Anant Raj Industries Ltd

To the members of Anant Raj Industries Limited

1. We have audited the annexed Balance Sheet of Anant Raj Industries Limited ason March 31, 2011, the Profit and Loss Account and also the Cash Flow Statement for theyear ended on that date annexed thereto. These financial statements are the responsibilityof the Company's management. Our responsibility is to express an opinion on thesefinancial statements based on our audit.

2. We conducted our audit in accordance with auditing standards generally accepted inIndia. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement. Anaudit includes examining, on a test basis, evidence supporting the amounts and disclosuresin the financial statements. An audit also includes assessing the accounting principlesused and significant estimates made by management, as well as evaluating the overallfinancial statement presentation. We believe that our audit provides a reasonable basisfor our opinion.

3. As required by the Companies (Auditor’s Report) Order, 2003, as amended by theCompanies (Auditors’ Report) (Amendment) Order, 2004, [Order], issued by the CentralGovernment of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956and on the basis of such checks of the books and records of the Company as we consideredappropriate and according to the information and explanations given to us, we give in theAnnexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4. Further to our comments in Annexure referred to in paragraph 3 above, we reportthat:

(a) We have obtained all the information and explanations which to the best of ourknowledge 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 appears from our examination of those books.

(c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with bythis report are in agreement with the books of account.

(d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statementdealt with by this report 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 and taken onrecord by the Board of Directors, none of the directors is disqualified as on March 31,2011 from being appointed as a director in the terms of clause (g) of sub-section (1) ofsection 274 of the Companies Act, 1956.

(f) In our opinion and to the best of our information and according to the explanationsgiven to us, the said financial statements read together with accounting policies andnotes thereon and attached thereto give in the prescribed manner the information requiredby the Companies Act, 1956, give a true and fair view in conformity with the accountingprinciples generally accepted in India:

i) in the case of the Balance Sheet, of the state of affairs of the Company as at March31, 2011;

ii) in the case of the Profit and Loss Account, of the profit for the year ended onthat date; and

iii) in the case of the Cash Flow Statement, of the cash flows for the year ended onthat date.

i) In respect of fixed assets:

a) The Company is maintaining proper fixed assets records showing full particulars,including quantitative details and situation of fixed assets.

b) The fixed assets were physically verified by the management at reasonable intervalsduring the previous year and no material discrepancies were noticed on such verificationas compared to book records.

c) In our opinion, the Company has not disposed off a substantial part of its fixedassets during the year and the going concern status of the Company is not affected.

ii) In respect of inventories:

a) The inventory includes land, buildings, construction work-in-progress, constructionand development material, development rights, raw materials, stores and spares andfinished goods were physically verified by the management at reasonable intervals duringthe year. The verification of raw materials lying in loose form like clay was carried outbased upon parameters of volume and weight.

b) In our opinion, the procedures of physical verification of inventory followed by themanagement are reasonable and adequate in relation to the size of the Company and thenature of its business.

c) The Company is maintaining proper records of inventory. The discrepancies noticed onphysical verification of inventory as compared to book records were not material and havebeen properly dealt with in the books of account.

iii) The Company has neither granted nor taken any loans, secured or unsecured, to orfrom companies, firms or other parties covered in the register maintained under section301 of the Companies Act, 1956.

iv) In our opinion and according to the information and explanations given to us, thereare adequate internal control systems commensurate with the size of the Company and thenature of its business for the purchase of inventory, fixed assets and for the sale ofgoods. Further, on the basis of our examination of the books and records of the Company,and according to the information and explanations given to us, we have neither come acrossnor have been informed of any continuing failure to correct major weaknesses in theaforesaid internal control systems.

v) In respect of contracts or arrangements referred to in section 301 of the CompaniesAct, 1956:

a) According to the information and explanations given to us, the transactions made inpursuance of contracts or arrangements that need to be entered in the register maintainedunder section 301 of the Companies Act, 1956, have so been entered.

b) Transactions made in pursuance of such contracts or arrangements have been made atprices which are reasonable having regard to the prevailing market prices at the relevanttime.

vi) The Company has not accepted any deposits from public within the meaning ofsections 58A, 58AA or any other relevant provisions of the Companies Act, 1956 and therules framed there under.

vii) In our opinion, the Company has an internal audit system commensurate with itssize and nature of its business.

viii) According to the information and explanations given to us, the Central Governmenthas not prescribed the maintenance of cost records under clause (d) of subsection (1) ofsection 209 of the Companies Act, 1956 for the products of the Company.

ix) a) According to the information and explanations given to us and the records of theCompany examined by us, in our opinion, the Company is generally regular in depositing theundisputed statutory dues including provident fund, employees’ state insurance,income tax, sales tax, wealth tax, service tax, custom duty, excise duty, cess and otherstatutory dues as applicable with the appropriate authorities except for a few instancesof slight delay in deposit.

b) According to the information and explanations given to us, no undisputed amountspayable in respect of provident fund, employees’ state insurance, income tax, salestax, wealth tax, service tax, custom duty, excise duty, cess and other statutory dues wereoutstanding, as at March 31, 2011, for a period of more than six months from the date theybecame payable. The Company has not charged and consequently, not deposited service taxamounting Rs. 597.87 lacs on revenue from leasing of immovable property, relying on orderdated April 18, 2009 of the Hon’ble High Court of Delhi. The Company does notconsider itself liable to pay service tax as the liability to deposit service tax onrental revenues is contractually recoverable from the tenants and therefore, the same hasnot been considered for the purpose of this report

c) According to the information and explanations given to us, there are no dues ofwealth tax, service tax, custom duty, excise duty and cess that have not been depositedwith appropriate authorities on account of dispute. There are dues of income tax, salestax and value added tax that have not been deposited with appropriate authorities onaccount of dispute. The forum where the disputes are pending are given below:

* Amounts are net of payments made and without considering interest for the overdueperiod, if any, as may be levied if demand as raised is upheld.

# Excluding interest and additional tax.

x) The Company has no accumulated losses as at the end of the year and it has notincurred any cash losses during the financial year covered by our audit and in theimmediately preceding financial year.

xi) According to the records of the Company examined by us and the information andexplanation given to us, the Company has not defaulted in repayment of dues to itsBankers.

xii) According to the information and explanations given to us, the Company has notgranted any loans and advances on the basis of security by way of pledge of shares,debentures and other securities.

xiii) The provisions of any special statute applicable to chit fund/nidhi/mutualbenefit fund/ societies are not applicable to the Company.

xiv) According to the information and explanations given to us, the Company does notdeal or trade in shares, securities or debentures. Proper records have been maintained ofthe transactions and contracts in respect of the investments made by the Company. Theinvestments are held by the Company in its own name.

xv) According to the information and explanations given to us, the Company has givenCorporate guarantees of Rs. 160 Crores to banks to secure the credit facility extended bythe banks to its 2 (two) subsidiary companies, against which outstanding amount as atMarch 31, 2011 is Rs. 1,000.34 lacs.

xvi) In our opinion and according to the information and explanations given to us, termloans have been applied for the purpose for which they were obtained.

xvii) According to the information and explanations given to us and on an overallexamination of the Balance Sheet of the Company, no funds raised on a short term basishave been used for long term investment.

xviii) According to the information and explanations given to us, the Company has notmade any preferential allotment of equity shares to parties or companies covered underregister maintained under section 301 of the Companies Act, 1956.

xix) The Company has not issued any debentures during the year.

xx) The Company has not raised any money by way of public issue during the year. Thefunds raised through issue of global depository receipts are being utilized for thepurpose for which they were raised.

xxi) During the course of our examination of the books and record of the Company,carried out in accordance with the generally accepted auditing practices in India, andaccording to the information and explanations given to us, we have neither come across anyinstance of fraud on or by the Company, noticed or reported during the year, nor have webeen informed of such case by the management.