Gujarat Pipavav Port Ltd

To the Members of

Gujarat Pipavav Port Limited

1. We have audited the attached balance sheet of Gujarat Pipavav Port Limited ('theCompany') as at 31 December 2011 and also the profit and loss account and the cash flowstatement for the year ended on that date, annexed thereto. These financial statements arethe responsibility of the Company's management. Our responsibility is to express anopinion on these financial 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 ('the Order'), issued bythe Central Government of India in terms of sub-section (4A) of Section 227 of theCompanies Act, 1956 ('the Act'), we enclose in the Annexure a statement on the mattersspecified in paragraphs 4 and 5 of the said Order.

4. Further to our comments above we report that:

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, 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 insub-section (3C) of Section 211 of the Act;

e) on the basis of written representations received from the Directors of the Companyas at 31 December 2011, and taken on record by the Board of Directors, we report that noneof the directors of the Company is disqualified as on 31 December 2011 from beingappointed as a Director in terms of clause (g) of sub-section (1) of Section 274 of theAct; and

f) in our opinion, and to the best of our information and according to the explanationsgiven to us the said accounts, 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 31December 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.

Annexure to the Auditors’ Report – 31 December 2011

(Referred to in our report of even date)

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

(b) The Company has a regular programme of physical verification of fixed assets, bywhich all fixed assets are verified in a phased manner over a period of 3 years. In ouropinion, this periodicity of physical verification is reasonable having regard to the sizeof the Company and the nature of its assets. No material discrepancies were noticed onsuch verification.

(c) Fixed assets disposed off during the year were not substantial, and therefore, donot affect the going concern assumption.

2. (a) The inventory of stores and spare parts, fuel and lubricants has been physicallyverified by management during the year. In our opinion, the frequency of such physicalverification is reasonable.

(b) In our opinion, the procedures of physical verification of inventories followed bymanagement 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 noticedon verification between the physical stocks and the book records were not material.

3. 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 Act.

4. In our opinion and according to the information and explanations given to us, thereis an adequate internal control system commensurate with the size of the Company andnature of its business with regard to the purchase of inventories and fixed assets andwith regard to the services rendered. The activities of the Company do not involve sale ofgoods. We have not observed any major weakness in the internal control system during thecourse of the audit.

5. (a) In our opinion and according to the information and explanations given to us,the particulars of contracts or arrangements referred to in Section 301 of the Act havebeen entered in the register required to be maintained under that Section.

(b) In our opinion, and according to the information and explanations given to us, thetransactions made in pursuance of contracts and arrangements referred to in (a) above andexceeding the value of INR 0.5 million with any party during the year have been made atprices which are reasonable having regard to the prevailing market prices at the relevanttime.

6. The Company has not accepted any deposits from the public.

7. In our opinion, the Company has an internal audit system commensurate with the sizeand nature of its business.

8. The Central Government has not prescribed the maintenance of cost records underSection 209(1)(d) of the Act for any of the services rendered by the Company.

9. (a) According to the information and explanations given to us and on the basis ofour examination of the records of the Company, amounts deducted/accrued in the books ofaccount in respect of undisputed statutory dues including Income Tax, Provident Fund,Sales-tax, Wealth tax, Service tax, Customs duty and other material statutory dues havebeen regularly deposited during the year by the Company with the appropriate authorities.As explained to us, the Company did not have any dues on account of Employees' StateInsurance, Investor Education and Protection Fund and Excise duty.

According to the information and explanations given to us, no undisputed amountspayable in respect of Provident Fund, Income tax, Sales tax, Wealth tax, Service tax,Customs duty and other material statutory dues were in arrears as at 31 December 2011 fora period of more than six months from the date they became payable.

(b) According to the information and explanations given to us, the following dues ofCustoms duty and Income tax have not been deposited by the Company on account of disputes:

10. The Company has accumulated losses at the end of the financial year aggregating INR7,745.45 million which is not in excess of 50% of its net worth. The Company has notincurred cash losses in the current year, however, has incurred cash losses in theimmediately preceding financial year.

11. In our opinion and according to the information and explanations given to us, theCompany has not defaulted in repayment of dues to banks or to any financial institutions.The Company did not have any outstanding debentures during the year.

12. The Company has not granted any loans and advances on the basis of security by wayof pledge of shares, debentures and other securities.

13. In our opinion and according to the information and explanations given to us, theCompany is not a chit fund or a nidhi / mutual benefit fund/ society.

14. According to the information and explanations given to us, the Company is notdealing or trading in shares, securities, debentures and other investments.

15. According to the information and explanations given to us, the Company has providedcommitment of INR 350 million towards consortium lending to Pipavav Shipyard Limitedconditional to fulfillment of certain obligations by Pipavav Shipyard Limited and otherparties. The Company has sought discharge from this commitment in the previous year whichis still in process.

16. No term loans have been taken by the Company during the year. In our opinion andaccording to the information and explanations given to us, the term loans outstanding asat the year -end have been fully utilised in earlier years for the purpose for which theywere raised.

17. According to the information and explanations given to us, and on an overallexamination of the balance sheet of the Company, we are of the opinion that funds raisedon short term basis have not been used for long term investment.

18. The Company has not made any preferential allotment of shares to companies / firms/ parties covered in the register maintained under Section 301 of the Act.

19. According to the information and explanations given to us, the Company did not haveany outstanding debentures during the year.

20. We have verified the end-use of money raised by public issues as disclosed in note3 of Schedule 15 to the financial statements

21. According to the information and explanations given to us, no material fraud on orby the Company has been noticed or reported during the course of our audit.