Sun Pharmaceuticals Industries Ltd

1. We have audited the attached Balance Sheet of Sun Pharmaceutical IndustriesLimited ("the Company") as at March 31, 2010, the Profit and Loss Accountand the Cash Flow Statement for the year ended on that date annexed thereto. Thesefinancial statements are the responsibility of the Company’s management. Ourresponsibility is to 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 (Auditors’ Report) Order, 2003 ("CARO")issued by the Central Government of India in terms of sub-section (4A) of section 227 ofthe Companies Act, 1956, we enclose in the Annexure, a statement on the matters specifiedin paragraphs 4 and 5 of the said Order.

4. Further to our comments in the Annexure referred to in Para 3 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) in our opinion and to the best of our information and according to the explanationsgiven to us, the said accounts read together with notes thereon, give the informationrequired by the Companies Act, 1956, in the manner so required and give a true and fairview in conformity with the accounting principles generally accepted in India:

(a) in the case of the Balance Sheet, of the state of affairs of the Company as atMarch 31, 2010

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

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

5. On the basis of written representations received from the Directors as on March 31,2010 taken on record by the Board of Directors, none of the Directors is disqualified ason March 31, 2010 from being appointed as a director in terms of Section 274 (1) (g) ofthe Companies Act, 1956.

(Referred to in paragraph 3 of our report of even date) Sun Pharmaceutical IndustriesLimited

(i) Having regards to the nature of the Company’s business/activities/resultClauses xiii, xiv, xviii, xix and xx of paragraph 4 of the CARO, are not applicable.

(ii) 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 fixed assets were physically verified during the year by the management inaccordance with a regular programme of verification which, in our opinion, provides forphysical verification of all the fixed assets at reasonable interval.

According to the information and explanations given to us, no material discrepancieswere noticed on such verification.

c) The fixed assets disposed off during the year, in our opinion, do not constitute asubstantial part of the fixed assets of the Company and such disposal has, in our opinion,not affected the going concern status of the Company.

(iii) In respect of its inventories:

a) As explained to us, the inventories (excluding inventories lying with third parties)were physically verified during the year by the management at reasonable intervals. Inrespect of inventories lying with third parties, these have substantially been confirmedby them.

b) In our opinion and according to the information and explanations given to us, theprocedures of physical verification of inventories followed by the Management werereasonable 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.

(iv) The Company has neither granted nor taken any loans, secured or unsecured, to orfrom Companies, firms or other parties listed in the Register maintained under Section 301of the Companies Act, 1956.

(v) In our opinion and according to the information and explanations given to us,having regard to the explanations that some of the items purchased are of special natureand suitable alternative sources are not readily available for obtaining comparablequotations, there is an adequate internal control system commensurate with the size of theCompany and nature of its business with regard to purchase of inventory and fixed assetsand for sale of goods and services. During the course of audit, we have not observed anymajor weaknesses in such internal control system.

(vi) 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 into the Register, maintained under the said Section have been so entered.

b) Where each such transaction (excluding loans reported under paragraph iv above) isin excess of Rs. 5 lakhs in respect of any party, the transactions have been made atprices which are prima facie reasonable having regard to prevailing market pricesat the relevant time, except in respect of certain purchases for which comparablequotations are not available and in respect of which we are unable to comment.

(vii) According to the information and explanations given to us, the Company has notaccepted any deposits within the meaning of Section 58A and 58AA or any other relevantprovisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules,1975 with regard to deposits accepted from the public.

(viii) In our opinion, the internal audit functions carried out during the year byfirms of Chartered Accountants appointed by the Management have been commensurate with thesize of the Company and the nature of its business.

(ix) We have broadly reviewed the books of account maintained by the Company pursuantto the rules made by the Central Government for maintenance of cost records under section209 (1)(d) of the Companies Act, 1956 in respect of manufacture of formulation and bulkdrug products and are of the opinion that prima facie the prescribed accounts andrecords have been made and maintained. We have, however, not made a detailed examinationof the records with a view to determining whether they are accurate or complete. To thebest of our knowledge and according to the information and explanations given to us, theCentral Government has not prescribed the maintenance of cost records for any otherproduct of the Company.

(x) According to the information and explanations given to us in respect of statutorydues:

a) The Company has generally been regular in depositing undisputed dues, includingProvident Fund, Investor Education and Protection Fund, Employees’ State Insurance,Income tax, Sales tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, Cess and othermaterial statutory dues applicable to it with the appropriate authorities.

b) There were no undisputed amounts payable in respect of Income Tax, Wealth Tax,Custom Duty, Excise Duty, Cess and other material statutory dues in arrears as at March31, 2010 for a period of more than six months from the date they became payable.

c) Details of dues of Income Tax, Sales Tax, Wealth Tax, Custom Duty and Excise Duty,which have not been deposited as at March 31, 2010 on account of any disputes, are givenbelow:

There were no unpaid disputed dues in respect of service tax and cess during the year.

(xi) The Company does not have any accumulated losses as at the end of the year. TheCompany has not incurred cash losses in the financial year and in the immediatelypreceding financial year.

(xii) In our opinion and according to the information and explanations given to us, theCompany has not defaulted in repayment of dues to banks and financial institutions. TheCompany has not obtained any borrowings by way of debentures. (xiii) In our opinion, theCompany has maintained adequate records where it has granted loans and advances on thebasis of security by way of pledge of shares. The Company has not granted any loans andadvances on the basis of security by way of pledge of debentures and other securities.

(xiv) In our opinion and according to the information and explanations given to us, theterms and conditions of the guarantees given by the Company for loan taken by others frombanks and financial institutions, are not prima facie prejudicial to the interest of theCompany.

(xv) The Company has not obtained any term loans during the year.

(xvi) According to the information and explanations given to us and on an overallexamination of the Balance Sheet of the Company, we report that the funds raised on shortterm basis have, prima facie, not been used during the year for long term investment.

(xvii) To the best of our knowledge and according to the information and explanationsgiven to us, no fraud by the Company and no material fraud on the Company has been noticedor reported during the year.