Castrol India Ltd

To

The Members of Castrol India Limited

1. We have audited the attached Balance Sheet of Castrol India Limited as atDecember 31, 2010 and also the Profit and Loss Account and 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) issuedby the Central Government of India in terms of sub-section (4A) of Section 227 of theCompanies Act, 1956, we enclose in the Annexure a statement on the matters specified inparagraphs 4 and 5 of the said Order.

4. Further to our comments in the Annexure referred to 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 referred to in sub-section(3C) of Section 211 of the Companies Act, 1956.

v. On the basis of the written representations received from the directors, as onDecember 31, 2010, and taken on record by the Board of Directors, we report that none ofthe directors is disqualified as on December 31, 2010 from being appointed as a directorin 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 the explanationsgiven to us, the said accounts give the information required by the Companies Act, 1956,in the manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India;

a) in the case of the balance sheet, of the state of affairs of the Company as atDecember 31, 2010;

b) in the case of the profit and loss account, of the profit for the year ended on thatdate; and

c) in the case of cash flow statement, of the cash flows for the year ended on thatdate.

For S. R. Batliboi & Co.

Firm Registration No.: 301003E

Chartered Accountants

per Ravi Bansal

Partner

Membership No.: 49365

Annexure referred to in paragraph 3 of our report of even date

Re: Castrol India Limited (‘the Company’)

(i) (a) The Company has maintained proper records showing full particulars, includingquantitative details and situation of fixed assets. (b) All fixed assets have not beenphysically verified by the management during the year but there is a regular programme ofverification which, in our opinion, is reasonable having regard to the size of the Companyand the nature of its assets. As informed to us, no material discrepancies were noticed onsuch verification.

(c) There was no substantial disposal of fixed assets during the year.

(ii) (a) The management has conducted physical verification of inventory at reasonableintervals during the year.

(b) The procedures of physical verification of inventory followed by the management arereasonable and adequate in relation to the size of the Company and the nature of itsbusiness.

(c) The Company is maintaining proper records of inventory and no materialdiscrepancies were noticed on physical verification.

(iii) (a) As informed to us, the Company has not granted any loans, secured orunsecured to companies, firms or other parties covered in the register maintained underSection 301 of the Companies Act, 1956. Accordingly, provisions of clause 4(iii) (b), (c)and (d) of the Companies (Auditor’s Report) Order, 2003 (as amended) are notapplicable to the Company.

(e) As informed to us, the Company has not taken any loans, secured or unsecured fromcompanies, firms or other parties covered in the register maintained under Section 301 ofthe Companies Act, 1956. Accordingly, provisions of clause 4(iii) (f) and (g) of theCompanies (Auditor’s Report) Order, 2003 (as amended) are not applicable to theCompany.

(iv) In our opinion and according to the information and explanations given to us,there is an adequate internal control system commensurate with the size of the Company andthe nature of its business, for the purchase of inventory and fixed assets and for thesale of goods and services. During the course of our audit, no major weakness has beennoticed in the internal control system in respect of these areas. During the course of ouraudit, we have not observed any continuing failure to correct major weakness in internalcontrol system of the company.

(v) (a) According to the information and explanations provided by the management, weare of the opinion that the particulars of contracts or arrangements referred to inSection 301 of the Act that need to be entered into the register maintained under Section301 have been so entered.

(b) In our opinion and according to the information and explanations given to us, thetransactions made in pursuance of such contracts or arrangements exceeding value of Rupeesfive lakhs have been entered into during the financial year at prices which are reasonablehaving regard to the prevailing market prices at the relevant time except in respect ofcertain transactions, where because of the unique and specialized nature of the itemsinvolved and absence of any comparable prices, we are unable to comment whether thetransactions were made at the prevailing market prices at the relevant time.

(vi) The Company has not accepted any deposits from the public.

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

(viii) We have broadly reviewed the books of account maintained by the Company pursuantto the rules made by the Central Government for the maintenance of cost records underSection 209(1)(d) of the Companies Act, 1956, and are of the opinion that prima facie, theprescribed accounts and records have been made and maintained.

(ix) (a) Undisputed statutory dues including provident fund, investor education andprotection fund, or employees’ state insurance, income-tax, sales-tax, wealth-tax,service tax, customs duty, excise duty and cess have generally been regularly depositedwith the appropriate authorities.

Further, since the Central Government has till date not prescribed the amount of cesspayable under Section 441 A of the Companies Act, 1956, we are not in a position tocomment upon the regularity or otherwise of the Company in depositing the same.

(b) According to the information and explanations given to us, no undisputed amountspayable in respect of provident fund, investor education and protection fund,employees’ state insurance, income-tax, wealth-tax, service tax, sales-tax, customsduty, excise duty, cess and other undisputed statutory dues were outstanding, at the yearend, for a period of more than six months from the date they became payable.

(c) According to the records of the Company, the dues outstanding of income tax,sales-tax, wealth-tax, service tax, customs duty, excise duty and cess on account of anydispute, are as follows:

(x) The Company has no accumulated losses at the end of the financial year and it hasnot incurred cash losses in the current and immediately preceding financial year.

(xi) Based on our audit procedures and as per the information and explanations given bythe management, we are of the opinion that the Company has not defaulted in repayment ofdues to bank. The Company has no outstanding dues in respect of financial institution ordebenture holders.

(xii) According to the information and explanations given to us and based on thedocuments and records produced to us, the Company has not granted loans and advances onthe basis of security by way of pledge of shares, debentures and other securities.

(xiii) In our opinion, the Company is not a chit fund or a nidhi/mutual benefitfund/society. Therefore, the provisions of clause 4(xiii) of the Companies (Auditor’sReport) Order, 2003 (as amended) are not applicable to the Company.

(xiv) In respect of dealing/trading in shares, securities, debentures and otherinvestments, in our opinion and according to the information and explanations given to us,proper records have been maintained of the transactions and contracts and timely entrieshave been made therein. The shares, securities, debentures and other investments have beenheld by the Company, in its own name.

(xv) According to the information and explanations given to us, the Company has notgiven any guarantee for loans taken by others from bank or financial institutions.

(xvi) The Company did not have any term loans outstanding during the year.

(xvii) According to the information and explanations given to us and on an overallexamination of the balance sheet and cash flow statement of the Company, we report that nofunds raised on short-term basis have been used for long-term investment.

(xviii) The Company has not made any preferential allotment of shares during the yearto parties or companies covered in the register maintained under section 301 of theCompanies Act, 1956.

(xix) The Company did not have any outstanding debentures during the year.

(xx) The Company has not raised any money through public issue during the year.Accordingly, the provisions of clause 4(xx) of the Companies (Auditor’s Report)Order, 2003 (as amended) are not applicable to the Company.

(xxi) Based upon the audit procedures performed for the purpose of reporting the trueand fair view of the financial statements and as per the information and explanationsgiven by the management, we report that no material fraud on or by the Company has beennoticed or reported during the course of our audit.

For S. R. Batliboi & Co.

Firm Registration No.: 301003E

Chartered Accountants

per Ravi Bansal

Partner

Membership No.: 49365

Place : Mumbai

Date : February 22, 2011