Tata Teleservices (Maharashtra) Ltd

TO THE MEMBERS OF TATATELE SERVICES (MAHARASHTRA) LIMITED

1. We have audited the attached Balance Sheet of TATA TELE SERVICES (MAHARASHTRA)LIMITED ("the Company") as at March 31, 2011, the Profit and Loss Accountand the Cash Flow Statement of the Company for the year ended on that date, both annexedthereto. These financial statements are the responsibility of the Company's Management.Our responsibility is to express an opinion on these financial statements based on ouraudit.

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, 1956.

Re:Tata Teleservices (Maharashtra) Limited

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

(i) Having regard to the nature of the Company's activities, clauses (xiii)and (xiv) ofCARO 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 the fixed assets.

(b) All fixed assets have not been physically verified by the management during theyear but there is a regular program 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) 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 inventory:

(a) As explained to us, the stocks of trading goods were physically verified during theyear by the Management at reasonable intervals.

(b) In our opinion and according to the information and explanation given to us, theprocedures of physical verification of stocks followed by the Management were reasonableand adequate in relation to the size of the Company and the nature of its business.

(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, fromcompanies, firms or other parties listed in the Register maintained under Section 301 ofthe Companies Act, 1956.

(v) In our opinion and according to the information and explanations given to us, thereis an adequate internal control system commensurate with the size of the Company and thenature of its business with regard to purchases of inventory and fixed assets and the saleof goods and services. During the course of our audit, we have not observed any majorweakness 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 Rs.5 lakhs in respect of any party,the transactions have been made at prices which are prima facie reasonable havingregard to the prevailing market prices at the relevant time except in respect of certainpurchases for which comparable quotations are not available and in respect of which we areunable to comment.

(vii) According to the information and explanations given to us, the Company has notaccepted any deposit from the public during the year.

(viii) In our opinion, the internal audit functions carried out during the year by firmof Chartered Accountants appointed by the Management have been commensurate with the sizeof 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 the maintenance of cost records underSection 209(1) (d) of the Companies Act, 1956 in respect of telecommunication activitiesand are of the opinion that prima facie the prescribed accounts and records havebeen made and maintained. We have, however, not made a detailed examination of the recordswith a view to determining whether they are accurate or complete. To the best of ourknowledge and according to the information and explanations given to us, the CentralGovernment has not prescribed the maintenance of cost records for any other product of theCompany, (x) According to the information and explanations given to us in respect ofstatutory dues:

(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, 2011 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, Service Tax, Custom Duty,Excise Duty and Cess which have not been deposited as on March 31, 2011 on account ofdisputes are given below:

(xi) The accumulated losses of the Company at the end of the financial year are morethan fifty percent of its net worth and the Company has not incurred cash losses in thefinancial year and in the immediately 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 banks and financial institutions.

(xiii) In our opinion and according to the information and explanations given to us,the Company has not granted any loans and advances on the basis of security by way ofpledge of shares, 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 loans taken by others frombanks and financial institutions are not prima facie prejudicial to the interestsof 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 were obtained, other thantemporary deployment pending application.

(xvi) In our opinion and according to the information and explanations given to us andon an overall examination of the Balance Sheet, we report that funds raised on short-termbasis have been used during the year for long-term investment to the extent of Rs 2,548.03Crores.

(xvii) According to the information and explanations given to us, the Company has notmade preferential allotment of shares to parties and companies covered in the Registermaintained under Section 301 of the Companies Act, 1956 at a price which is prima facienot prejudicial to the interests of the Company.

(xviii) The Company has not issued any debentures during the year.

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

(xx) To the best of our knowledge and according to the information and explanationsgiven to us, no fraud by the Company and no fraud on the Company has been noticed orreported during the year.