MRF Ltd

To the Shareholders of MRf Limited, on the Accounts for the year ended 30th September,2011.

1) We have audited the attached Balance Sheet of MRF Limited as at 30thSeptember, 2011, and also the Profit and Loss Account and the Cash Flow Statement for theyear ended on that date. 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 prepared, in all material respects,in accordance with an identified financial reporting framework and are free of materialmisstatement. An audit includes examining, on a test basis, evidence supporting theamounts and the disclosures in the financial statements. An audit also includes assessingthe accounting principles used and significant management, as well as evaluating theoverall financial statement presentation. We believe that our audit provides a reasonablebasis for our opinion.

3) As required by the Companies (Auditor’s Report) Order, 2003 issued by theCentral Government of India in terms of Section 227 (4A) of Companies Act, 1956 andaccording to the information and explanations given to us during the course of the auditand on the basis of such checks as were considered appropriate, we enclose in theAnnexure, 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, wereport that:

i) we have obtained all the information and explanations which to the best of ourknowledge and belief were necessary for the purposes of 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, Profit and Loss Statement dealt with by this report are inagreement with the Books of Account;

iv) in our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statementdealt with by this report comply with the requirements of the Accounting Standardsreferred to in sub-section (3C) of Section 211 of the Companies Act, 1956;

v) on the basis of the written representations received from the directors as on 30thSeptember, 2011 and taken on record by the Board of Directors, we report that none of thedirectors is disqualified as on 30th September, 2011 from being appointed as a director interms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956; and

vi) in our opinion and to the best of our information and according to the explanationsgiven to us, the said accounts, read with note 1-R in the notes forming part of theaccounts, in respect of change in accounting policy relating to depreciation and readtogether with theestimates made by other notes thereon, give the informationrequired by the Companies Act, 1956 in the manner so required and also give a true andfair view, in conformity with the accounting principles generally accepted in India;

a) in the case of the Balance Sheet, of the state of affairs of the Company as at 30thSeptember, 2011;

b) in the case of the Profitand Loss Account, of the profit for the year ended on thatdate, and

c) in the case of the Cash Flow Statement, of the cash flows for the year ended on thatdate.

ANNEXURE TO THE AUDITORS’ REPORT

(Referred to in Paragraph 3 of our Report of even date)

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

b) As explained to us, the fixed assets have been physically verified by themanagement, at reasonable intervals, in accordance with a phased programme ofverification, which in our opinion, is reasonable, considering the size of the Company andthe nature of its assets. No material discrepancies were noticed on such physicalverification;

c) The Company has not disposed of any substantial part of its fixed assets so as toaffect its going concern status.

ii) a) The inventory has been physically verified by the management during the year atreasonable intervals, except for materials lying with third parties, where confirmationsare obtained;

b) The procedures of physical verification of the inventory followed by the managementare, in our opinion, reasonable and adequate in relation to the size of the Company andnature of its business;

c) The Company has maintained proper records of inventory. The discrepancies noticed onphysical verification of inventory as compared to book records were not material.

iii) 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 CompaniesAct, 1956. Accordingly, clauses 4(iii) (b) to (d) of the Order are not applicable.

b) The Company has not taken any loans, secured or unsecured from companies, firms orother parties covered in the register maintained under Section 301 of the Companies Act,1956. Accordingly, clauses 4(iii) (f) and (g) of the Order are not applicable.

iv) In our opinion and according to the information and explanation given to us, thereare adequate internal control systems commensurate with the size of the Company and thenature of its business with regard to purchase of inventory, fixed assets and for the saleof goods and services. During the course of our audit, we have not observed any continuingfailure to correct major weaknesses in internal control system.

v) a) Based on the audit procedures applied by us and according to the information,explanations and representations given to us, we are of the opinion that particulars ofcontracts or arrangements referred to in Section 301 of the Companies Act, 1956 have beenentered 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 made in pursuance of contracts or arrangements entered in the registermaintained under Section 301 of the Companies Act, 1956 exceeding the value of rupees fivelacs in respect of any party during the year have been made at prices which are reasonablehaving regard to prevailing market prices at that time.

vi) The Company has complied with the directives issued by the Reserve Bank of Indiaand provisions of Section 58A, 58AA and other relevant provisions of the Companies Act,1956 and the rules formed thereunder with regard to deposits accepted from the Public. Noorder has been passed by the Company Law Board or National Company Law Tribunal or ReserveBank of India or any Court or any other Tribunal in this regard.

vii) In our opinion, the Company has an adequate internal audit system commensuratewith its size and nature of its business.

viii) We have broadly reviewed the Books of Account maintained by the Company asprescribed by the Central Government for maintenance of cost records under Section209(1)(d) of the Companies Act, 1956 and are of the opinion that prima-facie theprescribed accounts and records have been made and maintained. However, we have notcarried out a detailed examination of the accounts and records.

ix) a) According to the information and explanations given to us, the Company isregular in depositing undisputed statutory dues including Provident Fund, InvestorEducation and Protection Fund, Employees’ State Insurance, Income-tax, Sales-tax,Wealth-tax, Service tax, Customs Duty, Excise Duty, Cess and other statutory dues withappropriate authorities. According to the information and explanations given to us, thereare no undisputed amounts payable in respect of such statutory dues which have remainedoutstanding as at 30th September, 2011 for a period of more than six months from the datethey became payable;

b) According to the information and explanations given to us, the details of disputedsales-tax, customs duty, excise duty and income-tax which have not been deposited as at30th September, 2011 on account of any dispute, are as under:

x) The Company has no accumulated losses at the end of the financial year and has notincurred cash losses in the current financial year and in the immediately precedingfinancial year.

xi) The Company has not defaulted in repayment of its dues to banks and debentureholders.

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

xiii) The provisions of any special statute applicable to Chit Fund,

Nidhi or Mutual Benefit Fund/Societies are not applicable to the Company.

xiv) The Company is not dealing or trading in shares, securities, debentures or otherinvestments. Accordingly, requirements of Clause 4(xiv) of the said Order are notapplicable to the Company.

xv) According to the information and explanations given to us, the Company has notgiven any guarantee for loans taken by others from banks and financial institutions.

xvi) On the basis of the records examined by us, and relying on the informationcompiled by the Company for correlating the funds raised to the end use of term loans, theCompany has, prima-facie, applied the term loans for the purposes for which they wereobtained.

xvii) According to the information and explanation given to us and on an overallexamination of the Balance Sheet of the Company, we report that no funds raised on shortterm basis have been used for long term investments.

xviii) 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.

xix) The Company has during the year issued 9.07% and 10.09% Secured RedeemableNon-Convertible debentures amounting to Rs 200 crore and Rs 500 crore respectively, eachhaving a Face Value of Rs 10,00,000/-. The Company has created security in respect of thedebentures issued.

xx) The Company has not raised any money by way of public issues during the year. Hencethe requirements of clause 4(xx) of the said Order are not applicable to the Company.

xxi) On the basis of our examination and according to the information and explanationsgiven to us, considering the size of the Company and nature of its business, no fraud, onor by the Company, has been noticed or reported during the year.