IFCI Ltd

TO THE MEMBERS OF IFCI LIMITED

We have audited the attached Balance Sheet of IFCI Ltd. as at March 31, 2010 and alsothe Profit and Loss Account and the Cash Flow Statement for the year ended on that dateannexed thereto. These financial statements are the responsibility of the Company’smanagement. Our responsibility is to express an opinion on these financial statementsbased 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. As required by the Companies (Auditor’s Report) Order, 2003 and theCompanies (Auditor’s Report) (Amendment) Order, 2004 issued by the Central Governmentof India in terms of Sub-Section (4A) of Section 227 of the Companies Act, 1956, weenclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of thesaid Order.

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, the Profit and Loss Account and the Cash Flow Statement dealtwith by this report are in agreement with the books of account.

(iv) 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 Companies Act, 1956.

(v) As per information and explanation given to us, the central Government has, tilldate, not prescribed any cess payable under Section 441A of the Companies Act, 1956.

(vi) On the basis of written representations received from the Directors, as on March31, 2010 and taken on record by the Board of Directors, we report that none of theDirectors of the Company is disqualified as on March 31, 2010 from being appointed asDirector under Section 274(1) (g) of the Companies Act, 1956.

(vii) In our opinion and to the best of our information and according to theexplanations given to us, the said accounts read together with the Significant AccountingPolicies and Notes thereon, give the information required by the Companies Act, 1956 inthe 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 affairs of the Company as at March31, 2010;

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 REFERRED TO IN PARA 1 OF OUR REPORT OF EVEN DATE

(i) (a) The Company is maintaining proper records showing full particulars, includingquantitative details and situations of fixed assets.

(b) The fixed assets are being physically verified by the management at all its officesin a phased manner at reasonable intervals. According to the information and explanationgiven to us, no material discrepancies were noticed on such verification. (c) The Companydid not dispose off a substantial part of fixed assets during the year. However, theCompany did dispose off certain land and buildings during the year. This has not affectedthe going concern.

(ii) The nature of the Company does not require it to hold inventories and as suchClause 4(ii) of the Companies (Auditors' Report) Order, 2003 ('Order') is not applicable.(iii) (a) The Company has not granted any loans, secured or unsecured to companies, firmsor other parties covered in the register maintained under Section 301 of the CompaniesAct, 1956. As the Company has not granted any loans, secured or unsecured, to partieslisted in the registers maintained under Section 301 of the Companies Act, 1956,paragraphs (iii) (a), (b), (c) & (d) of the Order are not applicable.

(b) The Company has not taken any loans, secured or unsecured from companies, firms orother parties covered in the register maintained under Section 301 of the Companies Act,1956. As the Company has not taken any loans, secured or unsecured, from parties listed inthe registers maintained under Section 301 of the Companies Act, 1956, paragraphs (iii)(e), (f) and (g) of the Order are not applicable.

(iv) In our opinion, and according to the information and explanations given to us,there are adequate internal control procedures commensurate with the size of the Companyand the nature of its business, for the purchase of fixed assets and for sale of services.Further, during the course of our audit we have neither come across nor have we beeninformed of any continuing failure to correct major weakness in the internal controls.

(v) (a) In our opinion, and according to the information and explanations given to us,there are no transactions that need to be entered into a register maintained under Section301 of the Companies Act, 1956.

(b) In our opinion, and according to the information and explanations given to us, asthere are no transactions that need to be entered into a register maintained under Section301 of the Companies Act, 1956, paragraph (v) (b) of the Order is not applicable.

(vi) In our opinion, and according to the information and explanations given to us, theCompany has, not accepted any public deposits and hence, directives issued by the ReserveBank of India and the provisions of Sections 58A and 58AA or any other relevant provisionsof the Companies Act, 1956 and the rules framed there under are not applicable. As per theinformation and explanations given to us, no order has been passed by Company Law Board orNational Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunalin this respect.

(vii) In our opinion, the internal audit function carried out during the year by a firmof Charted Accountants appointed by the management have been commensurate with its sizeand nature of its business.

(viii) According to the information and explanations given to us the Central Governmenthas not prescribed maintenance of cost records under Clause (d) of Sub-Section (1) ofSection 209 of the Companies Act, 1956.

(ix) (a) According to the information and explanations given to us and on the basis ofour examination of the books of account, the Company has been generally regular indepositing undisputed statutory dues including Provident Fund, Investor Education andProtection Fund, Income-Tax, Sales-Tax, Wealth Tax, Service Tax, Custom Duty, Cess andother material statutory dues as applicable with the appropriate authorities. There are noarrears of outstanding statutory dues as at 31.03.2010 for a period of more than 6 monthsfrom the date they became payable.

(b) As at March 31, 2010, according to the records of the Company and the informationand explanations given to us, the following are the particulars of dues on account ofIncome Tax/Sales Tax/Wealth Tax/Service Tax/Custom Duty/ Excise Duty/Cess that have notbeen deposited on account of disputes:

However, according to the information and explanations given to us, the demand againstIncome Tax is fully covered by way of Advance Tax, deposited with Income Tax Authorities.(x) The Company did not have any accumulated losses as at the end of the financial yearand in the immediately preceding financial year.

(xi) According to the information and explanations given to us and on the basis of ourexamination of the books of account, the Company has not defaulted in repayment of dues toany financial institution or bank or debenture holders, except the differential interestin respect of certain bonds which are in the process of restructuring.

(xii) According to the information and explanations given to us and on the basis of ourexamination of the books of account, the Company has granted loans and advances on thebasis of security by way of pledge of shares, debentures and other securities. In ouropinion, the Company has maintained adequate documents and records in this respect.

(xiii) The Company is not a chit fund, nidhi, mutual benefit or a society. Accordingly,Clause 4(xiii) of the Order is not applicable.

(xiv) (a) According to the information and explanations given to us and on the basis ofour examination of the books of account, the Company has maintained proper records of thetransactions and contracts and timely entries have been made therein in respect of theshares, securities, debentures and other investments dealt with or traded by the Company.

(b) The shares, securities, debentures and other securities have been held by theCompany, in its own name except to the extent of the exemption, if any, granted underSection 49 of the Companies Act, 1956.

(xv) In our opinion and according to the information and explanations given to us, theterms and conditions on which the Company has given guarantees for loans taken by othersfrom bank 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,term loans availed by the Company were prima-facie applied by the Company during the yearfor the purpose for which they were obtained.

(xvii) According to the information and explanations given to us and based on theoverall examination of the Balance Sheet of the Company, funds raised on short term basishave prima-facie not been used for long term investment.

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

(xix) As all debentures and bonds issued are unsecured, creation of security or chargedoes not arise.

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

(xxi) To the best of our knowledge and belief and according to the information andexplanations given to us, no fraud on or by the Company has been noticed or reportedduring the year.