JSW Steel Ltd

to the Members of

JSW Steel Limited

To the Members of

JSW Steel Limited

1. We have audited the attached Balance Sheet of JSW Steel Limited ("theCompany") as at 31st March, 2011, the Profit and Loss Account and the Cash FlowStatement of the Company for the year ended on that date, both 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 the auditing standards generally acceptedin India. 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 thedisclosures in the financial statements. An audit also includes assessing the accountingprinciples used and the significant estimates made by the Management, as well asevaluating the overall financial statement presentation. We believe that our auditprovides a reasonable basis for our opinion.

3. As required by the Companies (Auditors' Report) Order, 2003 (CARO) issued by theCentral Government in terms of Section 227(4A) of the Companies Act, 1956, we enclose inthe Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

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

(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 it 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 are in compliance with the Accounting Standardsreferred to in Section 211(3C) 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 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 31stMarch, 2011;

(ii) in the case of the Profit and Loss Account, of the profit of the Company for theyear ended on that date and

(iii) in the case of the Cash Flow Statement, of the cash flows of the Company for theyear ended on that date.

5. On the basis of the written representations received from the Directors as on 31stMarch, 2011 taken on record by the Board of Directors, none of the Directors isdisqualified as on 31st March, 2011 from being appointed as a director in terms of Section274(1)(g) of the Companies Act, 1956.

Annexure to the Auditor's Report

(Referred to in paragraph 3 of our report of even date)

1. Having regard to the nature of the Company's business/activity, Clauses (i-c),(iii), (vi), (x), (xii), (xiii), (xiv), (xviii) and (xx) of CARO are not applicable to theCompany.

2. In respect of its fixed assets:

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

b) Some of the fixed assets were physically verified during the year by the managementin accordance with a programme of verification, which in our opinion provides for physicalverification of all the fixed assets at reasonable intervals. According to the informationand explanations given to us, no material discrepancies were noticed on such verification.

3. In respect of its inventories:

a) As explained to us, inventories were physically verified during the year by themanagement at reasonable intervals, except for inventories lying with third parties whereconfirmations have been received.

b) As the Company's inventory of raw materials mostly comprises bulk materials such ascoal, coke, pellets etc. requiring technical expertise for establishing the quality andthe quantification thereof, the Company has hired independent agencies for physicalverification of such stocks. Relying on the above, according to the information andexplanation furnished to us, the procedures of physical verification of inventory followedby the management are reasonable and adequate in relation to the size of the Company andthe nature of its business.

c) In our opinion and according to the information and explanations given to us, theCompany has maintained proper records of its inventories and no material discrepancieswere noticed on physical verification.

4. In our opinion and according to the information and explanations given to us, havingregard to the explanations that some of the items purchased/ sold are of special natureand suitable alternate sources for obtaining comparable quotations are not readilyavailable, there are adequate internal control systems commensurate with the size of theCompany and the nature of its business for the purchase of inventory and fixed assets andfor the sale of goods. During the course of our audit we have not observed any majorweaknesses in such internal controls.

5. In respect of contracts or arrangements entered in the register maintained inpursuance of Section 301 of the Companies Act, 1956 and according to the information andexplanations given to us:

a) The particulars of the contracts or arrangements referred to in Section 301 thatneeded to be entered into the register, maintained under the said section have been soentered.

b) Where each of such transaction is in excess of Rs. 5 lacs in respect of any party,the transactions have been made at prices which are prima facie reasonable having regardto the prevailing market prices at the relevant time.

6. In our opinion, the Company has an adequate internal audit system commensurate withthe size and the nature of its business.

7. We have broadly reviewed the books of account and records maintained by the Companypursuant to the rules made by the Central Government for the maintenance of cost recordsunder Section 209(1)(d) of the Companies Act, 1956 in respect of steel, steel products andelectricity and are of the opinion that prima facie the prescribed accounts andrecords have been made and maintained. We have, however, not made a detailed examinationof the records with a view to determining whether they are accurate or complete. To thebest of our knowledge and according to the information and explanations given to us, theCentral Government has not prescribed the maintenance of cost records for any otherproduct of the Company.

8. According to the information and explanations given to us in respect of itsstatutory dues:

a) The Company has generally been regular in depositing undisputed dues, includingProvident Fund, Income-tax, Wealth-tax, Sales-tax, Service tax, Custom duty, Excise duty,Cess, Investor Education and Protection Fund and any other material statutory duesapplicable to it with the appropriate authorities.

b) There were no undisputed amounts payable in respect of Income-tax, Wealth Tax,Customs Duty, Excise Duty, Cess and other material statutory dues in arrears as at 31stMarch, 2011 for a period of more than six months from the date they became payable.

c) Details of dues of Income Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty,Excise Duty and Cess which have not been deposited as on 31st March, 2011 on account ofdisputes are given below :

Rs. in crores

9. In our opinion and according to the information and explanations given to us, theCompany has not defaulted in the repayment of dues to financial institutions, banks anddebenture holders.

10. In our opinion and according to the information and explanations given to us, theterms and conditions of the guarantees given by the Company for loans taken bysubsidiaries (including step down subsidiaries) from banks are prima facie not prejudicialto the interests of the Company.

11. To the best of our knowledge and belief and according to the information andexplanations given to us, in our opinion, term loans availed by the Company were, primafacie, applied by the Company during the year for the purposes for which the loanswere obtained, other than temporary deployment pending application.

12. According to the information and explanations given to us, and on an overallexamination of the balance sheet of the Company, funds raised on short-term basis have, primafacie, not been used during the year for long-term investment.

13. According to the information and explanations given to us and the records examinedby us, securities/charges have been created in respect of the debentures issued.

14. To the best of our knowledge and belief and according to the information andexplanations given to us, no material fraud on or by the Company was noticed or reportedduring the year.