict compliance with AS 14. In case the accounting were in compliance with the “purchase method” specified in AS 14, amounts aggregating to Rs. 103.17 million would have been credited to Capital Reserve Account.

The Scheme of Amalgamation, accounted for in accordance with the order of the High Court of Andhra Pradesh dated November 7, 2007 approving the Scheme of Amalgamation of DQ Entertainment Limited with the Company, was not strictly in compliance with the “Pooling of interests” method specified in AS-14, although in substance all the equity shareholders of the transferor company became shareholders of the transferee Company. As per the Scheme of Amalgamation, the consideration was by payment of cash of Rs. 403.28 million and issuance of 629,447 Redeemable Optionally Convertible Non Cumulative Preference Shares having a face value of Rs.10 each, aggregating to Rs.6.29 million. In case we had accounted for the scheme of amalgamation in accordance with the “Purchase” method specified in AS-14:

(a) The difference between the paid up share capital of erstwhile DQ Entertainment Limited and aggregate face value of the shares issue and allotted by the Company amounting to Rs.5.48 million would have been credited to the Capital Reserve of the Company; and

(b) The credit balance in the Securities Premium Account amounting to Rs.116.79 million in the transferor company would have been credited to the Capital Reserve of the transferee Company.

(c) The debit balance in the Profit and Loss Account of Rs.19.10 million would have been adjusted to the Capital Reserve Account.

In respect of the above, Deloitte Haskins and Sells, our statutory auditors have issued a letter dated

23 January 2010 and titled “Accounting for Scheme of Amalgamation vis-à-vis AS 14” which is made available as a “Material Document for Inspection”.”