Lanco Infratech Ltd

To the Members of Lanco Infratech Limited,

We have examined the abridged Balance Sheet of Lanco Infratech Limited as atMarch 31, 2010, the abridged Profit and Loss Account and abridged Cash Flow Statements forthe year ended on that date, together with the notes thereon.

These abridged financial statements have been prepared by the company pursuant to Rule7A of the Companies (Central Government’s) General Rules and Forms, 1956 and arebased on the accounts of the Company for the year ended March 31, 2010 prepared inaccordance with Schedule VI to the Companies Act, 1956 and covered by our report of evendate to the members of the company which report is attached herewith.

Auditors’ Report to the Members of Lanco Infratech Limited

1. We have audited the attached Balance Sheet of Lanco Infratech Limited (the"Company") as at March 31, 2010, and the related Profit and Loss Account andCash Flow Statement for the year ended on that date annexed thereto, which we have signedunder reference to this report. These financial statements are the responsibility of theCompany’s Management. Our responsibility is to express an opinion on these financialstatements 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 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 by theCompanies (Auditor’s Report) (Amendment) Order, 2004 (together the"Order"), issued by the Central Government of India in terms of sub-section (4A)of Section 227 of ‘The Companies Act, 1956’ of India (the ‘Act’) andon the basis of such checks of the books and records of the Company as we consideredappropriate and according to the information and explanations given to us, we give in theAnnexure a statement on the matters specified in paragraphs 4 and 5 of the 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 purposes of our audit;

b) 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;

c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with bythis report are in agreement with the books of account;

d) 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 Act;

e) On the basis of written representations received from the directors, as on March 31,2010 and taken on record by the Board of Directors, none of the directors is disqualifiedas on March 31, 2010 from being appointed as a director in terms of clause (g) ofsubsection (1) of Section 274 of the Act;

f) In our opinion and to the best of our information and according to the explanationsgiven to us, the said financial statements together with the notes thereon and attachedthereto give, in the prescribed manner, the information required by the Act, and give atrue and fair view in conformity with the accounting principles generally accepted inIndia:

i) in the case of the Balance Sheet, of the state of affairs of the company as at March31, 2010;

ii) in the case of the Profit and Loss Account, of the profit for the year ended onthat date; and

iii) in the case of the Cash Flow Statement, of the cash flows for the year ended onthat date.

Annexure to Auditors’ Report

Referred to in paragraph 3 of the Auditors’ Report of even date to the members ofLanco Infratech Limited on the financial statements for the year ended March 31, 2010

1. (a) The Company is maintaining records showing particulars, including quantitativedetails and situation, of fixed assets other than for certain assets in respect of whichCompany is in the process of affixing identification numbers.

(b) The fixed assets are physically verified by the Management according to a phasedprogramme designed to cover all the items over a period of 3 years which, in our opinion,is reasonable having regard to the size of the Company and the nature of its assets.Pursuant to the programme, a portion of the fixed assets has been physically verified bythe Management during the year and no material discrepancies between the book records andthe physical inventory have been noticed.

(c) In our opinion and according to the information and explanations given to us, asubstantial part of fixed assets has not been disposed of by the Company during the year.

2. (a) The inventory (excluding stocks with third parties) has been physically verifiedby the Management during the year. In respect of inventory lying with third parties, thesehave substantially been confirmed by them. In our opinion, the frequency of verificationis reasonable.

(b) In our opinion, the procedures of physical verification of inventory except forcertain construction and project work in progress, followed by the Management arereasonable and adequate in relation to the size of the Company and the nature of itsbusiness.

(c) On the basis of our examination of the inventory records, in our opinion, theCompany is maintaining proper records of inventory except for certain construction andproject work in progress. The discrepancies noticed on physical verification of inventoryas compared to book records were not material.

3. (a) The Company has not granted any loans, secured or unsecured, to companies, firmsor other parties covered in the register maintained under Section 301 of the Act.Accordingly clause (iii) (b), (c) and (d) of paragraph 4 of the Companies (Auditor’sReport) Order, 2003 as amended by Companies (Auditor’s Report) (Amendment) Order,2004 are not applicable for the current year.

(b) The Company had taken an unsecured loan, from a company covered in the registermaintained under Section 301 of the Act in earlier years. The maximum amount involvedduring the year and the year-end balance of such loan aggregates to Rs.200 Million.

(c) In our opinion, the rate of interest and other terms and conditions of such loansare not prima facie prejudicial to the interest of the Company.

(d) In respect of the aforesaid loan, the principal amount has not fallen due forrepayment as stipulated and the Company is regular in payment of interest.

4. In our opinion and according to the information and explanations given to us, thereis an adequate internal control system commensurate with the size of the Company and thenature of its business for the purchase of inventory, fixed assets and for the sale ofgoods and services. Further, on the basis of our examination of the books and records ofthe Company, and according to the information and explanations given to us, we haveneither come across nor have been informed of any continuing failure to correct majorweaknesses in the aforesaid internal control system.

5. (a) In our opinion and according to the information and explanations given to us,the particulars of contracts or arrangements referred to in Section 301 of the Act havebeen entered in the register required to be maintained under that section.

(b) In our opinion and according to the information and explanations given to us, thetransactions for sale of services made in pursuance of such contracts or arrangement andexceeding the value of Rupees Five Lakhs in respect of certain parties during the yearwere of special nature for which no comparable market prices were available as explainedby the management of the company.

6. The Company has not accepted any deposits from the public within the meaning ofSections 58A and 58AA of the Act and the rules framed there under.

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

8. We have broadly reviewed the books of account maintained by the Company in respectof Electrical energy produced, pursuant to the Rules made by the Central Government ofIndia, the maintenance of cost records has been prescribed under clause (d) of sub-section(1) of Section 209 of the Act, and are of the opinion that prima facie, the prescribedaccounts and records have been made and maintained. We have not, however, made a detailedexamination of the records with a view to determine whether they are accurate or complete.

9. (a) According to the information and explanations given to us and the records of theCompany examined by us, the Company has generally been regular in depositing undisputedstatutory dues including provident fund (other than provident fund pertaining to contractworks), investor education and protection fund, employees’ state insurance,income-tax, wealth tax, sales tax, service tax, works contract tax, customs duty, Cess andother material statutory dues as applicable, with the appropriate authorities though therehave been slight delays in a number of cases.

(b) According to the information and explanations given to us and the records of theCompany examined by us, the particulars of dues of income-tax, service tax and sales-taxas at March 31, 2010 which have not been deposited on account of a dispute are as follows:

10. The Company has no accumulated losses as at March 31, 2010 and it has not incurredany cash losses in the financial year ended on that date or in the immediately precedingfinancial year.

11. According to the records of the Company examined by us and the information andexplanation given to us, the Company has not defaulted in repayment of dues to anyfinancial institution or bank or debenture holders as at the balance sheet date.

12. The Company has not granted any loans and advances on the basis of security by wayof pledge of shares, debentures and other securities.

13. The provisions of any special statute applicable to chit fund / nidhi / mutualbenefit fund/ societies are not applicable to the Company.

14. In our opinion, the Company is not a dealer or trader in shares, securities,debentures and other investments.

15. 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 by othersfrom banks or financial institutions during the year, are not prejudicial to the interestof the Company.

16. In our opinion, and according to the information and explanations given to us, onan overall basis, pending utilization for the stated purpose certain loan funds wereinvested in short term investments and / or held as bank balances till the stated end use.

17. On the basis of an overall examination of the balance sheet of the Company, in ouropinion and according to the information and explanations given to us, there are no fundsraised on a short-term basis which have been used for long-term investment.

18. The Company has not made any preferential allotment of shares to parties andcompanies covered in the register maintained under Section 301 of the Act during the year.

19. The Company has not issued any debentures during the year and there are nodebentures outstanding as at the year end. Accordingly clause (xix) of paragraph 4 of theCompanies (Auditor’s Report) Order, 2003 as amended by Companies (Auditor’sReport) (Amendment) Order, 2004 are not applicable for the current year.

20. The Company has not raised any money by public issues during the year.

21. During the course of our examination of the books and records of the Company,carried out in accordance with the generally accepted auditing practices in India, andaccording to the information and explanations given to us, we have not come across anyinstance of fraud on or by the Company, noticed or reported during the year, nor have webeen informed of such cases by the Management, except for

- inappropriate actions by certain employees of the Company (who have since beenreprimanded) that involved unauthorised renegotiation of insurance premium collected bythe Company from its contracting principals (customers) and paid to insurance companies,and inappropriate retention of the insurance premium, aggregating Rs. 19.7 million, sorefunded by insurance companies on Company's account, rather than crediting the customers.The reported amounts, as above, have since been paid to customers, and new internalcontrols have since been introduced by the Company,

- suspected fraud by some of the employees of the company relating to steel scrap inone of its units, quantum of which is not ascertainable at this point of time (which inthe opinion of the management might not be material) and for which management has lodged acomplaint and the matter is under investigation, and

- misappropriation (reported by the management) of construction material at one of itssites by the contractor which as confirmed by management has since been recovered.