Jaiprakash Associates Ltd

TO THE MEMBERS OF

JAIPRAKASH ASSOCIATES LIMITED

1. We have audited the attached Balance Sheet of Jaiprakash Associates Limitedas at 31st March 2010 and also the annexed Profit and Loss Account and the Cash FlowStatement for the year ended on that date. These financial statements are theresponsibility of the Jaiprakash Associates Limited management. Our responsibility is toexpress an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with auditing standards generally accepted inIndia. These Standards require that we plan and perform the audit to obtain reasonableassurance whether the Financial Statements are prepared 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 overallpresentation of financial statement. We believe that our audit provides a reasonable basisfor our opinion.

3. As required by the Companies (Auditor’s Report) Order, 2003, as amended by theCompanies (Auditor’s Report) (Amendment) Order 2004, issued by the Central Governmentof India in terms of Subsection (4A) of Section 227 of the Companies Act, 1956, we give 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 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 the Company so far as appearsfrom our examination of those books;

(c) the Balance Sheet, Profit & Loss Account and Cash Flow Statement dealt with bythis report, are in agreement with the books of account; (d) in our opinion, the BalanceSheet, Profit & Loss Account and Cash

. Flow Statement dealt with by this report, comply with the Accounting Standardsreferred to in sub-section (3C) of Section 211 of the Companies Act, 1956; (e) on thebasis of written representations received from the directors, as on 31st March 2010, andtaken on record by the Board of Directors, we report that none of the directors of theCompany is disqualified as on 31st March 2010 from being appointed as a director, in termsof clause (g) of sub-section (1) of section 274 of the Companies Act, 1956; (f) In ouropinion and to the best of our information and according to the explanations given to us,the said accounts, read together with significant accounting policies and notes thereon,give the information required by the Companies Act, 1956, in the manner so required andgive a true and fair view: (i) in the case of the Balance Sheet, of the state of affairsof the

- Company as at 31st March 2010;

(ii) in the case of the Profit & Loss Account, of the Profit of the 5 Company forthe year ended on that date; and (iii) in the case of the Cash Flow Statement of the cashflows of the Company for the year ended on that date.

ANNEXURE TO THE AUDITORS’ REPORT

Referred to in paragraph 3 of our report of even date on the accounts for the yearended 31st March 2010, of Jaiprakash Associates Limited. (i) (a) The Company ismaintaining proper records showing full particulars including quantitative details andsituation of fixed assets. The situation of the moveable assets used in the constructionactivity keeps on changing from works sites depending upon requirements for a particularcontract.

(b) A substantial portion of the Fixed Assets have been physically verified by themanagement during the year and in our opinion the frequency of verification is reasonablehaving regard to the size of the Company & nature of its assets. According to theinformation given to us and to the best of our knowledge, no material discrepancies werenoticed on such physical verification.

(c) Fixed assets disposed off by the Company during the year were not substantial;hence it does not affect the Company as a going concern.

(ii) (a) The inventories have been physically verified by the management at reasonableintervals during the year. In our opinion the frequency of verification is reasonable.

(b) The procedures of physical verification of inventories followed by the managementare reasonable and adequate in relation to the size of the company and the nature of itsbusiness. (c) The company is maintaining proper records of inventory. The discrepanciesnoticed on physical verification were not material and these have been properly dealt within the books of account.

(iii) The Company has not granted nor taken any loans, secured or unsecured to/fromcompanies, firms or other parties covered in the register maintained under section 301 ofthe Companies Act, 1956. (iv) In our opinion and according to the information andexplanations given to us there is an adequate internal control system commensurate withthe size of the Company and the nature of its business, for the purchase of inventory andfixed assets and for the sale of goods /real estate, electrical energy, services &supplies under EPC contracts. During the course of our audit we have not observed anycontinuing failure to correct major weakness in internal control system.

(v) Based on the audit procedures applied by us and according to the information andexplanations given to us we are of the opinion that the particulars of contracts orarrangements referred to in section 301 of the Companies Act, 1956 have been entered intothe register required to be maintained under that section. The transactions made inpursuance of such contracts or arrangements have been made at prices which are reasonablehaving regard to prevailing market prices at the relevant time.

(vi) In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of Section 58A, 58AA and any other provisions ofthe Companies Act, 1956, and the rules framed thereunder with regard to the depositsaccepted from the public. As informed to us, no order has been passed by the Company LawBoard or National Company Law Tribunal or Reserve Bank of India or any court or any otherTribunal. (vii) In our opinion the Company has an internal audit system commensurate withthe size & nature of its business.

(viii) We have broadly reviewed the accounts and cost records maintained by the Cement& Power divisions of the Company pursuant to the Rules made by the Central Governmentfor the maintenance of cost records under Section 209(1)(d) of the Companies Act, 1956,and are of the opinion that prima-facie the prescribed accounts and records have beenmaintained. We have not, however, made a detailed examination of the records.

(ix) (a) As per records produced before us, the Company is generally regular indepositing undisputed statutory dues like Provident Fund, Investor Education andProtection Fund, Employees’ State Insurance, Income-tax, Sales-tax, Wealth Tax,Service Tax, Custom Duty, Excise Duty, cess and other material statutory dues applicableto it, with the appropriate authorities and there were no arrears of such dues at the yearend which have remained outstanding for a period of more than six months from the datethey became payable. .

(b) As per records produced before us the dues of Income-tax, Sales-tax, Wealth tax,Service tax, Customs Duty, Excise Duty and cess which have not been deposited on accountof any dispute are stated hereunder:

(x) The company does not have any accumulated losses and has not incurred any cashlosses during the financial year covered by our audit or in the immediately precedingfinancial year.

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

(xii) The Company has not granted loans and advances on the basis of security by way ofpledge of shares, debentures and other securities. (xiii) In our opinion the Company isnot a chit fund or a nidhi/mutual benefit fund/society. Therefore, clause (xiii) of Para 4of the Order is not applicable.

(xiv) In our opinion the Company is not dealing in or trading in shares, securities,debentures and other investments. Accordingly, clause (xiv) of Para 4 of the Order is notapplicable.

(xv) In our opinion and according to the information and explanations given to us,where the Company has given guarantee for loans taken by its subsidiaries from banks orfinancial institutions, the terms and conditions thereof are not prejudicial to theinterest of the company.

(xvi) To the best of our knowledge and belief and according to the information andexplanations given to us, term loans availed by the Company were applied by the Companyduring the year for the purposes for which the loans were obtained, other than temporarydeployment pending application.

(xvii) According to the information and explanations given to us and on the overallexamination of the Balance Sheet of the Company for the year under report, we are of theopinion that no funds raised on short term basis have been used for long term investment.(xviii)According to the information and explanations given to us the Company has not madeany preferential allotment of shares to parties and companies covered in the Registermaintained under section 301 of the Companies Act, 1956.

(xix) According to the information and explanations given to us, the Company hascreated security/charge in respect of secured non-convertible debentures issued andoutstanding at the year end.

(xx) As the Company has not raised any money by way of public issues during the year,Clause

(xx) of Para 4 of the Order is not applicable. (xxi) According to the information andexplanations given to us, no material fraud by or on the Company has been noticed orreported during the year.