Jindal Steel & Power Ltd

To the Members of Jindal Steel & Power Limited

1. We have audited the attached Balance Sheet of JINDAL STEEL & POWER LIMITED,as at 31st March, 2012, the Statement of Profit & Loss and the Cash Flow statement forthe year ended on that date, annexed thereto. These financial statements are theresponsibility of the Company's management. Our responsibility is to express an opinion onthese 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 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 the 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 (Auditors' Report) order, 2003 as amended by theCompanies (Auditors' Report) (Amendment) Order 2004 (Collectively the Order), issued bythe Central Government of India in terms of section 227 (4A) of the Companies Act, 1956and on the basis of such checks as we considered appropriate and according to theinformation and explanations given to us, we enclose in the Annexure a statement on thematters specified in paragraphs 4 and 5 of the said Order.

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

(iv) In our opinion and read with sub note (a) of Note 4 regarding accounting for salestax included in sales price of products sold out of sales tax exempted unit under SalesTax Subsidy / Capital Reserve account in the circumstances as explained in the Note, theBalance Sheet, Statement of Profit & Loss and Cash Flow statement dealt with by thisreport comply with the accounting standards referred to in sub - section (3C) of section211 of the Companies Act, 1956;

(v) On the basis of written representations received from the Directors, as on 31stMarch, 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;

(vi) In our opinion and to the best of our information and according to theexplanations given to us, the said accounts read with the Accounting Policies and Notesthereon give the information required by the Companies Act, 1956 in the manner so requiredand give a true and fair view in conformity with the accounting principles generallyaccepted in India:

(a) in the case of Balance Sheet, of the state of affairs of the Company as at 31stMarch, 2012;

(b) in the case of Statement of the Profit & Loss of the Profit for the year endedon that date; and

(c) in the case of Cash Flow statement, of the Cash Flows for the year ended on thatdate.

Annexure

Re: Jindal Steel & Power Limited

Referred to in paragraph 3 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) The Company has a phased programme of physical verification of its fixed assetswhich, in our opinion, is reasonable having regard to the size of the Company and thenature of its assets. As part of this programme, the management has physically verifiedcertain fixed assets during the year. Discrepancies noticed on such verification ascompared to book records were not material and have been properly adjusted in the books ofaccount.

(c) Fixed assets disposed off during the year were not substantial.

2. (a) As explained to us, physical verification has been conducted by the managementat reasonable intervals in respect of finished goods, stores and spare parts and rawmaterials. Further, stocks in the possession and custody of third parties and stock intransit as at 31st March, 2012 have been verified by the management with reference toconfirmation or statement of account or correspondence with the third parties orsubsequent receipts of goods. In our opinion, the frequency of such verification isreasonable.

(b) The procedures for the physical verification of inventories followed by themanagement are, in our opinion, reasonable and adequate in relation to the size of theCompany and the nature of its business.

(c) In our opinion, the Company is maintaining proper records of inventory. Thediscrepancies noticed on physical verification of inventory as compared to book recordswere not material and have been properly dealt with in the books of account.

3. (a) The Company has not granted any loans, secured or unsecured, to companies, firmsor other parties listed in the register maintained under section 301 of the Companies Act,1956.

(b) Since there are no such loans, comments regarding terms & conditions, repaymentof the principal amount, interest due thereon and overdue amounts are not required.

(c) The Company has not taken any loans, secured or unsecured, from companies, firms orother parties listed in the register maintained under section 301 of the Companies Act,1956.

(d) Since there are no such loans, comments regarding terms & conditions, repaymentof the principal amount, interest due thereon and overdue amounts are not required.

4. In our opinion and according to the information & explanations given to usduring the course of audit, there are adequate internal control systems commensurate withthe size of the Company and the nature of its business with regard to purchase ofinventories and fixed assets and for the sale of goods and services. Further, on the basisof our examination of the books and records of the Company, carried out in accordance withthe generally accepted auditing practices in India, we have neither come across nor havewe been informed of any instance of a major weakness in the aforesaid internal controlsystems.

5. (a) To the best of our knowledge and according to the information and explanationsgiven to us, we are of the opinion that the particulars of contracts or arrangements thatneed to be entered into the register maintained under section 301 of the Companies Act,1956 have been so entered.

(b) In our opinion and according to the information and explanations given to us, thetransactions entered into in pursuance of contracts or arrangements, with whomtransactions exceeding the value of Rs. Five lacs in respect of each party have takenplace during the financial year, are at prices which are reasonable having regard to theprevailing market prices at the relevant time where such market prices are available.

6. In respect of fixed deposits accepted from the public, the provisions of section 58Aand 58AA or any other relevant provisions of the Companies Act, 1956 including theCompanies (Acceptance of Deposits) Rules, 1975 have been complied with. We have beeninformed that no Order has been passed by the Company Law Board or National Company LawTribunal or RBI or any Court or any other Tribunal in this regard.

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

8. We have broadly reviewed the cost accounting records maintained by the Companypursuant to the companies (Cost Accounting Records) Rules, 2011 prescribed by the CentralGovernment under section 209 (1)(d) of the Companies Act, 1956 and are of the opinionthat, prima facie, the prescribed records have been made & maintained. We are however,not required to carry out a detailed examination of the same.

9. (a) In our opinion and according to the information and explanations given to us andaccording to the records of the Company, undisputed statutory dues including ProvidentFund, Investor Education and Protection Fund, Employees State Insurance, Income tax, Salestax, Wealth tax, Service tax, Custom duty, Excise duty,

Cess and other material statutory dues, wherever applicable, have been regularlydeposited with the appropriate authorities during the year and there are no suchundisputed statutory dues payable for a period of more than six months from the date theybecame payable as at 31st March, 2012.

(b) According to the information and explanations given to us and as per the books andrecords examined by us, there are no dues of Custom duty and Wealth tax which have notbeen deposited on account of any dispute, except the following in respect of disputedExcise duty, Sales tax, Service tax, Cess, Entry tax, Income tax and the forum wheredispute is pending:

10. The Company does not have accumulated losses as at the end of the financial year.There are no cash losses during the financial year and in the immediately precedingfinancial year.

11. According to the information and explanations given to us and as per the books andrecords examined by us, the Company has not defaulted in repayment of dues to anyfinancial institution or bank or debenture holders.

12. According to the information and explanations given to us, the Company has notgranted any loans and advances on the basis of security by way of pledge of shares,debentures and other securities.

13. The Company does not fall within the category of Chit fund / Nidhi / Mutual Benefitfund / Society and hence the related reporting requirements of the Order are notapplicable.

14. According to the information and explanations given to us, the Company is notdealing or trading in shares, securities, debentures and other investments and hence therelated reporting requirements of the Order are not applicable.

15. The Company has given guarantees against loans taken by others from banks andfinancial institutions; the terms and conditions of such guarantees are not, prima facie,prejudicial to the interest of the Company.

16. In our opinion and according to the information and explanations given to us, theterm loans raised during the year by the Company have been applied for the purpose forwhich the said loans were obtained, where the lenders have stipulated such end use.

17 According to the information and explanations given to us and as per the books andrecords examined by us, on an overall examination of the Balance Sheet of the Company, thefunds raised by the Company on short-term basis have not been applied for long-terminvestment.

18 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, 1956.

19. According to the information and explanations given to us and on the basis of therecords examined by us, the Company has created necessary securities for the debenturesissued in earlier years.

20. The Company has not raised any money by way of public issue during the years.

21. During the course of our examination of the books and records of the Companycarried out in accordance with the generally accepted auditing practices in India, we haveneither come across any instance of fraud on or by the Company, noticed and reportedduring the year, nor have we been informed of such case by the management.