Petronet LNG Ltd

TO THE SHAREHOLDERS OF PETRONET LNG LIMITED.

1. We have audited the attached Balance Sheet of PETRONET LNG LIMITED as at 31^stMarch, 2011 and also the Profit and Loss Account and Cash Flow Statement of theCompany for the year ended on that date, annexed thereto. These financial statements arethe responsibility 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 the management, as well as evaluating the overallfinancial statement presentation. We believe that our audit provides a reasonable basisfor our opinion.

3. 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;

(c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with bythis report are in agreement with the books of Account;

(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 section 211(3C) of the Companies Act, 1956 to the extent applicable;

(e) On the basis of written representations received from the directors and taken onrecord by the Board of Directors, we report that none of the directors are prima facie,disqualified as on 31.03.2011 from being appointed as directors of the Company undersection 274(1)(g) of the Companies Act, 1956.

(f) In our opinion and to the best of our information and according to the explanationsgiven to us, the said financial statements together with the significant accountingpolicies and notes thereon, 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 stateof affairs of the Company as at 31^st March, 2011; ii in the case of the Profitand Loss Account, of the profit for the year ended on that date; and iii in the case ofcash flow statement, of the cash flows for the year ended on that date.

4. As required by the Companies (Auditors Report) Order, 2003 (as amended) issued bythe Department of Company Affairs, Govt. of India in terms of Section 227 (4A) of theCompanies Act, 1956, and on the basis of such checks of the books and records of theCompany as we considered appropriate and according to the information and explanationsgiven to us, we further report on the matters specified in the paragraphs 4 and 5 of thesaid Order as under :

i a) The Company is maintaining proper records showing full particulars, includingquantitative details and situation of fixed assets.

b) The management has physically verified most of the fixed assets at the year end, thefrequency of which, in our opinion, is reasonable. No material discrepancies were noticedon such verification.

c) Since there is no substantial disposal of fixed assets during the year, thepreparation of financial statements on a going concern basis is not affected on thisaccount.

ii a) The stock of raw materials and stores have been physically verified by themanagement at regular intervals. In our opinion, the frequency of verification isreasonable.

b) In our opinion, the procedures of physical verification of inventory followed by themanagement are reasonable and adequate in relation to the size of the Company and thenature of its business.

c) In our opinion, the Company is maintaining proper records of inventory and nomaterial discrepancies were noticed on physical verification.

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. Therefore, the provisions of clause 4(iii)(a) to (d) of the Companies (AuditorsReport) Order are not applicable.

e) 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. Therefore, the provisions of clause 4(iii)(e) to (g) of the Companies (AuditorsReport) Order are not applicable.

iv 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, for the purchase of inventory, fixed assets and for the sale ofgoods and services. During the course of our audit, we have neither come across nor havebeen informed of any continuing failure to correct major weaknesses in internal controlsystem of the Company.

v According to the information given to us, there are no contracts or arrangementsduring the year that need to be entered into a register in pursuance of section 301 of theCompanies Act, 1956.

vi The Company has not accepted deposits from the public within the provisions ofsections 58A and 58AA or any other relevant provisions and the Rules framed there under.

vii An outside agency has carried out internal audit during the year. In our opinion,the internal audit system of the Company is commensurate with the size and nature of itsbusiness.

viii We have broadly reviewed the books of accounts maintained by the Company, pursuantto rules made by the Central Government for the maintenance of cost records under clause(d) of sub-section (1) of section 209 of the Companies Act, 1956 and are of the opinionthat prima facie, the prescribed accounts and records have been maintained. We have not,however, made a detailed examination of the records with a view to determine whether theyare accurate and complete.

ix a) According to the information and explanations given to us and records of theCompany examined by us, in our opinion, the Company has been generally regular indepositing undisputed statutory dues including Provident Fund, Income-tax, Sales-tax,Wealth Tax, Service Tax, Custom Duty, and any other statutory dues with the appropriateauthorities. There were no arrears of undisputed statutory dues as at 31^stMarch, 2011, which were outstanding for a period of more than six months from the datethey became payable. We are informed that there is no liability towards Investor Educationand Protection Fund, Employees’ State Insurance, Cess and Excise Duty for the yearunder audit.

b) There are no disputed dues which have remained unpaid as on 31^st March,2011 in respect of sales tax / income tax / custom duty / wealth tax / service tax.

x The Company has no accumulated losses as at 31^st March 2011 and has notincurred cash losses during the financial year covered by our audit or in the immediatelypreceding financial year.

xi On the basis of the verification of records and information and explanations givento us, the Company has not defaulted in repayment of dues to financial institutions orbanks. There are no debentures outstanding in the books of accounts at any time during theyear.

xii The Company has not granted loans and advances on the basis of security by way ofpledge of shares, debentures and other securities.

xiii The Company is not a chit fund / nidhi / mutual benefit fund / society. Therefore,the provisions of clause 4(xiii) of the Companies (Auditors Report) Order are notapplicable.

xiv The Company is not dealing or trading in shares, securities, debentures and otherinvestments. Therefore, the provisions of clause 4(xiv) of the Companies (Auditors Report)Order are not applicable.

xv According to information and explanations given to us, the Company has not given anyguarantee for loans taken by others from banks or financial institutions.

xvi According to the records of the Company, term loans taken during the year have beenapplied for the purpose for which they were obtained except that an amount of Rs. 249.15crores pending utilization is temporarily held in short term investment.

xvii According to information and explanations given to us, the cash flow statementexamined by us and on overall examination of the balance sheet of the Company, we reportthat funds raised on short term basis have not been used for long term investments.

xviii During the year, the Company has not made any preferential allotment of shares toparties and companies covered in the Register maintained under section 301 of the Act.

xix As the Company has no outstanding debentures during the year, question of creatingsecurities or charge does not arise.

xx The Company has not raised any money through public issue of securities during theyear and therefore, verification of the end use of money does not arise.

xxi Based on the audit procedure performed and the representation obtained from themanagement, we report that no case of fraud on or by the Company has been noticed orreported during the year under audit.