CEAT Ltd

to the Members of CEAT Limited

1. We have audited the attached Balance Sheet of CEAT LIMITED, as at March 31,2012. the Profit and Loss Account and also the Cash Flow Statement for the year ended onthat date annexed thereto. These financial statements are the responsibility of theCompany’s management. Our responsibility is to express an opinion on these financialstatements based on our audit.

2. We conducted our audit in accordance with the auditing standards generally acceptedin India. 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 issued by theCentral Government of India in terms of sub-section (4A) of section 227 of the CompaniesAct, 1956 and on the basis of such checks of the books and records of the Company as weconsidered appropriate and according to the information and explanations given to usduring the course of the audit, we enclose in the Annexure a statement on the mattersspecified in paragraphs 4 and 5 of the said Order.

4. Further to our comments in the Annexure referred to above and our comments inparagraph 3 above, we report that:

(i) We have obtained all the information and explanations, which to the best of ourknowledge and belief were necessary for the purposes of our audit;

(ii) 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;

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

(iv) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statementdealt with by this report comply with the Accounting Standards prescribed by the Companies(Accounting Standards) Rules, 2006 referred to in sub-section (3C) of section 211 of theCompanies Act, 1956;

(v) On the basis of written representations received from the directors, as on March31, 2012, and taken on record by the Board of Directors, we report that none of thedirectors of the Company is disqualified as on March 31, 2012 from being appointed as adirector in terms of clause (g) of sub-section (1) of section 274 of the Companies Act,1956;

(vi) In our opinion and to the best of our information and according to theexplanations given to us, the said accounts read together with the notes thereon give theinformation required by the Companies Act, 1956, in the manner so required and give a trueand fair view in conformity with the accounting principles generally accepted in India:

(a) In the case of the Balance Sheet, of the state of affairs of the Company as atMarch 31, 2012;

(b) In the case of the Profit and Loss Account, of the Profit 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.

ANNEXURE TO THE AUDITORS’ REPORT

(Referred to in paragraph 3 of our report of even date)

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

(b) The Company has a programme of physical verification of fixed assets. As per thesaid programme, certain assets were physically verified during the year. In our opinion,the frequency of physical verification is reasonable having regard to the size andoperations of the Company and nature of its assets. No material discrepancies were noticedon such verification.

(c) The Company has not disposed off substantial part of fixed assets during the year.

(ii) (a) The inventories have been physically verified by the management at reasonableintervals during the year.

(b) In our opinion, the procedures of physical verification of inventories followed bythe management are reasonable and adequate in relation to the size of the Company and thenature of its business.

(c) In our opinion, the Company is maintaining proper records of inventory. Thediscrepancies noticed on physical verification were not material in relation to theoperations of the Company and the same have been properly dealt with in the books ofaccount.

(iii) The Company has neither granted nor taken any loans, secured or unsecured to/fromcompanies, firms or other parties covered in the register maintained under section 301 ofthe Companies Act, 1956. Accordingly, sub-clause (b), (c), (d), (f) and (g) are notapplicable

. (iv) In our opinion, there are adequate internal control system commensurate with thesize of the Company and the nature of its business for the purchase of inventory and fixedassets and for the sale of goods and services. During the course of our audit, we have notobserved any major weaknesses in internal controls.

(v) There are no particulars of contracts or arrangements referred to in Section 301 ofthe Companies Act, 1956 that need to be entered into the register maintained in pursuanceof section 301 of the Companies Act, 1956. Accordingly, sub-clause (b) is not applicable.

(vi) In our opinion, the Company has complied with the directives issued by the ReserveBank of India and the provisions of sections 58A, 58AA or any other relevant provisions ofthe Companies Act, 1956 and the rules framed there under, with regard to the depositsaccepted from the public. As informed to us, no order has been passed by the Company LawBoard or National Company Law Tribunal or Reserve Bank of India or any other court or anyother Tribunal.

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

(viii) Based on our review of the cost records, prima facie, the Company has made andmaintained cost records as prescribed by the Central Government under clause (d) ofSection 209(1) of the Act.

(ix) (a) According to the records of the Company, the Company is generally regular indepositing with the appropriate authorities undisputed statutory dues including ProvidentFund, Investor Education and Protection Fund, Employees’ State Insurance, Income-tax,Sales-tax, Wealth-tax, Service Tax, Custom Duty, Excise Duty, Cess and any other statutorydues applicable to it. Based on our audit procedures and according to the information andexplanations given to us, there are no arrears of undisputed statutory dues which remainedoutstanding as at March 31, 2012 for a period of more than six months from the date theybecame payable.

(b) According to the records made available to us and the information and explanationsgiven by the management, the details of the dues of Income tax/Sales tax/Wealthtax/Service Tax/Custom duty/Excise duty/cess, which have not been deposited with theappropriate authorities on account of any dispute, are given in the Appendix to thisreport.

(x) The Company does not have any accumulated losses at the end of the financial yearand has not incurred cash losses during the financial year covered by our audit and in theimmediately preceding financial year.

(xi) According to the records made available to us and the information and explanationsgiven by the management, the Company has not defaulted in the repayment of dues tofinancial institutions or banks.

(xii) The Company has not granted loans and advances on the basis of security by way ofpledge of shares, debentures and other securities.

(xiii) The Company is not a chit/nidhi/mutual benefit fund I society.

(xiv) The Company is not dealing in or trading in shares, securities debentures andother investments.

(xv) During the year, the Company has not given any guarantee for loans taken by othersfrom banks or financial institutions.

(xvi) In our opinion, the term loans availed by the Company during the year have beenapplied for the purposes for which they were obtained.

(xvii) According to the information and explanations given to us and an overallexamination of the balance sheet of the Company, we report that no short-term funds havebeen used for long-term purposes.

(xviii) During the year, the Company has not made any preferential allotment of Sharesto parties and companies covered in the register maintained under section 301 of theCompanies Act, 1956.

(xix) During the year, the Company has not issued any debentures.

(xx) The Company has not raised any money by public issue during the year.

(xxi) According to the information and explanations given to us, no fraud on or by theCompany, has been noticed or reported during the course of our audit.

APPENDIX TO AUDITORS’ REPORT

* The customs, Excise and Service Tax Appellate Tribunal