IRB Infrastructure Developers Ltd

The Members of IRB Infrastructure Developers Limited

1. We have audited the attached Balance Sheet of IRB Infrastructure DevelopersLimited ('the Company') as at March 31, 2011 and also the Profit and Loss Accountand the Cash Flow Statement for the year ended on that date annexed thereto. Thesefinancial statements are the responsibility of the Company's management. Ourresponsibility is to express an opinion 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 (as amended) 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.

4. Further to our comments in the Annexure referred to in paragraph 3 above, we reportthat:

(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 onMarch 31, 2011, and taken on record by the Board of Directors, we report that none of thedirectors is disqualified as on March 31, 2011 from being appointed as a director in termsof 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 theexplanations given to us, the said accounts give the information required by the CompaniesAct, 1956, in the manner so required and give a true and fair view in conformity with theaccounting principles generally accepted in India:

a) in the case of the Balance Sheet, of the state of affairs of the Company as at March31, 2011;

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 the Cash Flow Statement, of the cash flows for the year ended on thatdate.

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

(i) The Company does not have any fixed assets and therefore, the provisions of Clause4(i) (a) to (c) of the Companies (Auditor's Report) Order, 2003 (as amended) are notapplicable to the Company.

(ii) The Company does not have any inventory and therefore, the provisions of Clause4(ii) (a) to (c) of the Companies (Auditor's Report) Order, 2003 (as amended) are notapplicable to the Company.

(iii) (a) The Company has granted loans to nineteen wholly-owned subsidiaries coveredin the register maintained under Section 301 of the Companies Act, 1956. The maximumamount involved during the year was Rs. 16,837,598,633 and the year-end balance of loansgranted to such parties was Rs. 9,311,931,804.

(b) The Company has made interest bearing as well as interest free loans to fivewholly-owned subsidiaries and interest free loans to other wholly-owned fourteensubsidiaries. According to the information and explanations given to us and as per therecords maintained by the Company, the interest is charged on funds which are borrowedfrom banks and financial institutions and lent to these subsidiaries. In our opinion, therates of interest and other terms and conditions for interest bearing loans are not primafacie prejudicial to the interest of the Company. Having regard to management'srepresentation that the interest free loans are given to wholly-owned subsidiaries fromits own funds is in the interest of the Company's business, the rate of interest and otherterms and conditions for such loans are considered as not being prima facie prejudicial tothe interest of the Company.

(c) The loans granted and interest thereon, if any, are re-payable on demand exceptinterest free sub-ordinate debt aggregating to Rs. 742,390,000 given to four subsidiariesin lieu of equity as per common loan agreements with the lenders of those subsidiaries.The sub-ordinate loans will be repaid after those loans and other dues thereon have paidin full to the lenders. As informed, the loans re-payable on demand and interest thereon,if any, have been promptly repaid whenever they have been called, thus, there has been nodefault on the part of the parties to whom the money has been lent.

(d) There are no overdue amounts of loans granted to companies, firms or other partieslisted in the register maintained under Section 301 of the Companies Act, 1956.

(e) As informed, 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 Clause 4 (iii) (e) and (g) of the Companies(Auditor's Report) Order, 2003 (as amended) are not applicable to the Company and hencenot commented upon.

(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 sale of services. During the course of our audit, nomajor weakness has been noticed in the internal control system in respect of that area.The activities of the Company do not involve purchase of inventory or fixed assets andsale of goods. During the course of our audit, we have not observed any continuing failureto correct major weakness in internal control 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 Companies Act, 1956 that need to be entered into the registermaintained under Section 301 have been so entered.

(b) In respect of transactions made in pursuance of such contracts or arrangementsexceeding value of Rupees five lakhs entered into during the financial year, because ofthe unique and specialized nature of the items involved and absence of any comparableprices, we are unable to comment whether the transactions were made at prevailing marketprices 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) To the best of our knowledge and as explained, the Central Government has notprescribed maintenance of cost records under Clause (d) of sub-section (1) of Section 209of the Companies Act, 1956 for the products of the Company.

(ix) (a) The Company is regular in depositing with appropriate authorities undisputedstatutory dues including provident fund, income-tax, wealth-tax, cess and other materialstatutory dues applicable to it. The provisions relating to employees' state insurance,sales-tax, customs duty, service tax, and excise duty are not applicable to the Company.There are no dues payable to the investor education and protection fund.

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, income-tax,wealth-tax, cess and other material statutory dues were outstanding, at the year end, fora period of more than six months from the date they became payable.

(c) According to the information and explanations given to us, there are no dues ofincome tax, wealth-tax and cess which have not been deposited on account of any dispute.

(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, the Company has not defaulted in repayment of dues to banks or financialinstitutions. The Company did not have any outstanding debentures during the year.

(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 our opinion, the Company is not dealing in or trading in shares, securities,debentures and other investments. Accordingly, the provisions of Clause 4(xiv) of theCompanies (Auditor's Report) Order, 2003 (as amended) are not applicable to the Company.

(xv) According to the information and explanations given to us, the Company has givenguarantee for loans taken by subsidiaries from banks and financial institutions; the termsand conditions whereof in our opinion are not prima-facie prejudicial to the interest ofthe Company. According to the information and explanations given to us, the Company hasnot given any guarantee for loans taken by any other party from bank or financialinstitutions.

(xvi) Based on information and explanations given to us by the management, term loanswere applied for the purpose for which the loans were obtained.

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

(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.

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

(xx) The Company has not raised any money by the way of public issue during the year.Therefore 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 fraud on or by the Company has been noticed orreported during the course of our audit.