Mahindra & Mahindra Ltd

to the Members of Mahindra & Mahindra Limited

1. We have audited the attached Balance Sheet of Mahindra & Mahindra Limitedas at 31^st March, 2011, the Profit and Loss Account and the Cash Flow Statementof the Company for the year ended on that date, both annexed thereto. These financialstatements are the responsibility of the Company’s Management. Our responsibility isto 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 at 31^stMarch, 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 31^stMarch, 2011, and taken on record by the Board of Directors, we report that none of theDirectors is disqualified as on 31^st March, 2011 from being appointed as adirector in terms of Section 274(1) (g) of the Companies Act, 1956.

Annexure to the Auditors’ Report of Mahindra & Mahindra Limited for the yearended 31^st March, 2011.

(Referred to in paragraph (3) thereof)

i. 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 have not been physically verified by the management during theyear but the Company has a system of verifying the fixed assets once in every three years.In our opinion the frequency of verification is at reasonable intervals.

(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. ii. 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.

iii. 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.

iv. In our opinion and according to the information and explanations given to us,having regard to the explanations that some of the items purchased are of special natureand suitable alternative sources are not readily available for obtaining comparablequotations, there is an adequate internal control system commensurate with the size of theCompany and the nature of its business with regard to purchases of inventory and fixedassets and the sale of goods and services. During the course of our audit, we have notobserved any major weakness in such internal control system.

v. In respect of contracts or arrangements entered in the Register maintained inpursuance of Section 301 of the Companies Act, 1956, to the best of our knowledge andbelief and according to the information and explanations given to us:

(a) The particulars of contracts or arrangements referred to in Section 301 that neededto be entered in the Register maintained under the said Section have been so entered.

(b) Where each of such transaction is in excess of Rs. 5 lakhs in respect of any party,having regard to the explanations that some of the items purchased are of special natureand suitable alternative sources are not readily available for obtaining comparablequotations, the transactions have been made at prices which are prima faciereasonable having regard to the 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 Sections 58A and 58AA or any other relevantprovisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules,1975 with regard to the deposits accepted from the public. According to the informationand explanations given to us, no order has been passed by the Company Law Board or theNational Company Law Tribunal or the Reserve Bank of India or any Court or any otherTribunal.

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

viii. We have broadly reviewed the books of account maintained by the Company pursuantto the rules made by the Central Government for the maintenance of cost records underSection 209(1) (d) of the Companies Act, 1956 in respect of manufacture of motor vehiclesand tractors and are of the opinion that prima facie the prescribed accounts andrecords have been made and maintained. We have, however, not made a detailed examinationof the records with a view to determining whether they are accurate or complete. To thebest of our knowledge and according to the information and explanations given to us, theCentral Government has not prescribed the maintenance of cost records for any otherproduct of the Company.

ix. 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, Wealth Tax, Service Tax, Value Added Tax, Customs Duty, ExciseDuty, Cess and other material statutory dues applicable to it with the appropriateauthorities.

(b) There were no undisputed amounts payable in respect of Income-tax, Wealth Tax,Customs Duty, Excise Duty, Cess and other material statutory dues in arrears as at 31^stMarch, 2011 for a period of more than six months from the date they became payable.

(c) Details of dues of Income-tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty,Excise Duty and Cess which have not been deposited as on 31^st March, 2011 onaccount of disputes are given below:

x. The Company does not have accumulated losses as at 31^st March, 2011 andhas not incurred cash losses during the financial year ended on that date and in theimmediately preceding financial year.

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

xii. In our opinion and according to the information and explanations given to us, theCompany has not granted any loans and advances on the basis of security by way of pledgeof shares, debentures and other securities.

xiii. The provisions of any special statute as specified under the clause (xiii) of thesaid Order are not applicable to the Company.

xiv. In our opinion the Company is not dealing in or trading in shares, securities,debentures and other investments. Accordingly, the provisions of paragraph 4(xiv) of theOrder are not applicable to the Company.

xv. According to the information and explanations given to us, the Company has notgiven any guarantees for loans taken by others from banks or financial institutions, theterms and conditions, whereof, in our opinion are prejudicial to the interests of theCompany.

xvi. In our opinion and according to the information and explanations given to us, theterm loans have been applied for the purposes for which they were obtained.

xvii. 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 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,during the year.

xix. According to the information and explanations given to us, the Company has createdsecurity in respect of the debentures issued in earlier years.

xx. The Company has not raised any money by public issue during the year.

xxi. 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 neither come across anyinstance of significant fraud on or by the Company, noticed or reported during the yearnor have we been informed of such case by the management.