Reliance Capital Ltd

To,

The Members of

Reliance Capital Limited

We have audited the attached balance sheet of Reliance Capital Limited ('theCompany'), as at March 31, 2010 and also the profit and loss account and cash flowstatement 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.

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 from material misstatement. Anaudit also includes examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by management, as well as evaluating theoverall financial statement presentation. We believe that our audit provides a reasonablebasis for our opinion.

1. As required by the Companies (Auditor's Report) Order, 2003 ('the order') asamended, issued by the Central Government of India in terms of sub-section (4A) of Section227 of the Companies Act 1 956 ('the Act'), we enclose in the Annexure a statement on thematters specified in paragraphs 4 and 5 of the said order.

2. 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 purpose 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 the 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 sub section(3C) of Section 211 of the Act.

e) on the basis of written representations received from the directors as on March 31,2010 and taken on record by the Board of Directors, we report that none of the directorsof the Company are disqualified as on March 31, 2010 from being appointed as a director interms of clause (g) of sub-section (1) of Section 274 of the Act;

f) in our opinion and to the best of our information and according to explanationsgiven to us, the said financial statements together with the notes thereon, give theinformation required by the Act, in the manner so required and give a true and fair viewin conformity with the accounting principles generally accepted in India:

(i) in the case of the balance sheet, of the state of affairs of the Company as atMarch 31, 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 flow for the year ended onthat date.

Annexure to Auditors' Report

(Referred to in our report of even date)

(i) In respect of its fixed assets:

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

(b) The Company has a regular program of physical verification of its fixed assets bywhich all fixed assets are verified in a phased manner over a period of three years. Inour opinion, this periodicity of physical verification is reasonable having regard to thesize of the Company and the nature of its assets. No material discrepancies were noticedon such verification.

(c) As per information and explanation given to us, during the year, the Company hasnot disposed off any substantial part of fixed assets that would affect the going concern.

(ii) The Company is a service company, primarily engaged in lending and investingactivities. Accordingly, it does not hold any physical inventories. Thus, paragraph 4 (ii)of the Order is not applicable to the Company.

(iii) In respect of loans, secured or unsecured, granted or taken by the Company to/from companies, firms or other parties covered in the register maintained under Section301 of the Companies Act, 1956

(a) During the year the Company has granted unsecured demand loan amounting to Rs.102crore to a one company covered in the register maintained under Section 301 of the Act.The maximum amount outstanding during the year was Rs.112.10 crore and the year endbalance of such loans was Rs.32.10 crore. The Company had given interest free loan in thepast to a company whose maximum balance and the year end balance was Rs.229.25 crore.

(b) In our opinion, the rate of interest and other terms and conditions on which loanshave been granted to the above mentioned companies are not, prima facie, prejudicial tothe interest of the Company.

(c) The loans granted to the aforementioned companies are repayable on demand.According to the information and explanations given to us, the borrowers have been regularin repaying in the payment of interest, where applicable.

(d) There is no overdue amount of more than rupees one lakh in respect of the aboveloans.

(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 Act.Accordingly, paragraphs 4(iii)(f) and 4(iii)(g) of the Order are not applicable to theCompany.

(iv) According to the information and explanations given to us, there are adequateinternal control procedures commensurate with the size of the Company and nature of itsbusiness for the purchase of fixed assets and services taken & rendered. We have notobserved any continuing failure to correct major weaknesses in internal controls.

(v) (a) According to information and explanations given to us, we are of the opinionthat the transactions made in pursuance of contracts or arrangements that needed to beentered in the register maintained under Section 301 of the Companies Act, 1956 have beenso entered.

(b) In our opinion and according to the information and explanations given to us, thereare no transactions of purchase of goods & material and sale of goods, materials &services made in pursuance of contracts or arrangement required to be entered in theregister maintained under Section 301 of the Companies Act, 1956 aggregating during theyear to Rs.5,00,000/- or more in respect of each party.

(vi) The Company has not accepted deposits from public hence directives issued by theReserve Bank of India and the provisions of Section 58A and 58 AA or any other relevantprovisions of the Companies Act, 1956 and rules framed there under are not applicable forthe year under audit.

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

(viii) The Central Government has not prescribed maintenance of cost records underSection 209(1) (d) of the Companies Act, 1956 in respect of activities carried on by theCompany. Hence the provisions of clause 4 (viii) of the Companies (Auditor's Report)Order, 2003 are not applicable to the Company.

(ix) (a) According to the records of the Company, the Company has been regular indepositing with appropriate authorities undisputed statutory dues including ProvidentFund, Investor Education Protection Fund, Income-tax, Sales-tax, Wealth tax, Service Tax,Custom Duty, Excise Duty and other statutory dues.

(b) According to the information and explanations given to us, no undisputed amountspayable in respect of such statutory dues were outstanding as at March 31, 2010 for aperiod of more than six months from the date they became payable.

(c) According to the information and explanation given to us, there are no suchstatutory dues, which have not been deposited on account of any dispute, except in respectof sales tax under Gujrat Sales Tax Act, 1969 of Rs.4,75,916 for the period 2001-02 whichis pending before the Gujarat Sales Tax Tribunal, Ahmedabad and sales tax under MadhyaPradesh Sales Tax Act, 1969 of Rs.4,30,472 for the period 1996-97 which is pending beforeAppellate Deputy Commissioner of the Commercial Tax, Indore Division - I .

(x) The Company neither has accumulated losses nor has it incurred any cash lossesduring the current financial year and in the immediately preceding financial year.

(xi) Based on our audit procedures and the information and explanation given bymanagement, we are of the opinion that the Company has not defaulted in repayment of duesto a financial institution, bank or debenture holders.

(xii) In our opinion and according to the information and explanations given to us,adequate documents and records have been maintained by the Company in respect of loans andadvances granted on the basis of security by way of pledge of shares, debentures and othersecurities.

(xiii) In our opinion, the Company is not a chit fund, a nidhi or a mutual benefitsociety. Therefore, the provisions of clause 4 (xiii) of the Companies (Auditor's Report)Order, 2003 are not applicable to the Company.

(xiv) The Company has maintained proper records of transactions and contracts inrespect of trading in shares, debentures, and other investment and timely entries havebeen made therein.

(xv) The Company has given guarantees for loan taken by others from banks or financialinstitutions. According to the information and explanations given by the management, inour opinion the terms and conditions of the guarantees given by the Company for loanstaken by others from banks or financial institutions are not prejudicial to the interestof the Company.

(xvi) According to the information and explanation given to us, the term loans taken bythe Company have been applied for the purpose for which they were raised.

(xvii) According to information and explanation given to us and on an overallexamination of the Balance Sheet of the Company as at March 31 2010, no funds raised onshort-term basis have been used for long-term investment.

(xviii) The Company has not made any preferential allotment of equity shares during theyear to a company, covered in the register maintained under Section 301 of the CompaniesAct, 1956, at price which is not prejudicial to the interest of the Company.

(xix) The Company has created securities and /or charges in respect of secureddebentures issued and redeemed during the year.

(xx) The Company has not raised any money by way of public issue during the year.

(xxi) According to the information and explanations given to us, no fraud on or by theCompany has been noticed or reported during the year.