Sobha Developers Ltd

To

The Members of Sobha Developers Limited

1. We have audited the attached balance sheet of Sobha Developers Limited(‘the Company’) as at March 31, 2011 and also the profit and loss account andthe cash flow statement for the year ended on that date annexed thereto. These financialstatements are the responsibility of the Company’s management. Our responsibility isto express an opinion 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 (‘the Act’), we enclose in the Annexure a statement on thematters specified in paragraphs 4 and 5 of the said Order.

4. Without qualifying our opinion, we draw attention to Note 25 under Schedule 19,regarding the purchase of material and services in the prior years from private limitedcompanies/ firms, covered under section 297 of the Act, which require prior approval ofthe Central Government. As indicated in the said note, the Company has filed anapplication for compounding and obtaining approval from the Company Law Board underSection 621A of the Act. The Company is confident of obtaining the approvals, and pendingobtaining such approvals, no adjustments have been made in the financial statements.

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; and

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 & ASSOCIATES

Firm registration number: 101049W

Chartered Accountants

per Adarsh Ranka

Partner

Membership No.: 209567

Bengaluru, India

May 10, 2011

Re: Sobha Developers Limited

(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 materialdiscrepancies were noticed on such verification.

(c) There was no disposal of a substantial part 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 party covered in the register maintainedunder section 301 of the Act. The maximum amount involved during the year was Rs. 87.11million and the year-end balance was Rs. 87.11 million.

(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. We are informed that the Company hasnot demanded repayment of any such loan or interest during the year, and thus, there hasbeen no default on the part of the parties to whom the money has been lent.

(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) The Company has taken loan from two parties covered in the register maintainedunder section 301 of the Act. The maximum amount involved during the year was Rs. 13.45million and the year end balance was Rs. 13.45 million.

(f) In our opinion and according to the information and explanations given to us, therate of interest and other terms and conditions for such loan are prima facie notprejudicial to the interest of the Company.

(g) The loans taken are re-payable on demand. As informed to us, the lenders have notdemanded repayment of any such loan during the year, and thus, there has been no defaulton the part of the Company. The payment of interest has been regular.

(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 any major weakness in the internal controlsystem of the Company 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 Act that need to be entered into the register maintained under section301 have been so entered.

(b) In respect of transactions made in pursuance of such contracts or arrangementsexceeding value of Rs. 0.50 million entered into during the financial year, because of theunique and specialized nature of the items involved and absence of any comparable prices,we are unable to comment whether the transactions were made at prevailing market prices atthe 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 regular in depositing with appropriate authorities undisputedstatutory dues including provident fund, investor education and protection fund,employees’ state insurance, income-tax, sales-tax, excise duty, wealth-tax, servicetax, customs duty, cess 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 to commentupon 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, wealth-tax, service tax, sales-tax, income-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. 73.45 million, paid under protest

(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, bank or debenture holders.

(xii) According to the information and explanations given to us and based on thedocuments and records produced before us, the Company has not granted loans and advanceson the 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 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 (as amended) are not applicable to theCompany.

(xv) According to the information and explanations given to us, the Company has givenguarantee for loans taken by others from bank or financial institutions, the terms andconditions whereof in our opinion are not prima facie prejudicial to the interest of theCompany considering Company’s economic interest in such entities.

(xvi) Based on information and explanations given to us by the management, term loans(representing loans with a repayment period beyond 36 months) were applied for the purposefor 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) According to the information and explanations given to us, the Company has notissued any debentures during the year. The Company had created security or charge inrespect of debentures issued in prior years, which were outstanding during the currentyear.

(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 to theCompany.

(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 year.

For S.R. BATLIBOI & ASSOCIATES

Firm registration number: 101049W

Chartered Accountants

per Adarsh Ranka

Partner

Membership No.: 209567

Bengaluru, India

May 10, 2011