PVR Ltd

To the Members of PVR Limited

1. We have audited the attached balance sheet of PVR Limited (‘the Company’)as at March 31, 2011 and also the profit and loss account and the cash flow statement forthe year ended on that date annexed thereto. These financial statements are theresponsibility of the Company’s management. Our responsibility is to express anopinion on these financial statements based on our audit.

2. We conducted our audit in accordance with 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.

3. As required by the Companies (Auditor’s Report) Order, 2003 (as amended) issuedby the Central Government of India in terms of sub-section (4A) of Section 227 of theCompanies Act, 1956, we enclose in the Annexure a statement on the matters specified inparagraphs 4 and 5 of the said Order.

4. Without qualifying our opinion, we draw attention to the following:

(a) Note 7 of Schedule 22 of the financial statements, wherein as per requirements ofthe Finance Act 2010, the Company may be liable to pay service tax in respect of rentingof immovable properties as lessee of such properties. The Company has challenged theimpugned provisions of law by way of a writ petition filed with the Hon’ble HighCourt of Delhi and an interim stay order is obtained. The Company has also been legallyadvised that no Service Tax is payable on renting of immovable properties as lessee ofsuch properties. Pending the final outcome of this matter, no provision for service taxliability amounting to Rs. 141,624,348 (including Rs. 87,303,515 pertaining to earlieryears) (net of service tax credit claimable) has been made.

(b) Note No. 22.1 of Schedule 22 of the financial statements, the Company has duringthe year ended March 31, 2011 paid managerial remuneration to Mr. Ajay Bijli which is inexcess of the approval granted by Ministry of Corporate Affairs, Central Government (CG)by Rs. 1,628,903. In the previous years, the Company had paid managerial remuneration inexcess of the approval granted by Ministry of Corporate Affairs, Central Government by Rs.6,848,852 paid to Mr. Ajay Bijli. The Company has filed representations in the matter withthe CG and a separate representation is being filed with CG for waiver of excessremuneration of Rs. 1,628,903 paid to Mr. Ajay Bijli during the financial year 2010-11.Pending the final outcome of the Company’s representations, no adjustments have beenmade to the accompanying financial statements in this regard.

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

i. We have obtained all the information and explanations, which to the best of ourknowledge and belief were necessary for the purposes of our 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 account and cash flow statement dealt with bythis report are in agreement 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 accounting standards referred 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 March31, 2011, and taken on record by the Board of Directors, we report that none of thedirectors is disqualified as on March 31, 2011 from being appointed as a director in termsof clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956.

vi. 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,in the manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India;

a) in the case of the balance sheet, of the state of affairs of the Company as at March31, 2011;

b) in the case of the profit and loss account, of the profit for the year ended on thatdate; and

c) in the case of cash flow statement, of the cash flows for the year ended on thatdate.

For S.R. Batliboi & Co.

Firm registration number: 301003E

Chartered Accountants

per Yogender Seth

Partner

Membership No.: 94524

Place: Gurgaon

Date: May 27th, 2011

Re: PVR Limited (‘the Company’)

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

(b) All fixed assets have not been physically verified by the management during theyear but there is a regular programme of verification which, in our opinion, is reasonablehaving regard to the size of the Company and the nature of its assets.

No material discrepancies were noticed on such verification.

(c) There was no substantial disposal of fixed assets during the year.

(ii) (a) The management has conducted physical verification of inventory at reasonableintervals during the year.

(b) The procedures of physical verification of inventory followed by the management arereasonable and adequate in relation to the size of the Company and the nature of itsbusiness.

(c) The Company is maintaining proper records of inventory and no materialdiscrepancies were noticed on physical verification.

(iii) (a) The Company has granted loan to one company covered in the registermaintained under Section 301 of the Companies Act, 1956. The maximum amount involvedduring the year was Rs. 670,608,652 and the year end balance of loan granted to such partywas Rs. 596,902,802.

(b) In our opinion and according to the information and explanations given to us, therate of interest and other terms and conditions for such loans are not prima facieprejudicial to the interest of the Company.

(c) The loans granted are re-payable on demand.

As informed, the Company has not demanded repayment of any such loan during the year,thus, there has been no default on the part of the parties to whom the money has beenlent. The payment of interest has been regular.

(d) There is no overdue amount of loans granted to companies, firms or other partieslisted in the register maintained under Section 301 of the Companies Act, 1956.

(e) According to information and explanations given to us, the Company has not takenany loans, secured or unsecured, from companies, firms or other parties covered in theregister maintained under Section 301 of the Companies Act, 1956. Accordingly, theprovisions of clause 4(iii)(e) to (g) of the Order are not applicable to the Company andhence not commented upon.

(iv) In our opinion and according to the information and explanations given to us,there is an adequate internal control system commensurate with the size of the Company andthe nature of its business, for the purchase of inventory and fixed assets and for thesale of goods and services. During the course of our audit, we have not observed any majorweakness or continuing failure to correct major weakness in internal control system of thecompany in respect of these areas.

(v) (a) According to the information and explanations provided by the management, weare of the opinion that the particulars of contracts or arrangements referred to inSection 301 of the companies Act, 1956 that need to be entered into the registermaintained under Section 301 have been so entered.

(b) In our opinion and according to the information and explanations given to us, thetransactions made in pursuance of such contracts or arrangements exceeding value of Rupeesfive lakhs have been entered into during the financial year at prices which are reasonablehaving regard to the prevailing market prices at the relevant time.

(vi) The Company has not accepted any deposits from the public.

(vii) In our opinion, the Company has an internal audit system commensurate with thesize and nature of its business.

(viii) To the best of our knowledge and as explained, the Central Government has notprescribed maintenance of cost records under clause (d) of sub-Section (1) of Section 209of the Companies Act, 1956 for the products of the Company.

(ix)(a) The Company is generally regular in depositing with appropriate authoritiesundisputed statutory dues including provident fund, investor education and protectionfund, employees’ state insurance, income-tax, wealth tax, sales-tax, service tax,customs duty, excise duty and other material statutory dues applicable to it.

Further, since the Central Government has till date not prescribed the amount of cesspayable under Section 441 A of the Companies Act, 1956, we are not in a position tocomment upon the regularity or otherwise of the Company in depositing the same.

(b) According to the information and explanations given to us, no undisputed amountspayable in respect of provident fund, investor education and protection fund,employees’ state insurance, income-tax, wealth-tax, service tax, sales-tax, customsduty, excise duty, cess and other material statutory dues were outstanding, at the yearend, for a period of more than six months from the date they became payable.

(c) According to the records of the Company, the dues outstanding of income-tax,sales-tax, wealth-tax, service tax, customs duty, excise duty and cess on account of anydispute, are as follows:

* Net of Rs. 7.32 Crores paid under protest and disclosed in Schedule 13 Loans andAdvances.

(x) The Company has no accumulated losses at the end of the financial year and it hasnot incurred cash losses in the current and immediately preceding financial year.

(xi) Based on our audit procedures and as per the information and explanations given bythe management, we are of the opinion that the Company has not defaulted in repayment ofdues to a financial institution, banks or debenture holders.

(xii) According to the information and explanations given to us and based on thedocuments and records produced to us, the Company has not granted loans and advances onthe basis of security by way of pledge of shares, debentures and other securities.

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

(xiv) In respect of dealing/trading in mutual funds, in our opinion and according tothe information and explanations given to us, proper records have been maintained of thetransactions and contracts and timely entries have been made therein. The units andsecurities have been held by the Company in its own name except for Rs. 5,413,000.

(xv) According to the information and explanations given to us, the Company had givenguarantee for loans taken by a subsidiary company from a financial institution, the termsand conditions whereof in our opinion are not prima-facie prejudicial to the interest ofthe Company.

(xvi) Based on the information and explanations given to us by the management, termloans were applied for the purpose for which the loans were obtained.

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

(xviii) The Company has not made any preferential allotment of shares to parties orcompanies covered in the register maintained under Section 301 of the Companies Act, 1956.

(xix) The Company has secured debentures outstanding as at the year end. The Companyhas created security or charge in respect of debentures issued.

(xx) The Company has not raised any money through a public issue during the year.

(xxi) Based upon the audit procedures performed for the purpose of reporting the trueand fair view of the financial statements and as per the information and explanationsgiven by the management, we report that no fraud on or by the Company has been noticed orreported during the course of our audit.

For S.R. Batliboi & Co.

Firm registration number: 301003E

Chartered Accountants

per Yogender Seth

Partner

Membership No.: 94524

Place: Gurgaon

Date: May 27th, 2011