Sterlite Industries (India) Ltd

To,

THE MEMBERS OF

STERLITE INDUSTRIES (INDIA) LIMITED

1. We have audited the attached Balance Sheet of 'STERLITE INDUSTRIES (INDIA)LIMITED' ("the Company"), as at 31st March, 2011, the Profit and LossAccount and also the Cash Flow Statement of the Company for the year ended on that dateannexed thereto. These financial statements are the responsibility of the Company'sManagement. Our responsibility is to express an opinion on these financial statementsbased 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 from 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, issued by the CentralGovernment of India in terms of subsection (4A) of Section 227 of the Companies Act 1956,we enclose in the Annexure a statement on the matters specified in the paragraphs 4 and 5of the said order.

4. Further to our comments in the Annexure referred to in paragraph 3 above, we reportthat:

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 & 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 & 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. Additionally, the Company has chosen toearly adopt Accounting Standard 30, "Financial Instruments: Recognition andMeasurement" and limited revisions arising out from the Announcement of the Instituteof Chartered Accountants of India on 29th March, 2008 as stated in Note 6 of Schedule 21;

e) On the basis of the written representations received from the directors as on 31stMarch, 2011 and taken on record by the Board of Directors, we report that none of thedirectors is disqualified as on 31st March, 2011 from being appointed as a director interms of Section 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 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:

(i) in the case of the Balance Sheet, of the state of affairs of the Company as at 31stMarch, 2011;

(ii) in the case of the Profit and Loss Account, of the profit of the Company for theyear ended on that date; and

(iii) in the case of the Cash Flow Statement, of the cash fiows of the Company for theyear ended on that date.

(Referred to in paragraph 3 of 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 programme of physical verification of its fixed assets in a threeyear period which, in our opinion, is reasonable having regard to the size of the Companyand the nature of its assets. In accordance with such programme, the fixed assets werephysically verified by the Management during the year and no material discrepancies werenoticed.

(c) In our opinion and according to the information and explanations given to us, theCompany has not made any substantial disposal of fixed assets during the year and goingconcern status of the Company is not affected.

(ii) In respect of its inventories:

(a) As explained to us, inventory has been physically verified during the year by themanagement at reasonable intervals.

(b) In our opinion and according to the information and explanations given to us, theprocedures of physical verification of inventories followed by the management arereasonable and adequate in relation to the size of the Company and the nature of itsbusiness.

(c) In our opinion, and according to the information and explanations given to us, theCompany has maintained proper records of its inventories and no material discrepancieswere noticed on physical verification.

(iii) In respect of loans, secured or unsecured, granted by the Company to companies,firms or other parties covered in the Register maintained under Section 301 of theCompanies Act,1956, according to the information and explanations given to us:

(a) The Company has granted loans to two parties during the year. At the year-end, theoutstanding balances of such loans aggregated Rs. 12,120.01 Crore and the maximum amountinvolved during the year was Rs. 15,081.50 Crore.

(b) In our opinion, the rate of interest and other terms and conditions of such loansare, prima facie not prejudicial to the interest of the Company.

(c) The loans given were not due for repayment at year end. In respect of payment ofinterest, these parties have been generally regular in payment. In respect of one of theseparties, interest amounting to Rs. 81.40 Crore was due and outstanding at year end.

(d) The loans given were not due for repayment, therefore the question of overdueprincipal amount does not arise. There was no overdue interest at the year end except fromone party amounting to Rs. 81.40 Crore and reasonable steps have been taken by the Companyfor the recovery of the same.

(e) The Company has not taken any loans, secured or unsecured from companies, firms andother parties covered in the Register maintained under Section 301 of the Companies Act,1956, hence requirement of clauses 4(iii)(f) and (g) of the Companies (Auditor's Report)Order, 2003 are not applicable.

(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 with regard to purchases of inventory and fixed assets and forthe sale of goods and services. During the course of our audit, we have not observed anycontinuing failure to correct major weakness in such internal control system.

(v) In respect of contracts or arrangements entered in the Register maintained inpursuance of Section 301 of the Companies Act, 1956, to the best of our knowledge andbelief and according to the information and explanations given to us:

(a) The particulars of contracts or arrangements referred to in Section 301 that neededto be entered in the Register maintained under the said Section have been so entered.

(b) Where each of such transaction is in excess of - 5 lakhs in respect of any party,the transactions have been made at prices which appear reasonable as per informationavailable with the Company.

(vi) In our opinion and according to the information and explanations given to us, theCompany has not accepted any deposit from the public and hence directives issued by theReserve Bank of India and the provisions of Section 58A and 58AA of the Companies Act,1956 and rules framed there under are not applicable for the year under audit.

(vii) In our opinion, the Company has an adequate internal audit system commensuratewith the size and nature of its business.

(viii) The Central Government has prescribed maintenance of cost records under Section209 (1) (d) of the Companies Act, 1956 in respect of manufacture of copper, sulphuric Acidand generation of electricity. We have broadly reviewed the accounts and recordsmaintained by the Company in this connection and are of the opinion that prima facie, theprescribed accounts and records have been maintained and are being made. We have, however,not made a detailed examination of the records with a view to determining whether they areaccurate or complete.

(ix) According to the information and explanations given to us, and the records of theCompany examined by us:

a) The Company has generally been regular in depositing with appropriate authoritiesundisputed statutory dues, including Provident Fund, Investor Education and ProtectionFund, Employees' State Insurance, Income-tax, Sales-tax, Wealth tax, Service Tax, CustomDuty, Excise Duty and any other material statutory dues applicable to it.

Further, since the Central Government has till date not prescribed the amount of cesspayable under section 441A 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) There were no undisputed amounts payable in respect of Income Tax, Sales Tax, WealthTax, Excise Duty and other material statutory dues in arrears as at 31st March, 2011 for aperiod of more than six months from the date they became payable, except Rs. 1.01 Crore inrespect of Investor Education and Protection Fund, which is held in abeyance due topending legal case and Rs. 3.96 Crore in respect of Custom Duty, which is pending furtherappeal by the Company.

c) Details of dues of Income-tax, Sales Tax, Wealth Tax, Service Tax, Custom Duty andExcise Duty which have not been deposited as on 31st March, 2011 on account of disputesare given below:

(x) The Company does not have accumulated losses at the end of financial year. It hasnot incurred any cash losses during the financial year covered by the audit and in theimmediately preceding financial year.

(xi) In our opinion and according to the information and explanations given to us, theCompany has not defaulted in repayment of dues to financial institutions, banks ordebenture holders.

(xii) According to the information and explanations given to us, the Company has notgranted loans and advances on the basis of security by way of pledge of shares, debentureand other securities.

(xiii) In our opinion, the Company is not a chit fund, a nidhi or a mutual benefitfund/ society. Therefore, the provisions of Clause 4 (xiii) of the Companies (Auditor'sReport) Order 2003 are not applicable.

(xiv) In our opinion and according to the information and explanations given to us, theCompany is not a dealer or trader in shares, securities, debentures & otherinvestments. The Company has maintained proper records of transactions and contracts inrespect of shares, securities, debentures and other investments and timely entries havebeen made therein. All shares, securities, debentures and other investments have been heldby the Company in its own name.

(xv) According to the information and explanations given by the management, the Companyhas given guarantees for loans taken by others from banks and financial institutions asmentioned in note 31(e) of Schedule 21. The guarantees outstanding as at year end are forsubsidiary companies and an associate company, which according to the information andexplanations given to us, are prima facie not prejudicial to the interest of the Company.

(xvi) According to the information and explanations given to us, no term loans wereraised during the year by the Company therefore question of utilization for stated purposedoes not arise.

(xvii) On the basis of review of utilization of funds, which is based on overallexamination of the Balance Sheet of the Company as at 31st March, 2011, relatedinformation as made available to us and as represented to us by the Management, we are ofthe opinion that funds raised on short-term basis have not prima facie been used duringthe year for long-term investment.

(xviii) During the year the Company has not made any preferential allotment of sharesto parties and companies covered in the register maintained under Section 301 of theCompanies Act, 1956.

(xix) The Company has not issued any secured debentures during the year under audit.

(xx) We have verified the end use of moneys raised by right issues of equity shares andAmerican Depository Shares (ADS) represented by equity shares and the same has beendisclosed in note no. 17 (i) and (ii) respectively, of Schedule 21 to notes forming partof the accounts.

(xxi) According to the information and explanations given by the management, we reportthat no material fraud on or by the Company has been noticed or reported during the courseof our audit.