Crompton Greaves Ltd

TO THE SHAREHOLDERS OF CROMPTON GREAVES LIMITED

We have audited the attached Balance Sheet of Crompton Greaves Limited as at31st March, 2011, the Profit and Loss Account and also the Cash Flow Statement for theyear ended on that date, annexed thereto. These financial statements are theresponsibility of the Company’s management. Our responsibility is to express anopinion on these financial statements based on our audit.

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.

In accordance with provisions of Section 227 of the Companies Act 1956, we report that:

1. As required by the Companies (Auditor’s Report) Order, 2003 and as amended bythe Companies (Auditor’s Report) (Amendment) Order, 2004 issued by the CentralGovernment of India in terms of Section 227 (4A) of the Companies Act, 1956, we enclose inthe Annexure, a statement on the matters specified in paragraphs 4 and 5 of the saidOrder.

2. Further to our comments in the Annexure referred to above, we report that:

(a) we have obtained all 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, the Profit and Loss Account and the Cash Flow Statement dealtwith by this report are in agreement with the books of account;

(d) in our opinion, the Balance Sheet, the Profit and Loss Account and the Cash FlowStatement dealt with by this report comply with the accounting standards referred to inSection 211 (3C) of the Companies Act, 1956; and

(e) on the basis of the written representations received from directors of the Companyas on 31st March, 2011, and taken on record by the Board of Directors, we report that noneof the directors is disqualified as on 31st March, 2011, from being appointed as adirector in terms of Section 274 (1) (g) of the Companies Act, 1956.

In our opinion, and to the best of our information and according to the explanationsgiven to us, the said accounts, read together with the Significant Accounting Policies inSchedule ‘A’ and the Notes on the Balance Sheet and Profit and Loss Account inSchedule ‘B’, give the information required by the Companies Act, 1956, in themanner so required and 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 31stMarch, 2011;

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

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

ANNEXURE TO THE AUDITORS’ REPORT

(REFERRED TO IN PARAGRAPH 1 OF OUR REPORT OF EVEN DATE)

(i) (a) The Company is maintaining proper records to show full particulars, includingquantitative details and situation of all fixed assets.

(b) As explained to us, these fixed assets have been physically verified by themanagement, in accordance with a phased programme of verification, which in our opinion,is reasonable, considering the size of the Company and nature of its assets. The frequencyof physical verification is reasonable and no material discrepancies were noticed on suchverification.

(c) The Company has not disposed off any substantial part of its fixed assets duringthe year, so as to affect its going concern status.

(ii) (a) As explained to us, the inventories have been physically verified bythe management during the year. In our opinion, the frequency of such verificationis reasonable.

(b) As per the information given to us, the procedures of physical verification ofinventory followed by the management are, in our opinion, reasonable and adequate inrelation to the size of the Company and the nature of its business.

(c) The Company is maintaining proper records of inventory.

The discrepancies noticed on verification between the physical stocks and thebook records, which were not material, have been properly dealt with in the booksof account.

(iii) (a) According to the information and explanations given to us, the Company hasnot granted any loans, secured or unsecured, to companies, firms and other partiescovered in the register maintained under Section 301 of the Companies Act, 1956.Accordingly, paragraphs 4(iii)(b), (c) and (d) of the Companies (Auditor’s Report)Order, 2003 are not applicable to the Company.

(b) According to the information and explanations given to us, the Company has nottaken any loans, secured or unsecured, from companies, firms and other parties covered inthe register maintained under Section 301 of the Companies Act, 1956. Accordingly,paragraphs 4(iii) (f) and (g) of the Companies (Auditor’s Report) Order, 2003 are notapplicable to the Company.

(iv) In our opinion, and according to the information and explanations given tous, there is adequate internal control system commensurate with the size of the Companyand nature of its business, for the purchase of inventory and fixed assets and for thesale of goods and services. During the course of audit, we have neither come across norhave been informed of any continuing failure to correct major weaknesses in theaforesaid internal control system.

(v) (a) According to the information and explanations given to us, we are of theopinion that the particulars of contracts or arrangements that need to be entered in theregister maintained under Section 301 of the Companies Act, 1956, have beenso entered.

(b) In our opinion and according to the information and explanations given tous, the transactions made in pursuance of such contracts or arrangements entered inthe register maintained under Section 301 of the Companies Act, 1956 andexceeding the value of rupees five lakhs in respect of any party during the year,have been made at prices which are reasonable having regard to the prevailing marketprices at the relevant time.

(vi) The Company has accepted deposits from the public and in our opinion and accordingto the information and explanations given to us, the directives issued by the Reserve Bankof India and the provisions of Sections 58A, 58AA and other relevant provisions of theCompanies Act, 1956 and the rules framed thereunder, where applicable, have been compliedwith. We are informed that no order has been passed by the Company Law Board or NationalCompany Law Tribunal or Reserve Bank of India or any Court or any other Tribunal.

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

(viii) We have broadly reviewed the books of account and records maintained by theCompany pursuant to the rules prescribed by the Central Government for the maintenance ofcost records under Section 209 (1) (d) of the Companies Act, 1956, in respect of electricfans, motors, power driven pumps, transformers and electric lamps and are of the opinionthat prima facie the prescribed accounts and records have been made and maintained.The contents of these accounts and records have not been examined by us.

(ix) (a) According to the information and explanations given to us, in our opinion, theCompany has been regular in depositing undisputed statutory dues including provident fund,investor education and protection fund, employees state insurance, income-tax, sales tax,wealth tax, service tax, custom duty, excise duty, cess and other statutory dues, asapplicable, with the appropriate authorities. According to the information andexplanations given to us, no undisputed amounts were in arrears as at 31st March, 2011,for a period of more than six months from the date they become payable.

(b) According to the information and explanations given to us and the records of theCompany examined by us, the particulars of income tax, sales tax, service tax, excise dutyand cess as at 31st March, 2011, which have not been deposited on account of a dispute,are as under:

* Net of pre-deposit paid in getting the stay / appeal admitted

(x) The Company has no accumulated losses as at 31st March, 2011 and it has notincurred any cash losses in the financial year ended on that date and in the immediatelypreceding financial year.

(xi) According to the information and explanations given to us, in our opinion theCompany has not defaulted in the repayment of dues to any financial institutions or bankas at the balance sheet date.

The Company has not issued any debentures.

(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 / society are not applicable to the Company.

(xiv) In our opinion and according to the information and explanations given to us, theCompany is not dealing in or trading in securities. The Company has invested surplus fundin mutual funds. According to the information and explanations given to us, proper recordshave been made of the transactions and contracts and timely entries have been madetherein. The investments in mutual funds have been held by the Company in its own name.

(xv) In our opinion and according to the information and explanations given to us, theterms and conditions of guarantee given by the Company for loans taken by others frombanks or financial institutions are not prima facie prejudicial to the interests ofthe Company.

(xvi) In our opinion and according to the information and explanations given to us, theterm loans have been applied for the purposes for which they were obtained.

(xvii) According to the information and explanations given to us and on overallexamination of the balance sheet of the Company, we report that no funds raised onshort-term basis have been used for long-term investments.

(xviii) The Company has not made any preferential allotment of shares to parties orcompanies covered in the register maintained under Section 301 of the Companies Act, 1956,during the year.

(xix) The Company has not issued any debentures during the year. Hence, reporting onparagraph 4 (xix) of the Companies (Auditor’s Report) Order, 2003 pertaining tocreation of security or charge for debentures does not arise.

(xx) The Company has not raised any money by public issues during the year.Accordingly, paragraph 4 (xx) of the Companies (Auditor’s Report) Order, 2003 is notapplicable to the Company.

(xxi) During the course of our examination of books and records of the Company, carriedout in accordance with the generally accepted auditing practices in India, and accordingto the information and explanations given to us, we have neither come across any instancesof material fraud on or by the Company, noticed or reported during the year, nor have webeen informed of such case by the management.