NMDC Ltd

The Members NMDG Ltd

We have audited the attached Balance Sheet of NMDC LIMITED (The Company) as at31st March, 2010 and also the Profit and Loss Account of the Company for the year ended onthat date annexed thereto, into which are incorporated the accounts of Seven Projects /Units audited by Branch Auditors and in respect of Head Office, Lalapur arid R&D Labsaudited by us, and the cash flow statement for the year ended on that date. Thesefinancial statements are the responsibility of the Company's management. Ourresponsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the auditing standards generally accepted inIndia. 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.

As required by the Companies (Auditor's Report) Order, 2003 issued by the Government ofIndia in terms of sub-section (4A) of Section 227 of the

Companies Act, 1956 we enclose in the Annexure a statement on the matters specified inparagraphs 4 & 5 of the said Order, to the extent applicable.

1. Further to our comments in the Annexure referred to above, we report that:

(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 and proper returns adequatefor the purpose of our audit have been received from the branches not visited by us. TheBranch Auditors Reports have been forwarded to us and have been appropriately dealt with;

(c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with bythis report are in agreement with the books of account and with the audited returns fromthe Projects 1 Units;

(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 Companies Act, 1956;

(e) The Company has informed that Department of Company affairs vide the notificationNo. GSR 829(E) dt 21st October 2003 notified that Section 274(1 )(g) of the Companies Act1956 is not applicable to the Government Companies. Hence Clause regardingdisqualification of directors is not applicable.

(f) The Company has provided for cess under section 441A of the Companies Act, 1956 butthe same has not been deposited, pending notification specifying the manner of payment.

(g) In our opinion and to the best of our information and according to the explanationsgiven to us, the said accounts read with the Significant Accounting Policies and Notesforming part of accounts appearing in Schedule No.23 give the information required by theCompanies Act, 1956 in the manner so required and give a true and fair view in conformitywith the accounting principles generally accepted in India:

(i) In the case of the Balance Sheet, of the state of affairs of the Company as at31.03.2010;

(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.

For RAMAMOORTHY (N) & Co.,

Chartered Accountants

(CA Surendranath Bharathi)

Partner

Membership No.23837

Place : New Delhi

Date : 22-May-2010.

(i) In respect of Fixed Assets:

(a) The Company is generally maintaining proper records showing full particularsincluding quantitative details and situation of fixed assets.

(b) All the assets have not been physically verified by the management during the yearbut there is a regular program of verification which, in our opinion, is reasonable havingregard to the size of the Company and the nature of its assets. No material discrepancieswere noticed on such verification.

(c) During the year, few fixed assets have been disposed off by the Company. On thebasis of information and explanations given to us, we are of the opinion, that disposal ofthe part of fixed assets has not affected the going concern status of the Company.

(ii) In respect of Inventories:

(a) The inventory has been physically verified by the management during the year exceptthe inventory with Third parties. In our opinion, the frequency of verification isreasonable.

(b) In our opinion and according to the information and explanation given to us, theprocedures of physical verification of inventory followed by the management are reasonableand adequate in relation to the size of the Company and the nature of its business.

(c) According to the information and explanation given to us, the Company ismaintaining proper records of inventory. The discrepancies noticed on physicalverification of inventory as compared to book records were not material.

(iii) According to the information and explanations given to us,

(a) The Company has neither granted nor taken any loans secured or unsecured to/fromCompanies, firms or other parties covered in the register maintained under section 301 ofthe Companies Act, 1956 (The Act), hence clauses iii (a, b, c , d, e, f and g) are notapplicable.

(b) There are no contracts or agreements that need to be entered into the Registermaintained under section 301 of the Companies Act, 1956. As there are no such contracts oragreements, Clause (b) of paragraph 4(v) is in applicable.

(iv) In our opinion and according to the information and explanations given to us,there are adequate internal control procedures commensurate with the size of the Companyand the nature of its business with regard to purchase of inventory, fixed assets and withregard to sale of goods and services. During the course of our audit, we have not observedany continuing failure to' correct major weaknesses in internal controls.

(v) In our opinion and according to the information and explanation given to us, theCompany has not accepted any deposits from the public within the meaning of Sections 58Aand 58AA or any other relevant provision of the Act and the rules framed there under.

(vi) The Company has an internal audit system commensurate with the size and nature ofits business.

(vii) The maintenance of cost records under Section 209(1 )(d) of The Act has not beenprescribed by the Central government for the products of the Company.

(viii) In respect of Statutory Dues:

(a) According to the information and explanations given to us and the records of theCompany examined by us, the Company is generally regular in depositing with appropriateauthorities undisputed statutory dues including Provident fund, Investor education andprotection fund, Employees' state insurance, Income-tax, Sales-tax, Wealth tax, Servicetax, Customs duty, Excise duty, Cess and other material statutory dues applicable to it.

(b) According to information and explanation given to us, no undisputed amounts payablein respect of Income tax, Sales tax, Wealth tax, Service tax, Custom duty, Excise duty andCess were in arrears, as at 31.03.2010 for a period of more than six months from the datethey became payable, (c) According to the information and explanations given to us, thereare dues of Forest Development Tax, Entry Tax, Sales Tax, Property Tax, Export Tax,Conservancy Tax, Road Tax and Property Tax which are not deposited on account of disputewhich are as follows:

(ix) In our opinion, the Company has no accumulated losses as at 31.03.2010 and it hasnot incurred any cash losses in the financial year ended on that date or in theimmediately preceding financial year.

(x) In our opinion and according to the information and explanation given to us, theCompany has not taken any loans from financial Institution, Bank and has not issued anydebentures. Therefore, the provisions of clause 4(xi) of the Companies (Auditor's Report)Order, 2003 are not applicable to the Company.

(xi) In our opinion and according to the information and explanation given to us, theCompany has not granted loans and advances on the basis of security by way of pledge ofshares, debentures and other securities. Accordingly the provisions of clause 4(xii) ofthe Companies* (Auditor's Report) Order, 2003 are not applicable to the Company.

(xii) In our opinion, the Company is not a chit fund or a nidhi / mutual benefitfund/society. Therefore, the provisions of clause 4(xiii) of the Companies (Auditor'sReport) Order, 2003 are not applicable to the Company.

(xiii) In our opinion, the Company is not dealing in or trading in shares, securities,debentures and other investments. Accordingly, the provisions of clause 4(xiv) of theCompanies (Auditor's Report) Order, 2003 are not applicable to the Company.

(xiv) 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.

(xv) According to the information and explanations given to us, the Company has notobtained any term loans. Therefore, the provisions of clause 4 (xvi) of the Companies(Auditor's Report) Order, 2003 are not applicable to the Company.

(xvi) According to the information and explanations given to us and on an overallexamination of the balance sheet of the Company, we report that the no funds raised on ashort-term basis have been used for long-term investments.

(xvii) According to the information and explanation given to us, the Company has notmade preferential allotment of shares to parties and Companies covered in the registermaintained under Section 301 of The Act. Accordingly, the provisions of clause 4{xviii) ofthe Companies (Auditor's Report) Order, 2003 are not applicable to the Company.

(xviii) According to the information and explanation given to us, the Company has notissued any debentures. Therefore, the provisions of clause 4(xix) of the Companies(Auditor's Report) Order, 2003 are not applicable to the Company.

(xix) . According to the information and explanation

given to us, the Company has not raised any money by public issues during the year.Accordingly, the provisions of clause 4(xx) of the Companies (Auditor's Report) Order,2003 are not applicable to the Company.

(xx) According to the information and explanations given to us, no fraud on or by theCompany has been noticed or reported during the course of our audit.

For RAMAMOORTHY (N) & Co.,

Chartered Accountants

(CA SURENDRANATH BHARATHI)

Partner

Membership No.23837

Place : New Delhi

Date : 22-May-2010

COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION 619(4) OF THECOMPANIES ACT, 1956 ON THE ACCOUNTS OF NMDC LIMITED, HYDERABAD FOR THE YEAR ENDED 31 MARCH2010.

The preparation of financial statements of NMDC Limited, Hyderabad for the year ended31 March 2010 in accordance with the financial reporting framework prescribed under theCompanies Act, 1956 is the responsibility of the management of the Company. The statutoryauditor appointed by the Comptroller and Auditor General of India under Section 619(2) ofthe Companies Act, 1956 is responsible for expressing opinion on these financialstatements under Section 227 of the Companies Act, 1956 based on the independent audit inaccordance with the auditing and assurance standards prescribed by their professionalbody, the Institute of Chartered Accountants of India. This is stated to have been done bythem vide their Audit Report dated 22 May 2010.

I on the "behalf of the Comptroller and Auditor General of India have conducted asupplementary audit under Section 619(3)(b) of the Companies Act, 1956 of the financialstatements of NMDC Limited, Hyderabad for the year ended on 31 March 2010. Thissupplementary audit has been carried out independently without access to the workingpapers of the statutory auditor and is limited primarily to inquiries of the statutoryauditor and company personnel and a selective examination of some of the accountingrecords. On the basis of my audit, nothing significant has come to my knowledge, whichwould give rise to any comment upon or supplement to the Statutory Auditor's Report underSection 619(4) of the Companies Act, 1956.