Honda Siel Power Products Ltd

TO THE MEMBERS OF HONDA SIEL POWER PRODUCTS LIMITED

a) We have audited the attached Balance Sheet of Honda Siel Power Products Limited("the Company") as at 31 March 2012, Statement of Profit and Loss and the CashFlow Statement of the Company for the year ended on that date, (or "financialstatements"), annexed thereto. These financial statements are the responsibility ofthe Company's management. Our responsibility is to express an opinion on these financialstatements based on our audit.

b) 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 statements presentation. We believe that our audit provides a reasonable basisfor our opinion.

c) 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, we enclose in the Annexure, a statement on the matters specified inparagraphs 4 and 5 of the said Order.

d) 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, Statement of Profit and Loss and Cash Flow Statement dealtwith by this report are in agreement with the books of account;

(iv) in our opinion, the Balance Sheet, Statement of Profit and Loss and the Cash FlowStatement dealt with by this report comply with the Accounting Standards referred to insub-section (3C) of Section 211 of the Companies Act, 1956;

(v) on the basis of written representations received from the Directors of the Companyas on 31 March 2012 and taken on record by the Board of Directors, we report that none ofthe directors is disqualified as on 31 March 2012 from being appointed as a Director interms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956;

e) 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:

i) in the case of the Balance Sheet, of the state of the affairs of the Company as at31 March 2012;

ii) in the case of Statement of Profit and Loss, 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

(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) As explained to us, the Company has a programme of physical verification of itsfixed assets in a phased manner over a period of three years. In accordance with thisprogramme, during the current year, physical verification of certain fixed assets has beencarried out by the Company. In our opinion, this periodicity of physical verification isreasonable having regard to the size of the Company and the nature of its assets. Nomaterial discrepancies were noticed on such verification.

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

2. (a) Inventories, except stock-in transit, have been physically verified bymanagement during the year. In our opinion, the frequency of such verification isreasonable. For stocks lying with third parties at the year-end, written confirmationshave been obtained.

(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 verification between the physical stocks and the book recordswere not material.

3. According to the information and explanations given to us, the Company has neithergranted nor taken any loans, secured or unsecured to or from companies, firms or otherparties covered in the register maintained under Section 301 of the Companies Act, 1956.

4. In our opinion and according to the information and explanations given to us, andhaving regard to the explanation that purchases of certain items of inventories and fixedassets are for the Company's specialised requirements and similarly certain goods sold andservices rendered are for the specialised requirements of the buyers and suitablealternative sources are not available to obtain comparable quotations, there is anadequate internal control system commensurate with the size of the Company and the natureof its business with regard to purchase of inventories and fixed assets and with regard tothe sale of goods and services. We have not observed any major weakness in the internalcontrol system during the course 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 CompaniesAct, 1956 have been 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 Rs 5 lakhs are for sale of certain goods and services for thespecialised requirements of the buyer and for which suitable alternative sources are notavailable to obtain comparable quotations. Hence it is not possible for us to commentwhether above contracts or arrangements have been made at prices which are reasonablehaving regard to the prevailing market prices at the relevant time.

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. We have broadly reviewed the books of account maintained by the Company pursuant tothe rules prescribed by the Central Government for maintenance of cost records underclause (d) of sub-section (1) of Section 209 of the Companies Act, 1956 in respect of itsproducts and are of the opinion that prima facie, the prescribed accounts and records havebeen made and maintained. However, we have not made a detailed examination of the records.

9. (a) According to the information and explanations given to us and on the basis ofour examination of the records of the Company, undisputed statutory dues includingProvident Fund, Investor Education and Protection Fund, Employees' State Insurance, Incometax, Wealth tax, Excise duty, Service tax, Customs duty, Cess and other material statutorydues have been regularly deposited with the appropriate authorities. Sales tax, Entry taxand Professional tax have generally been regularly deposited with the appropriateauthorities though there has been slight delay in a few cases.

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, Customs duty, Excise duty, Salestax, Entry tax, Professional tax, Cess and other material statutory dues were in arrearsas at 31 March 2012 for a period of more than six months from the date they becamepayable.

(b) According to the information and explanations given to us, there are no dues ofWealth tax, Customs duty and Cess which have not been deposited with the appropriateauthorities on account of any dispute. According to the information and explanations givento us, the following dues of Income tax, Sales tax, Service tax and Excise duty have notbeen deposited by the Company on account of disputes:

* Includes penalty wherever indicated in the order

10. The Company does not have any accumulated losses and has not incurred cash lossesin the financial year and in the immediately preceding financial year.

11. In our opinion and according to the information and explanations given to us, theCompany did not have any outstanding dues to its bankers or any financial institution ordebenture holders 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 notgiven any guarantee for loans taken by others from banks or financial institutions.

16. According to the information and explanations given to us, no term loan has beentaken by the Company during the year.

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 the fundsraised on short-term basis have not been used for long-term investment.

18. The Company has not made any preferential allotment of shares during the year.

19. The Company has not issued any debentures during the year.

20. The Company has not raised any money by way of public issue during the year.

21. 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.