Mahindra Holidays & Resorts India Ltd

TO THE MEMBERS OF MAHINDRA HOLIDAYS & RESORTS INDIA LIMITED

1) We have audited the attached Balance Sheet of Mahindra Holidays & ResortsIndia Limited as at March 31, 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 (Auditor’s Report) Order, 2003 (CARO) issued bythe Central Government in terms of Section 227(4A) of the Companies Act, 1956, we enclosein the Annexure a statement on the matters specified in paragraphs 4 and 5 of the saidOrder.

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 atMarch 31, 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 March31, 2011 taken on record by the Board of Directors, none of the Directors is disqualifiedas on March 31, 2011 from being appointed as a director in terms of Section 274(1) (g) ofthe Companies Act, 1956.

ANNEXURE REFERRED TO IN PARAGRAPH 3 OF THE AUDITORS’ REPORT TO THE MEMBERS OFMAHINDRA HOLIDAYS & RESORTS INDIA LIMITED ON THE ACCOUNTS FOR THE YEAR ENDED MARCH 31,2011

(i) Having regard to the nature of Company’s business / activities / result,clauses (v), (vi), (viii), (x), (xii) to (xvi), (xviii) and (xxi) of CARO are notapplicable to the Company in the current year.

(ii) In respect of its fixed assets:

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

(b) The fixed assets were physically verified during the year by the Management inaccordance with a regular programme of verification which, in our opinion, provides forphysical verification of all the fixed assets at reasonable intervals. According to theinformation and explanation given to us, no material discrepancies were noticed on suchverification.

(c) The fixed assets disposed off during the year, in our opinion, do not constitute asubstantial part of the fixed assets of the Company and such disposal has, in our opinion,not affected the going concern status of the Company.

(iii) In respect of its inventory:

(a) As explained to us, the inventories were physically verified during the year by theManagement at reasonable intervals.

(b) In our opinion and according to the information and explanation given to us, theprocedures of physical verification of inventories followed by the Management werereasonable and adequate in relation to the size of the Company and the nature of itsbusiness.

(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.

(iv) The Company has neither granted nor taken any loans, secured or unsecured, to/fromcompanies, firms or other parties listed in the Register maintained under Section 301 ofthe Companies Act, 1956.

(v) 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 with regard to purchases of inventory and fixed assets and the saleof goods and services. During the course of our audit, we have not observed any majorweakness in such internal control system.

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

(vii) According to the information and explanations given to us in respect of statutorydues:

(a) The Company has generally been regular in depositing undisputed dues, includingProvident Fund, Investor Education and Protection Fund, Employees’ State Insurance,Income-tax, Sales Tax, VAT, Wealth Tax, Service Tax, Custom Duty, Excise Duty, Cess andother material statutory dues applicable to it with the appropriate authorities.

(b) There were no undisputed amounts payable in respect of Provident Fund, InvestorEducation and Protection Fund, Employees’ State Insurance, Income-tax, Sales Tax,VAT, Wealth Tax, Service Tax, Custom Duty, Excise Duty, Cess and other material statutorydues in arrears as at March 31, 2011 for a period of more than six months from the datethey became payable.

(c) As on March 31, 2011, there are no dues of Income-tax, Sales Tax, Wealth Tax,Service Tax, Custom Duty, Excise Duty and Cess which have not been deposited on account ofdisputes except the following :

(viii) In our opinion and according to the information and explanations given to us andon an overall examination of the Balance Sheet, we report that funds raised on short termbasis have not been used during the year for long term investment.

(ix) To the best of our knowledge and according to the information and explanationsgiven to us, no fraud by or on the Company has been noticed or reported during the year.