Puravankara Projects Ltd

(Parent Company)

To,

The Members of Puravankara Projects Limited

1. We have audited the attached Balance Sheet of Puravankara Projects Limited,(the ‘Company’) as at 31 March 2010, and also the Profit and Loss Accountand the Cash Flow Statement for the year ended on that date annexed thereto (collectivelyreferred as the ‘financialstatements’). 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 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 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 (the‘Order’) (as amended), issued by the Central Government of India in terms ofsub-section (4A) of Section 227 of the Companies Act, 1956 (the ‘Act’), weenclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of theOrder.

4. 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;

c. The financial statements dealt with by this report are in agreement with the booksof account;

d. On the basis of written representations received from the directors, as on 31 March2010 and taken on record by the Board of Directors, we report that none of the directorsis disqualified as on 31 March 2010 from being appointed as a director in terms of clause(g) of sub-section (1) of Section 274 of the Act;

e. In our opinion and to the best of our information and according to the explanationsgiven to us, the financial statements dealt with by this report comply with the accountingstandards referred to in sub-section (3C) of Section 211 of the Act and the Rules framedthere under and give the information required by the Act, in the manner so required andgive a true and fair view in conformity with the accounting principles generally acceptedin India, in the case of:

i) the Balance Sheet, of the state of affairs of the Company as at 31 March 2010;

ii) the Profit and Loss Account, of the profit for the year ended on that date; and

iii) the Cash Flow Statement, of the cash flows for the year ended on that date.

Chartered Accountants

Firm Registration No. 001076N

per Aashish Arjun Singh

Partner

Membership No. 210122

29 April 2010

Annexure to the Auditors’ Report

Annexure to the Auditors’ Report of even date to the members of PuravankaraProjects Limited, on the financial statements for the year ended 31 March 2010.

Based on the audit procedures performed for the purpose of reporting a true and fairview on the financial statements of the Company and taking into consideration theinformation and explanations given to us and the books of account and other recordsexamined by us in the normal course of audit, we report that:

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

(b) The Company has a regular programme of physical verification of its fixed assets bywhich fixed assets are verified in a phased manner over a period of three years. In ouropinion, this periodicity of physical verification is reasonable having regard to the sizeof the Company and the nature of its assets. No material discrepancies were noticed onsuch verification.

(c) In our opinion, a substantial part of fixed assets has not been disposed off duringthe year.

(ii) (a) The inventory has been physically verified during the year by the management.In our opinion, the frequency of verification is reasonable.

(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) There are nine wholly-owned subsidiary companies and two associate companiescovered in the register maintained under Section 301 of the Act to which the Company hasgranted unsecured loans.

The maximum amount outstanding during the year was Rs.1,795,912,369 and the year-endbalance was Rs.1,795,734,944.

(b) In our opinion, the rate of interest and the interest free nature where applicableand other terms and conditions of such loans are not, prima facie, prejudicial tothe interest of the Company.

(c) The principal amounts, are repayable on demand and there is no repayment schedule,the payment of interest, where applicable, has been regular.

(d) In respect of the said loans, the same are repayable on demand and there are nooverdue amounts.

(e) The Company had taken interest free loans from three parties covered in theregister maintained under Section 301 of the Act. The maximum amount outstanding duringthe year was Rs.537,590,962 and the year-end balance was Rs.452,504,816.

(f) In our opinion, the interest free nature and other terms and conditions for suchloans are not, prima facie, prejudicial to the interest of the Company.

(g) The principal amounts, are repayable on demand and there is no repayment schedule.

(iv) In our opinion, there is an adequate internal control system commensurate with thesize of the Company and the nature of its business for the purchase of inventory and fixedassets and for the sale of goods and services.

(v) (a) In our opinion, the particulars of all contracts or arrangements that need tobe entered into the register maintained under Section 301 of the Act have been so entered.

(b) Owing to the unique and specialised nature of the items involved and in the absenceof any comparable prices, we are unable to comment as to whether the transactions made inpursuance of such contracts or arrangements have been made at prevailing market prices atthe relevant time.

(vi) The Company has not accepted any deposits from the public within the meaning ofSections 58A and 58AA of the Act and the Companies (Acceptance of Deposits) Rules, 1975.Accordingly, the provisions of Clause 4(vi) of the Order are not applicable.

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

(viii) To the best of our knowledge and belief, the Central Government has notprescribed maintenance of cost records under clause (d) of sub-section (1) of Section 209of the Act, in respect of the services rendered by the Company. Accordingly, theprovisions of clause 4(viii) of the Order are not applicable.

(ix)(a) Undisputed statutory dues including provident fund, investor education andprotection fund, employees’ state insurance, income-tax, sales-tax, wealth-tax,service-tax, custom duty, excise duty, cess and other material statutory dues, asapplicable, have generally been regularly deposited with the appropriate authorities,though there has been a slight delay in a few cases. No undisputed amounts payable inrespect thereof were outstanding at the year-end for a period of more than six months fromthe date they became payable.

(b) The dues outstanding in respect of sales-tax, income-tax, custom duty, wealth-tax,excise duty, cess on account of any dispute, are as follows:

(x) In our opinion, the Company has no accumulated losses at the end of the financialyear and it has not incurred cash losses in the current and the immediately precedingfinancial year.

(xi) In our opinion, the Company has not defaulted in repayment of dues to a financialinstitution or debenture holders during the year. In respect of dues to banks, a lenderhas re-scheduled repayments amounting to Rs.257,500,000 that were due from the Company.The said approval for re-scheduling the repayment was obtained from the lender before theyear-end.

(xii) The Company has not granted any loans and advances on the basis of security byway of pledge of shares, debentures and other securities. Accordingly, the provisions ofclause 4(xii) of the Order are not applicable.

(xiii) In our opinion, the Company is not a chit fund or a nidhi/ mutual benefit fund/society. Accordingly, the provisions of clause 4(xiii) of the Order are not applicable.

(xiv) 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 theOrder are not applicable.

(xv) The Company has not given any guarantees for loans taken by others from banks orfinancial institutions. Accordingly, the provisions of clause 4(xv) of the Order are notapplicable.

(xvi) In our opinion, the Company has applied the term loans for the purpose for whichthe loans were obtained.

(xvii) In our opinion, no funds raised on short-term basis have been used for long-terminvestment.

(xviii) The Company has not made any preferential allotment of shares to parties orcompanies covered in the register maintained under Section 301 of the Act. Accordingly,the provisions of clause 4(xviii) of the Order are not applicable.

(xix) The Company has created a security in respect of debentures outstanding duringthe year.

(xx) The Company has not raised any money by public issues during the year.Accordingly, the provisions of clause 4(xx) of the Order are not applicable.

(xxi) No fraud on or by the Company has been noticed or reported during the periodcovered by our audit.

Chartered Accountants

Firm Registration No. 001076N

per Aashish Arjun Singh

Partner

Membership No. 210122