Tata Motors Ltd

TO THE MEMBERS OF TATA MOTORS LIMITED

1. We have audited the attached Balance Sheet of TATA MOTORS LIMITED ("theCompany") as at March 31, 2011, the Profit and Loss Account and the Cash FlowStatement of the Company for the year ended on that date, both 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 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 misstatements. Anaudit includes examining, on a test basis, evidence supporting the amounts and thedisclosures in the financial statements. An audit also includes assessing the accountingprinciples used and the significant estimates made by the Management, as well asevaluating the overall financial statement presentation. We believe that our auditprovides a reasonable basis for our opinion.

3. As required by the Companies (Auditor's Report) Order, 2003 (CARO) issued by theCentral Government in terms of Section 227(4A) of the Companies Act, 1956, we enclose inthe Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

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

(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 it appears from our examination of those books;

(c) the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealtwith by this report are in agreement with the books of account;

(d) in our opinion, the Balance Sheet, the Profit and Loss Account and the Cash FlowStatement dealt with by this report are in compliance with the Accounting Standardsreferred to in Section 211 (3C) of the Companies Act, 1956;

(e) 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 inthe 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 atMarch 31, 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 flows of the Company for theyear ended on that date.

5. On the basis of the written representations received from the Directors as on March31, 2011 taken on record by the Board of Directors, none of the Directors is disqualifiedas on March 31, 2011 from being appointed as a director in terms of Section 274(1) (g) ofthe Companies Act, 1 956.

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

(i) The nature of the Company's business activities during the year are such thatclauses (xiii), and (xiv) of paragraph 4 of the Companies (Auditors' Report) Order, 2003are not applicable to the Company.

(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 intervals. According to theinformation and explanation given to us, no material discrepancies were noticed on suchverification;

(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, in our opinion, hasnot affected the going concern status of the Company.

(iii) In respect of its inventory:

(a) As explained to us, the stock of finished goods (other than a significant part ofthe spare parts held for sale) and work-in-progress in the Company's custody have beenphysically verified by the Management as at the end of the financial year, before theyear-end or after the year-end, and in respect of stocks of stores and spares, theaforesaid spare parts held for sale, and raw materials in the Company's custody, there isa perpetual inventory system and a substantial portion of the stocks have been verifiedduring the year. In our opinion, the frequency of verification is reasonable. In case ofmaterials and spare parts held for sale lying with the third parties, certificatesconfirming stocks have been received in respect of a substantial portion of the stocksheld during the year or at the year-end;

(b) In our opinion and according to the information and explanation 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 is maintaining proper records of inventory. The discrepancies noticed onverification between the physical stocks and the book records were not material havingregard to the size of the operations of the Company and have been properly dealt with inthe books of account.

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

(a) the Company has granted unsecured loans aggregating T415.24 Crores to four partiescovered in the register maintained under Section 301 of the Companies Act, 1956 (including?174.24 Crores granted during the year to four parties). At the year-end, the outstandingbalances of such loans aggregated T434.41 Crores and maximum amount outstanding during theyear was ? 434.41 Crores.

(b) the rate of interest and other terms and conditions of such loans are, in ouropinion, prima facie not prejudicial to the interest of the Company having regard to themarket yields and the business relationship with the Company to whom loans have beengranted.

(c) The receipts of principal amounts have been as per stipulations however there havebeen delays in receipts of interests.

(d) There are no overdue amounts in respect of principal outstanding. In respect ofoverdue interest amounts of more than rupees one lakh remaining outstanding as at theyear-end, the Management has taken reasonable steps for the recovery of the overdueinterest amounts.

In respect of loans, secured or unsecured, taken by the Company from companies, firmsor other parties covered in the Register maintained under Section 301 of the CompaniesAct, 1956, according to the information and explanations given to us:

(e) the Company has taken loans aggregating T11.52 Crores from six parties covered inthe Register maintained under Section 301 of the Companies Act, 1956 (including ?1 Crorefrom one party during the year). At the year-end, the outstanding balance of such loanstaken aggregated T11.52 Crores and the maximum amount outstanding during the year wasT18.04 Crores.

(f) the rate of interest and other terms and conditions of such loans taken are, in ouropinion, prima facie not prejudicial to the interests of the Company.

(g) The principal amount is not due for repayment and the Company has been regular inpayment of interest.

(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 do not exist for obtaining comparable quotations, thereexists 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 withregard to the sale of goods and services. During the course of our audit, we have notobserved any major weakness 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 Section 301 that needed tobe entered in the register maintained under the said section have been so entered.

(b) Where each of such transaction is in excess of rupees five lakhs in respect of anyparty, and having regard to our comments in para (v) above, the transactions have beenmade at prices which are prima facie reasonable having regard to the prevailing marketprices at the relevant time.

(vii) In our opinion and according to the information and explanations given to us, theCompany has complied with the provisions of Sections 58A and 58AA or any other relevantprovisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules,1975 with regard to the deposits accepted from the public. According to the informationand explanations given to us, no order has been passed by the Company Law Board or theNational Company Law Tribunal or the Reserve Bank of India or any Court or any otherTribunal.

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

(ix) We have broadly reviewed the books of account relating to the manufacture of motorvehicles pursuant to the Rules made by the Central Government for the maintenance of costrecords under Section 209 (1 )(d) of the Companies Act, 1956 and are of the opinion thatprima facie, the prescribed accounts and records have been made and maintained. We have,however, not made a detailed examination of the records with a view to determining whetherthey are accurate or complete. To the best of our knowledge and according to theinformation and explanations given to us, the Central Government has not prescribedmaintenance of cost records for any other product 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 with the appropriateauthorities undisputed dues, including provident fund, investor education and protectionfund, employees' state insurance, income-tax, sales tax, wealth tax, service tax, customsduty, excise duty, cess and other material statutory dues applicable to it. With regard tothe contribution under the Employees' Deposit Linked Insurance Scheme, 1976 (the Scheme),we are informed that the Company has its own Life Cover Scheme, and consequently, anapplication has been made seeking an extension of exemption from contribution to theScheme, which is awaited. Further, since the Central Government has till date notprescribed the amount of cess payable under Section 441 A of the Companies Act, 1 956, weare not in a position to comment upon the regularity or otherwise of the Company indepositing the same.

(b) There were no undisputed amounts payable in respect of provident fund, investoreducation and protection fund, employees' state insurance, income-tax, wealth tax, servicetax, customs duty, excise duty, cess and other material statutory dues applicable to theCompany that were in arrears as at March 31, 2011 for a period of more than six monthsfrom the date they became payable.

(c) Details of dues of income-tax, sales tax, wealth tax, service tax, customs duty,excise duty and cess which have not been deposited as on March 31, 2011 on account of anydisputes are given below:

(xi) The Company does not have any accumulated losses at the end of the financial yearand has not incurred cash losses during the financial year covere by our audit and theimmediately preceding financial year.

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

(xiii) Based on our examination of the records and the information and explanationsgiven to us, the Company has not granted any loans and advances o the basis of security byway of pledge of shares, debentures and other securities.

(xiv) In our opinion and according to the information and explanations given to us, theCompany has not given any guarantee for loans taken by othei from banks or financialinstitutions. Accordingly, the provisions of clause (xv) of Paragraph 4 of the Companies(Auditor's Report) Order, 2003 are nc applicable to the Company.

(xv) In our opinion and according to the information and explanations given to us, theterm loans have been applied for the purposes for which they wer obtained.

(xvi) In our opinion and according to the information and explanations given to us andon an overall examination of the Balance Sheet of the Company as at March 31, 2011, wereport that funds raised on short term basis of ? 4,797.78 Crores have been used duringthe year for long-term investmen Further the Company has explained that steps are beingtaken to augment long term funds.

(xvii) According to the information and explanations given to us, the Company has notmade any preferential allotment of shares to parties and companie covered in the registermaintained under Section 301 of the Companies Act, 1956.

(xviii) According to the information and explanations given to us, during the periodcovered by our audit report, the Company has issued 5,000 debenture of Rs 10 lakhs each.The Company has created security in respect of 5,000 debentures issued in the current yearand in respect of 2,000 debenture issued in month of March 2010.

(xix) According to the information and explanations given to us, during the yearcovered by our audit report, the Company has not raised any money b public issue.

(xx) 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 th Company has been noticedor reported during the year.