Indus Finance Corporation Ltd

To

The Members of

INDUS FINANCE CORPORATION LTD

We have audited the attached Balance Sheet of INDUS FINANCE CORPORATION LTD, asat 31st March, 2012 and the Profit and Loss Account of the Company for the same periodended on that date, 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.

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 misstatements. 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 ouropinion.

1. As required by the Companies (Auditors' report) Order 2003, issued by the CentralGovernment of India in terms of Section 227 (IV) (a) of the Companies Act, 1956, we annexhereto a statement of the matters specified in paragraphs 4 and 5 of the said order.

2. Furtherto our comments in the statement referred to in paragraph 1 above, we reportthat:

a. We have obtained all the information and explanations, which to the best of ourknowledge and belief were necessary for the purpose of our audit.

b. In our opinion, proper books of account, as required by law have been kept by thecompany so far as it appears from our examination of such books.

c. The Company's Balance Sheet and Profit and Loss Account dealt with by this reportare in agreement with the books of account.

d. In our opinion the Profit & Loss Account and the Balance Sheet comply with theapplicable Accounting Standards referred to in Section 211 (3C) of the Companies Act,1956.

e. On the basis of the written representations received from the Directors as on 3151March, 2012 and taken on record by the Board of Directors, we report that none of theDirectors is disqualified as on 31st March, 2012 from being appointed as a Director interms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956.

f. In our opinion and to the best of our information and according to the explanationsgiven to us, the said accounts read with the notes thereon under Schedule give theinformation required by the Companies Act, 1956, in the manner so required and give a trueand fair view in conformity with the accounting principle generally accepted in India,

1 in the case of the Balance Sheet, the state of affairs of the company as at 3181March, 2012;

2 in the case of the Profit and Loss Account, profit for the period ended on that date;and

3 In so far as it relates to cash flow statement, the cash flow of the Company for theyear ended on that date

Annexure -1

RE: INDUS FINANCE CORPORATION LTD Referred to Paragraph 2 of our report of even date

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

(b) All the Assets have been physically verified by the management during the year andthe Company has regular programme of verification which, in our opinion, is reasonablehaving regard to the nature of the Company and its size. No material discrepancies werenoticed.

(c) The Company has not disposed off substantial portion of the fixed assets during theyear, affecting the concern.

2. The Inventory has been physically verified during the year by the management. In ouropinion, the frequency of verification is reasonable.

The procedures of physical verification of inventories followed by the management arereasonable and adequate in relation to the size of the Company and its nature of business.

The Company is maintaining proper records of inventory. No discrepancies noticed onverification between the physical stocks and the book records.

3. The company has taken secured loan from three companies covered under registermaintained under section 301 of the Act. The total outstanding as at 31st March, 2012 isRs. 31,55,68,450/-. There is no stipulation regarding repaymentand interest for theloanstaken.

4. In our opinion and according to the information and explanations given to us, thereare adequate internal control procedures commensurate with the size of the Company andnature of its business with regard to purchase of inventory, fixed assets and with regardto the sale of goods. During the course of our audit, we have not observed any continuingfailure to correct major weakness in internal controls.

5. (a) According to the information and explanations given to us, we are of the opinionthat the transactions that need to be entered into the Register maintained under section301 of the Companies Act, 1956 have been so entered.

(b) In our opinion and according to the information and explanation given to us andaccording to the contracts and arrangements entered in the register maintained undersection 301 of the Companies Act, 1956, the value of transactions exceeding Rs.5,00,000/-with those parties, are reasonable having regard to the prevailing market price.

6. In our opinion and according to the information and explanations given to us, theCompany has not accepted deposits from the public to which the provisions of section58Aand 58AAof the Companies Act, 1956 and the Rules framed there under are applicable andtherefore paragraph 4(vi) of the Order is not applicable. The Company has taken unsecuredloans from Companies covered under section 301 of the Companies Act, 1956.

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

8. As the Company is predominantly a Non Banking Finance Company, it is not required tomaintain Cost Audit Records under the Act, for the income generated from sale of power.

9. In our opinion and according to the information and explanations given to us, thecompany does not have any undisputed statutory dues, as at 31 st March, 2012 for a periodof more than six months from the date they became payable to investor education protectionfund, employees' state insurance, sales tax, wealth tax, customs duty, excise duty, cessand other statutory dues, if any, with the appropriate authorities except Income Tax of Rs2,81,89,967/- relating to Assessment years 1996-97,

1997-98, 1998-99 and 2004-05 raised by the department which is disputed and thecompany's appeals are pending for disposal due to disputes related to earlier years and aservice tax amount of Rs. 181,386/- the payment of which is pending for completion ofregistration formalities.

10. The Company has neither accumulated losses nor incurred cash loss during thefinancial year covered under our audit and preceding financial year.

11. In our opinion and according to the information and explanations given to us, theCompany has no overdue of Installments payable to any financial Institutions.

12. In our opinion the company has maintained adequate records for loans granted on thebasis of security by way of pledge of shares.

13. In our opinion, the Company is not a chit fund or a nidhi/mutual benefit fund,society. Therefore, the provisions of clause 4 (xiii) of the Companies (Auditor's Report)Order, 2003 are not applicable to the Company.

14. In our opinion, where the company has given any guarantees for loans taken byothers from banks or financial institutions the terms and conditions are not prejudicialto the interest of the Company.

16. The Company has not taken term loans during the period covered under our audit andthere is no term loan outstanding as on the date of audit.

17. According to the information and explanations given to us and on an overallexamination of the Balance Sheet of the company, we report that no short-term funds wereinvested in long-term investment.

18. According to the information and explanations given to us, the company has notraised money by public issue during the year.

19. According to the information and explanations given to us during the period coveredunder our audit, the company has not issued any debentures during the year and hence, theprovisions of clause no 4 (xix) of the Companies (Auditor's Report) Order, 2003 is notapplicable to the company.

20. According to the information and explanations given to us, the company has notraised any money by way of public issue during the year and therefore paragraph 4 (xx) ofthe Order is not applicable to the company.

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.

Annexure - II

RE: INDUS FINANCE CORPORATION LTD

Auditors' Report as per Reserve Bank of India Notification No. DFC.114/DG(SPT)-98

1. The Company had applied for and obtained registration as provided in Section 45IA ofthe Reserve Bankof India Act, 1934 (2 of 1934).

2. According to Information and Explanation provided to us, the Board of Directors ofthe Company has passed the necessary resolution for the non-acceptance of any publicdeposits during the year.

3. According to Information and Explanation provided to us, the Company has notaccepted deposits from the public during the year.

4. According to Information and Explanation provided to us, the Company has compliedwith the prudential norms relating the income recognition, accounting standards, assetclassification and provisioning for bad and doubtful debts as applicable to it.