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Auditor Report of Gujarat Pipavav Port Ltd.

Dec 31, 2013

We have audited the accompanying financial statements of Gujarat Pipavav Port Limited ("the Company'') which comprise the balance sheet as at 31 December 2013, the statement of profit and loss and the cash flow statement for the year then ended and a summary of significant accounting policies and other explanatory information.

Management''s responsibility for the financial statements

The management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the recognition and principles laid down in the Companies (Accounting Standards) Rules, 2006 referred to in sub-section (3C) of Section 211 of the Companies Act, 1956 (''the Act'') and other accounting principles generally accepted in India. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor''s responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit includes performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances but not for the purposes of expressing an opinion on the effectiveness of the entity''s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Act in the manner so required and give a true and fair view 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 at 31 December 2013;

(b) in the case of the statement of profit and loss, of the profit of the Company for the year ended on that date; and

(c) in the case of the cash flow statement, of the cash flows of the Company for the year ended on that date Report on other legal and regulatory requirements

1. As required by the Companies (Auditor''s Report) Order, 2003 ("the Order"), as amended, issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

2. As required by Section 227(3) of the Act, we report that:

a. we have obtained all the information and explanations which to the best of our knowledge and belief, were necessary for the purposes of our audit;

b. in our opinion, proper books of accounts as required by law have been kept by the Company so far it appears from our examination of those books;

c. the balance sheet, the statement of profit and loss and the cash flow statement dealt with by this report are in agreement with the books of account;

d. in our opinion, the balance sheet, the statement of profit and loss and the cash flow statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Act; and

e. on the basis of written representations received from the Directors of the Company as at 31 December 2013, and taken on record by the Board of Directors, we report that none of the directors of the Company is disqualified as on 31 December 2013, from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Act.

ANNEXURE TO THE INDEPENDENT AUDITORS'' REPORT - 31 DECEMBER 2013

(Referred to in our report of even date)

1. (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

(b) The Company has a regular programme of physical verification of fixed assets, by which all fixed assets are verified in a phased manner over a period of three years. In our opinion, this periodicity of physical verification is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification.

(c) Fixed assets disposed off during the year were not substantial, and therefore, do not affect the going concern assumption.

2. (a) The inventory of stores and spare parts, fuel and lubricants has been physically verified by management during the year. In our opinion, the frequency of such physical verification is reasonable.

(b) In our opinion, the procedures of physical verification of inventories followed by management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) The Company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book records were not material.

3. The Company has neither granted nor taken any loans, secured or unsecured, to or from companies, firms or other parties covered in the register maintained under Section 301 of the Act.

4. 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 and nature of its business with regard to the purchase of inventories and fixed assets and with regard to the services rendered. The activities of the Company do not involve sale of goods. We have not observed any major weakness in the internal control system during the course of the audit.

5. (a) In our opinion and according to the information and explanations given to us, the particulars of contracts or arrangements referred to in Section 301 of the Act have been entered in the register required to be maintained under that Section.

(b) In our opinion, and according to the information and explanations given to us, the transactions made in pursuance of contracts and arrangements referred to in (a) above and exceeding the value of Rs. 0.5 Million with any party during the year have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

6. The Company has not accepted any deposits from the public.

7. In our opinion, the Company has an internal audit system commensurate with the size and nature of its business.

8. We have broadly reviewed the books of account maintained by the Company pursuant to the rules prescribed by the Central Government for maintenance of cost records under Section 209(1)(d) of the Act and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. However, we have not made a detailed examination of the records.

9. (a) According to the information and explanations given to us and on the basis of our examination of the records of the Company, amounts deducted/accrued in the books of account in respect of undisputed statutory dues of Wealth tax. Customs duty, Income Tax, Service tax. Works Contract tax. Profession tax, Provident Fund and Value added tax and other material statutory dues have been generally regularly deposited during the year by the Company with the appropriate authorities. As explained to us, the Company did not have any dues on account of Employees'' State Insurance, Investor Education and Protection Fund and Excise duty.

According to the information and explanations given to us, no undisputed amounts payable in respect of Wealth tax. Customs duty, Income Tax, Service tax, Works Contract tax, Profession tax, Provident Fund, Value added tax and other material statutory dues were in arrears as at 31 December 2013 for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us, the following dues of Customs duty, Income tax and Service tax have not been deposited by the Company on account of disputes:

Name of the Statute Nature of dues Finan cial Amount in Forum where dispute is pending Year Rs. Million

Income tax Act, 1961 Tax deducted at source 2006-07 6.50 Commissioner of Income Tax appeals

Income tax Act, 1961 Tax deducted at source 2007-08 0.92 Commissioner of Income Tax appeals

Income tax Act, 1961 Tax deducted at source 2008-09 15.05 Commissioner of Income Tax appeals

Income tax Act, 1961 Tax deducted at source 2008-09 0.02 Assessing Officer

Income tax Act, 1961 Tax deducted at source 2009-10 0.03 Assessing Officer

Income tax Act, 1961 Tax deducted at source 2010-11 1.42 Assessing Officer

Income tax Act, 1961 Tax deducted at source 2011-12 2.03 Assessing Officer

Income tax Act, 1961 Tax deducted at source 2011-12 0.04 Commissioner of Income Tax appeals

Income tax Act, 1961 Tax deducted at source 2012-13 0.01 Assessing Officer

Income tax Act, 1961 Tax deducted at source 2013-14 3.88 Assessing Officer

Income tax Act, 1961 Tax deducted at source 2014-15 0.20 Assessing Officer

Custom Act Custom duty 2004-05 5.79 Supreme Court

Finance Act, 1994 Service tax 2009-10 3.61 Assessing Officer

Finance Act, 1994 Service tax 2010-11 0.65 Assessing Officer

10. The Company has accumulated losses at the end of the financial year aggregating Rs. 5,088.19 Million which is not in excess of 50% of its net worth. The Company has not incurred cash losses in the current year or in the immediately preceding financial year.

11. In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to financial institutions. The Company did not have any outstanding debentures or dues from banks during the year.

12. The Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

13. In our opinion and according to the information and explanations given to us, the Company is not a chit fund or a nidhi / mutual benefit fund/ society.

14. According to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debentures and other investments.

15. According to the information and explanations given to us, the Company has provided commitment of Rs. 350 Million towards consortium lending to Pipavav Shipyard Limited conditional to fulfillment of certain obligations by Pipavav Shipyard Limited and other parties. The Company is in the process of seeking discharge from this commitment.

16. In our opinion and according to the information and explanations given to us, the term loans taken by the company have been applied for the purpose for which they were raised.

17. According to the information and explanations given to us, and on an overall examination of the balance sheet of the Company, we are of the opinion that funds raised on short term basis have not been used for long term investment.

18. The Company has not made any preferential allotment of shares to companies/firms/parties covered in the register maintained under Section 301 of the Act.

19. According to the information and explanations given to us, the Company did not have any outstanding debentures during the year.

20. The Company has not raised any money by public issues.

21. According to the information and explanations given to us, no material fraud on or by the Company has been noticed or reported during the course of our audit.

For B S R & Associates LLP

Chartered Accountants

Firm''s Registration No: 116231W

N Sampath Ganesh

Place : Mumbai Partner

Date : 18th February 2014 Membership No: 042554


Dec 31, 2012

1. We have audited the attached Balance Sheet of Gujarat Pipavav Port Limited (''the Company'') as at 31 December 2012 and also the Statement of Profit and Loss and the Cash flow statement for the year ended on that date, annexed thereto. These financial statements are the responsibility of the Company''s management. Our responsibility 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 in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

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

4. Further to our comments above we report that:

a) we have obtained all the information and explanations which to the best of our knowledge 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 the Company so far as appears from our examination of those books;

c) the Balance Sheet, the Statement of Profit and Loss and the Cash flow statement dealt with by this report are in agreement with the books of account;

d) in our opinion, the Balance sheet, the Statement of Profit and Loss and the Cash flow statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Act;

e) on the basis of written representations received from the Directors of the Company as at 31 December 2012, and taken on record by the Board of Directors, we report that none of the directors of the Company is disqualified as on 31 December 2012 from being appointed as a Director in terms of clause (g) of sub-section (1) of Section 274 of the Act; and

f) in our opinion, and to the best of our information and according to the explanations given to us the said accounts, give a true and fair view in conformity with the accounting principles generally accepted in India:

i) in the case of the Balance sheet, of the state of affairs of the Company as at 31 December 2012;

ii) in the case of the Statement of Profit and Loss, of the profit of the Company for the year ended on that date; and

iii) in the case of the Cash flow statement, of the cash flows of the Company for the year ended on that date.

ANNEXURE TO THE AUDITORS'' REPORT - 31 DECEMBER 2012

(Referred to in our report of even date)

1. (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

(b) The Company has a regular programme of physical verification of fixed assets, by which all fixed assets are verified in a phased manner over a period of three years. In our opinion, this periodicity of physical verification is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification.

(c) Fixed assets disposed off during the year were not substantial, and therefore, do not affect the going concern assumption.

2. (a) The inventory of stores and spare parts, fuel and lubricants has been physically verified by management during the year. In our opinion, the frequency of such physical verification is reasonable.

(b) In our opinion, the procedures of physical verification of inventories followed by management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) The Company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book records were not material.

3. The Company has neither granted nor taken any loans, secured or unsecured, to or from companies, firms or other parties covered in the register maintained under Section 301 of the Act.

4. 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 and nature of its business with regard to the purchase of inventories and fixed assets and with regard to the services rendered. The activities of the Company do not involve sale of goods. We have not observed any major weakness in the internal control system during the course of the audit.

5. (a) In our opinion and according to the information and explanations given to us, the particulars of contracts or arrangements referred to in Section 301 of the Act have been entered in the register required to be maintained under that Section.

(b) In our opinion, and according to the information and explanations given to us, the transactions made in pursuance of contracts and arrangements referred to in (a) above and exceeding the value of Rs. 0.5 million with any party during the year have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

6. The Company has not accepted any deposits from the public.

7. In our opinion, the Company has an internal audit system commensurate with the size and nature of its business.

8. We have broadly reviewed the books of account maintained by the Company pursuant to the rules prescribed by the Central Government for maintenance of cost records under Section 209(1 )(d) of the Act and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. However, we have not made a detailed examination of the records.

9. (a) According to the information and explanations given to us and on the basis of our examination of the records of the Company, amounts deducted/accrued in the books of account in respect of undisputed statutory dues including Provident Fund, Value added tax, Wealth tax. Customs duty. Income tax, Service tax and other material statutory dues have been generally regularly deposited during the year by the Company with the appropriate authorities. As explained to us, the Company did not have any dues on account of Employees'' State Insurance, Investor Education and Protection Fund and Excise duty.

According to the information and explanations given to us, no undisputed amounts payable in respect of Provident Fund, Value added tax. Wealth tax, Customs duty, Income tax, Service tax and other material statutory dues were in arrears as at 31 December 2012 for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us, the following dues of Income tax have not been deposited by the Company on account of disputes:

Name of the Nature of dues Asst. Year Statute

Income tax Act Tax deducted at source 2006-07

Income tax Act Tax deducted at source 2007-08

Income tax Act Tax deducted at source 2008-09

Income tax Act Tax deducted at source 2008-09

Income tax Act Tax deducted at source 2009-10

Income tax Act Tax deducted at source 2010-11

Income tax Act Tax deducted at source 2011-12

Income tax Act Tax deducted at source 2011-12 Tax appeals

Name of the Amount Forum where dispute Status in Rs. Million is pending

Income tax Act 6.50 Commissioner of Income Tax appeals

Income tax Act 0.92 Commissioner of Income Tax appeals

Income tax Act 15.05 Commissioner of Income Tax appeals

Income tax Act 0.02 Assessing Officer

Income tax Act 0.34 Assessing Officer

Income tax Act 1.04 Assessing Officer

Income tax Act 3.17 Assessing Officer

Income tax Act 0.04 Commissioner of Income Tax appeals

10. The Company has accumulated losses at the end of the financial year aggregating Rs 7,005.84 million which is not in excess of 50% of its net worth. The Company has not incurred cash losses in the current year or in the immediately preceding financial year.

11. In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to bank or to any financial institutions. The Company did not have any outstanding debentures during the year.

12. The Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

13. In our opinion and according to the information and explanations given to us, the Company is not a chit fund or a nidhi / mutual benefit fund/ society.

14. According to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debentures and other investments.

15. According to the information and explanations given to us, the Company has provided commitment of Rs 350 million towards consortium lending to Pipavav Shipyard Limited conditional to fulfillment of certain obligations by Pipavav Shipyard Limited and other parties. The Company is in the process of seeking discharge from this commitment.

16. In our opinion and according to the information and explanations given to us, the term loans taken by the Company have been applied for the purpose for which they were raised.

17. According to the information and explanations given to us, and on an overall examination of the balance sheet of the Company, we are of the opinion that funds raised on short term basis have not been used for long term investment.

18. The Company has not made any preferential allotment of shares to companies /firms / parties covered in the register maintained under Section 301 of the Act.

19. According to the information and explanations given to us, the Company did not have any outstanding debentures during the year.

20. We have verified the end-use of money raised by public issues as disclosed in Note 28 to the financial statements.

21. According to the information and explanations given to us, no material fraud on or by the Company has been noticed or reported during the course of our audit.

For B S R & Associates

Chartered Accountants

Firm''s Registration No: 116231W

Sanjay Aggarwal

Place: Mumbai Partner

Date : 21st February 2013 Membership No: 40780


Dec 31, 2011

1. We have audited the attached balance sheet of Gujarat Pipavav Port Limited ('the Company') as at 31 December 2011 and also the profit and loss account and the cash flow statement for the year ended on that date, annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility 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 in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

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

4. Further to our comments above we report that:

a) we have obtained all the information and explanations which to the best of our knowledge 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 the Company so far as appears from our examination of those books;

c) the balance sheet, the profit and loss account and the cash flow statement dealt with 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 flow statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Act;

e) on the basis of written representations received from the Directors of the Company as at 31 December 2011, and taken on record by the Board of Directors, we report that none of the directors of the Company is disqualified as on 31 December 2011 from being appointed as a Director in terms of clause (g) of sub-section (1) of Section 274 of the Act; and

f) in our opinion, and to the best of our information and according to the explanations given to us the said accounts, give a true and fair view in conformity with the accounting principles generally accepted in India:

i) in the case of the balance sheet, of the state of affairs of the Company as at 31 December 2011;

ii) in the case of the profit and loss account, of the profit for the year ended on that date; and

iii) in the case of the cash flow statement, of the cash flows for the year ended on that date.

Annexure to the Auditors' Report – 31 December 2011

(Referred to in our report of even date)

1. (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

(b) The Company has a regular programme of physical verification of fixed assets, by which all fixed assets are verified in a phased manner over a period of 3 years. In our opinion, this periodicity of physical verification is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification.

(c) Fixed assets disposed off during the year were not substantial, and therefore, do not affect the going concern assumption.

2. (a) The inventory of stores and spare parts, fuel and lubricants has been physically verified by management during the year. In our opinion, the frequency of such physical verification is reasonable.

(b) In our opinion, the procedures of physical verification of inventories followed by management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) The Company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book records were not material.

3. The Company has neither granted nor taken any loans, secured or unsecured, to or from companies, firms or other parties covered in the register maintained under Section 301 of the Act.

4. 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 and nature of its business with regard to the purchase of inventories and fixed assets and with regard to the services rendered. The activities of the Company do not involve sale of goods. We have not observed any major weakness in the internal control system during the course of the audit.

5. (a) In our opinion and according to the information and explanations given to us, the particulars of contracts or arrangements referred to in section 301 of the Act have been entered in the register required to be maintained under that Section.

(b) In our opinion, and according to the information and explanations given to us, the transactions made in pursuance of contracts and arrangements referred to in (a) above and exceeding the value of INR 0.5 million with any party during the year have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

6. The Company has not accepted any deposits from the public.

7. In our opinion, the Company has an internal audit system commensurate with the size and nature of its business.

8. The Central Government has not prescribed the maintenance of cost records under Section 209(1)(d) of the Act for any of the services rendered by the Company.

9. (a) According to the information and explanations given to us and on the basis of our examination of the records of the Company, amounts deducted/accrued in the books of account in respect of undisputed statutory dues including Income Tax, Provident Fund, Sales-tax, Wealth tax, Service tax, Customs duty and other material statutory dues have been regularly deposited during the year by the Company with the appropriate authorities. As explained to us, the Company did not have any dues on account of Employees' State Insurance, Investor Education and Protection Fund and Excise duty.

According to the information and explanations given to us, no undisputed amounts payable in respect of Provident Fund, Income tax, Sales tax, Wealth tax, Service tax, Customs duty and other material statutory dues were in arrears as at 31 December 2011 for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us, the following dues of Customs duty and Income tax have not been deposited by the Company on account of disputes:

Name of the Nature of dues Financial Year Amount in Forum where

Statute INR million dispute is pending

Customs Act Customs duty 2004-05 5.79 Appellate Tribunal Income tax Act Tax deducted at 2006-07 15.34 Commissioner of Income source Tax appeals

Income tax Act Tax deducted at 2010-11 0.05 Commissioner of Income source Tax appeals

Income tax Act Tax deducted at 2011-12 9.83 Commissioner of Income source Tax appeals

10. The Company has accumulated losses at the end of the financial year aggregating INR 7,745.45 million which is not in excess of 50% of its net worth. The Company has not incurred cash losses in the current year, however, has incurred cash losses in the immediately preceding financial year.

11. In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to banks or to any financial institutions. The Company did not have any outstanding debentures during the year.

12. The Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

13. In our opinion and according to the information and explanations given to us, the Company is not a chit fund or a nidhi / mutual benefit fund/ society.

14. According to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debentures and other investments.

15. According to the information and explanations given to us, the Company has provided commitment of INR 350 million towards consortium lending to Pipavav Shipyard Limited conditional to fulfillment of certain obligations by Pipavav Shipyard Limited and other parties. The Company has sought discharge from this commitment in the previous year which is still in process.

16. No term loans have been taken by the Company during the year. In our opinion and according to the information and explanations given to us, the term loans outstanding as at the year -end have been fully utilised in earlier years for the purpose for which they were raised.

17. According to the information and explanations given to us, and on an overall examination of the balance sheet of the Company, we are of the opinion that funds raised on short term basis have not been used for long term investment.

18. The Company has not made any preferential allotment of shares to companies / firms / parties covered in the register maintained under Section 301 of the Act.

19. According to the information and explanations given to us, the Company did not have any outstanding debentures during the year.

20. We have verified the end-use of money raised by public issues as disclosed in note 3 of Schedule 15 to the financial statements

21. According to the information and explanations given to us, no material fraud on or by the Company has been noticed or reported during the course of our audit.

For B S R & Associates

Chartered Accountants

Firm's Registration No: 116231W

Sanjay Agarwal

Place : Mumbai Partner

Date : 22nd February 2012 Membership No: 40780


Dec 31, 2010

1. We have audited the attached balance sheet of Gujarat Pipavav Port Limited ("the Company") as at 31 December 2010 and also the profit and loss account and the cash flow statement for the year ended on that date, annexed thereto. These financial statements are the responsibility of the Companys management. Our responsibility 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 in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditors Report) Order, 2003 ("the Order"), issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956 ("the Act"), we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4. As more fully explained in note 14of Schedule 15, the Company has applied to the Central Government and is awaiting its approval for the managerial remuneration paid in excess of the ceiling on remuneration prescribed under Schedule XIII of the Companies Act, 1956bylNR. 34.65 million as at 31 December 2070 (including INR. 16.12 million in respect of earlier years) to the managing director.

5. Further to our comments above we report that:

a) we have obtained all the information and explanations which to the best of our knowledge 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 the Company so far as appears from our examination of those books;

c) the balance sheet, the profit and loss account and the cash flow statement dealt with 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 flow statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of section 211 of the Act;

e) on the basis of written representations received from the Directors of the Company as at 31 December 2010, and taken on record by the Board of Directors, we report that none of the directors of the Company is disqualified as on 31 December 2010 from being appointed as a Director in terms of clause (g) of sub-section (1) of Section 274 of the Act; and

f) in our opinion, and to the best of our information and according to the explanations given to us and subject to any adjustments that may be required in respect of the matter stated in paragraph 4 above, the said accounts, give a true and fair view in conformity with the accounting principles generally accepted in India:

i) in the case of the balance sheet, of the state of affairs of the Company as at 31 December 2010;

ii) in the case of the profit and loss account, of the loss for the year ended on that date; and

iii) in the caseof the cash flow statement, of the cash flows for the year ended on that date.

Annexure to the Auditors Report - 31 December 2010

(Referred to in our report of even date)

1. (a) The Company has maintained proper records showing full particulars, including quantitative details and situation

of fixed assets.

(b) The Company has a regular programme of physical verification of fixed assets, by which all fixed assets are verified in a phased manner over a period of 3 years. In our opinion, this periodicity of physical verification is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification.

(c) Fixed assets disposed off during the year were not substantial, and therefore, do not affect the going concern assumption.

2. (a) The inventory of spare stores and spare parts, fuel and lubricants has been physically verified by management

during the year. In our opinion, the frequency of such physical verification is reasonable.

(b) In our opinion, the procedures of physical verification of inventories followed by management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) The Company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book records were not material.

3. (a) The Company has not granted any loans to companies, firms or ther parties covered in the register maintained under section 301 of the Act.

(b) (i) The Company had taken unsecured loans from a company covered in the register maintained under section 301 of the Act. The maximum amount outstanding during the year was INR 507.46 million and the year-end balance of such loan was INR Nil.

(ii) In our opinion, the rate of interest and other terms and conditions on which the loans have been taken from the aforesaid company covered in the register maintained under section 301 of the Act are not prima facie prejudicial to the interest of the Company.

(iii) In the case of loans taken from companies listed in the register maintained under section 301, the Company has been regular in repaying the principal amounts as stipulated and in the payment of interest.

4. 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 and nature of its business with regard to the purchase of inventories and fixed assets and with regard to the services rendered. The activities of the Company do not involve sale of goods. We have not observed any major weakness in the internal control system during the course of the audit.

5. (a) In our opinion and according to the information and explanations given to us, the particulars of contracts or arrangements referred to in section 301 of the Act have been entered in the register required to be maintained under that section.

(b) In our opinion, and according to the information and explanations given to us, the transactions made in pursuance of contracts and arrangements referred to in (a) above and exceeding the value of INR 0.50 million with any party during the year have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

6. The Company has not accepted any deposits from the public.

7. In our opinion, the Company has an internal audit system commensurate with the size and nature of its business.

8. The Central Government has not prescribed the maintenance of cost records under section 209(1 )(d) of the Act for any of the services rendered by the Company.

9. (a) According to the information and explanations given to us and on the basis of our examination of the records of

the Company, amounts deducted/accrued in the books of account in respect of undisputed statutory dues including Income Tax, Provident Fund, Sales-tax, Wealth tax. Service tax, Customs duty and other material statutory dues have been generally regularly deposited during the year by the Company with the appropriate authorities. As explained to us, the Company did not have any dues on account of Employees State Insurance, Investor Education and Protection Fund and Excise duty.

There were no dues on account of Cess under section 441A of the Act since the date from which the aforesaid section comes into force has not yet been notified by the Central Government.

According to the information and explanations given to us, no undisputed amounts payable in respect of Provident Fund, Income tax. Sales tax, Wealth tax. Service tax. Customs duty and other material statutory dues were in arrears as at 31 December 2010 for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us, the following dues of Customs duty have not been deposited by the Company on account of disputes:

Name of the Nature of Financial Year Amount Forum where Statute dues INR in million dispute is pending

Customs duty Matter under dispute 2004-05 5.79 Appellate Tribunal

10. The Company has accumulated losses at the end of the financial year aggregating INR 8,316.45 million which is in excess of 50% of its net worth. The Company has incurred cash loss in the current and preceding financial year.

11. In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to its bankers or to any financial institutions The Company did not have any outstanding debentures during the year.

12. The Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

13. In our opinion and according to the information and explanations given to us, the Company is not a chit fund or a nidhi / mutual benefit fund/ society.

14. According to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debentures and other investments.

15. According to the information and explanations given to us, the Company had provided commitment of INR 350 million towards consortium lending to Pipavav Shipyard Limited conditional to fulfillment of certain obligations by Pipavav Shipyard Limited and other parties. The Company has sought discharge from this commitment in the previous year which is still in process.

16. In our opinion and according to the information and explanations given to us, the term loans taken by the Company have been applied for the purpose for which they were raised.

17. According to the information and explanations given to us, and on an overall examination of the balance sheet of the Company, we are of the opinion that funds raised on short term basis have not been used for long term investment.

18. The Company has not made any preferential allotment of shares to companies/firms/ parties covered in the register maintained under section 301 of the Act.

19. According to the information and explanations given to us, the Company did not have any outstanding debentures during the year.

20. We have verified the end-use of money raised by public issues as disclosed in note 3 of Schedule 15 to the financial statements

21. According to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the course of our audit.

For B S R & Associates

Chartered Accountants Firms Registration No: 116231W

Bhavesh Dhupelia

Mumbai Partner

23 February 2011 Membership No: 042070


Dec 31, 2009

1. We have audited the attached balance sheet of Gujarat Pipavav Port Limited (the Company) as at 31 December 2009 and the profit and loss account and the cash flow statement for the year ended on that date, annexed thereto. These financial statements are the responsibility of the Companys management. Our responsibility 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 in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As more fully explained in note 15 of Schedule 15, the Company has applied to the Central Government and is awaiting its approval for the managerial remuneration paid in excess of the ceiling on remuneration prescribed under Schedule XIII of the Companies Act, 1956 by Rs. 38.49 million to the erstwhile managing director, and Rs. 16.12 million to the current managing director.

4. Further, we report that:

a) we have obtained all the information and explanations which to the best of our knowledge 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 the Company so far as appears from our examination of those books;

c) the balance sheet, the profit and loss account and the cash flow statement dealt with 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 flow statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of section 211 of the Act; and

e) In our opinion and to the best of our information and according to the information and explanations given to us and subject to any adjustments that may be required in respect of matters stated in paragraphs 3 above, the said accounts, give a true and fair view in conformity with the accounting principles generally accepted in India:

i) in the case of the Balance Sheet, of the state of affairs of the Company as at 31 December 2009;

ii) in the case of the Profit and Loss Account, of the loss for the year ended on that date; and

iii) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

Annexure to the Auditors Report - 31 December 2009 (Referred to in our report of even date)

1. (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of

fixed assets.

(b) The Company has a regular programme of physical verification of fixed assets, by which all fixed assets are verified in a phased manner over a period of 2 years. In our opinion, this periodicity of physical verification is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification.

(c) Fixed assets disposed off during the year were not substantial, and therefore, do not affect the going concern assumption.

2. (a) The inventory of the stores and spare parts and fuel and lubricants has been physically verified by management

during the year. In our opinion, the frequency of such physical verification is reasonable.

(b) In our opinion, the procedures of physical verification of inventories followed by management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) The Company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book records were not material.

3. (a) The Company has not granted any loans to companies, firms or other parties covered in the register maintained under section 301 of the Act.

(b) (i) The Company had taken unsecured loans from a Company covered in the register maintained under section 301 of the Act. The maximum amount outstanding during the year was Rs. 880 million and the year-end balance of such loan was Rs. Nil.

(ii) In our opinion, the rate of interest and other terms and conditions on which the loans have been taken from the aforesaid Company covered in the register maintained under section 301 of the Act are not prima facie prejudicial to the interest of the Company.

(iii) In the case of loans taken from companies listed in the register maintained under section 301, the Company has been regular in repaying the principal amounts as stipulated and in the payment of interest.

4. 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 and nature of its business with regard to the purchase of inventories and fixed assets and with regard to the services rendered. We have not observed any major weakness in the internal control system during the course of the audit.

5. (a) In our opinion and according to the information and explanations given to us, the particulars of contracts or arrangements referred to in section 301 of the Act have been entered in the register required to be maintained under that section.

(b) In our opinion, and according to the information and explanations given to us, the transactions made in pursuance of contracts and arrangements referred to in (a) above and exceeding the value of Rs. 0.5 million with any party during the year have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

6. The Company has not accepted any deposits from the public.

7. In our opinion, the Company has an internal audit system commensurate with the size and nature of its business.

8. The Central Government has not prescribed the maintenance of cost records under section 209(1 )(d) of the Act for any of the services rendered by the Company.

9. (a) According to the information and explanations given to us and on the basis of our examination of the records of the Company, amounts deducted/accrued in the books of account in respect of undisputed statutory dues including Income Tax, Provident Fund, Sales-tax, Wealth tax, Service tax, Customs duty, Cess and other material statutory dues have been generally regularly deposited during the year by the Company with the appropriate authorities. As explained to us, the Company did not have any dues on account of Employees State Insurance, Investor Education and Protection Fund and Excise duty.

There were no dues on account of Cess under section 441A of the Act since the date from which the aforesaid section comes into force has not yet been notified by the Central Government.

According to the information and explanations given to us, no undisputed amounts payable in respect of Provident Fund, Income tax, Sales tax, Wealth tax, Service tax, Customs duty, Cess and other material statutory dues were in arrears as at 31 December 2009 for a period of more than six months from the date they became payable

(b) According to the information and explanations given to us, the following dues have not been deposited by the Company on account of disputes:

Name of Nature of dues Financial Year Amount Rs. Forum where dispute is the Statute in million pending

Income Matter under 2006-07 and 21.40 CIT-Appeals Tax dispute 2007-08 ( First Appellate)

Customs Matter under 2004-05 5.79 Appellate dispute Tribunal

10. The Company has accumulated losses at the end of the financial year aggregating Rs. 7,769.23 million which is in excess of 50% of its net worth. The Company has incurred cash losses in the current and preceding financial year.

11. In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to its bankers or to any financial institutions The Company did not have any outstanding debentures during the year.

12. The Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

13. In our opinion and according to the information and explanations given to us, the Company is not a chit fund or a nidhi / mutual benefit fund/ society.

14. According to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debentures and other investments.

15. According to the information and explanations given to us, the Company has provided commitment of Rs.350 million towards consortium lending to Pipavav Shipyard Limited conditional to fulfillment of certain obligations by Pipavav Shipyard Limited and other parties. However, the Company has sought discharge from this commitment in the previous year which is still awaited.

16. In our opinion and according to the information and explanations given to us, the term loans taken by the Company have been applied for the purpose for which they were raised.

17. According to the information and explanations given to us, and on an overall examination of the balance sheet of the Company, we are of the opinion that funds raised on short term basis have not been used for long term investment.

18. The Company has not made any preferential allotment of shares to companies / firms / parties covered in the register maintained under section 301 of the Act.

19. According to the information and explanations given to us, the Company did not have any outstanding debentures during the year.

20. The Company has not raised any money by public issues.

21. According to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the course of our audit.

For B S R & Associates

Chartered Accountants

Bhavesh Dhupelia

Mumbai Partner

Date: 3rd March 2010 Membership No: 042070


Dec 31, 2008

We have audited the attached Balance Sheet of Gujarat Pipavav Port Limited (the Company) as at 31 December 2008, the Profit and Loss Account and the Cash Flow Statement for year ended on that date, annexed thereto. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted In India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

1. As required by the Companies (Auditors Report) Order, 2003 (the Order) issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956 (the Act), we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

2. As more fully explained in note 17 to Schedule 14, at 31 December 2008 the Company has paid managerial remuneration in excess of ceiling on remuneration prescribed under Schedule XIII of the Act by Rs 32.96 million (2007:Rs 9.41 million). The Company has applied to the Central Government for approval of the same.

3. Further to our comments in the Annexure referred to in paragraph 1 above, we report that:

(a) we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of the audit;

(b) in our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books;

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

(d) in our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Act;

(e) on the basis of written representations received from the directors of the Company as at 31 December 2008 and taken on record by the Board of Directors, we report that none of the directors is disqualified as at 31 December 2008 from being appointed as director in terms of clause (g) of sub-section (1) of Section 274 of the Act; and

(f) in our opinion and to the best of our information and according to the explanations given to us, subject to the matter referred to in paragraph 2 above the said financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:


(ii) in the case ofthe Profit and Loss Account, ofthe loss for the year ended on that date; and

(iii) in the case ofthe Cash Flow Statement, ofthe cash flows for the year ended on that date.

Annexure to the Auditors Report 31 December 2008 Referred to in our report of even date

1. (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

(b) The Company has a regular programme of physical verification of fixed assets, by which all fixed assets are verified in a phased manner over a period of 2 years. In our opinion, this periodicity of physical verification Is reasonable having regard to the size ~f the Company and the nature of its assets. No material discrepancies were noticed on such verification.

(c) Fixed assets disposed off duriny the year were not substantial, and therefore, do not affect the going concern assumption.

2. (a) The inventory of the stores and spare parts and fuel and lubricants has b^en physically verified by management during the year. In our opinion, the frequency of sucl. physical verification is reasonable.

(b) In our opinion, the procedures of physical verification of inventories followed by management are reasonable and adequate id relation to the size of the Company and the nature of its business.

(c) The Company is maintaining proper records of Inventory. The discrepancies noticed on verification between the physical stocks and the book records were not material.

3. (a) The Company has not granted any loans to companies, firms or other parties covered in the register maintained under Section 301 of the Act.

(b) (i) The Company has taken unsecured loans from a company covered, in the register maintained under Section 301 of the Act. The maximum amount outstanding during the year was Rs 500 million and the year-end balance of such loans was Rs 500 million.

(ii) In our opinion, the rate of Interest and other terms and conditions o: which the loans have been taken from the aforesaid company covered in the register mai italned under Section 301 of the Act are not, prima facie prejudicial to the interest of the Co ipany.

(iii) In the case of loans taken from companies listed in the register ma; itair ed under Section 301, the Company has been regular in repaying the principal amoui s at stipulated and in the payment of interest.

4. In our opinion and according to the information and explanations given to us, there is an idequate internal control system commensurate with the size of the Company and nature of its business with regard to the purchase of inventories and fixed assets and with regard to the services rendered. We have not observed any major weakness in the internal control system during the course of the audit.

5. (a) In our opinion and according to the Information and explanations given to us, the particulars of contracts or arrangements referred to In Section 301 of the Act have been entered in the register required to be maintained under that section.

(b) In our opinion, and according to the information and explanations given to us, the transactions made in pursuance of contracts and arrangements referred to in (a) above and exceeding the value of Rs 0.5 million with any party during the year have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

6. The Company has not accepted any deposits from the public.

7. In our opinion, the Company has an internal audit system commensurate with the size and nature of its business.

8. The Central Government has not prescribed the maintenance of cost records under Section 209(l)(d) of the Act for any of the services rendered by the Company.

9. (a) According to the information and explanations given to us and on the basis of our examination of the records of the Company, amounts deducted/accrued in the books of account in respect of undisputed statutory dues including Income Tax, Provident Fund, Sales-tax, Wealth tax. Service tax, Customs duty, Cess and other material statutory dues have been generally regularly deposited during the year by the Company with the appropriate authorities. As explained to us, the Company did not have any dues on account of Employees State Insurance, Investor Education and Protection Fund and Excise duty.

There were no dues on account of Cess under Section 441A of the Act since the date from which the aforesaid section comes into force has not yet been notified by the Central Government.

According to the information and explanations given to us, no undisputed amounts payable in respect of Provident Fund, Income tax, Sales tax, Wealth tax, Service tax, Customs duty. Cess and other material statutory dues were in arrears as at 31 December 2008 for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us, there are no dues of Income tax, Sales tax, Wealth tax. Service tax, Customs duty and Cess which have not been deposited with the appropriate authorities on account of any dispute.

10. The Company has accumulated losses at the end of the financial year which is in excess of fifty per cent of Its net worth. The Company has incurred cash losses In the current financial year and in the immediately preceding previous year.

11. According to the information and explanations given to us, the dues to financial institutions have been either repaid / rescheduled by the respective banks / financial institutions as at 31 December 2008, pursuant to the Corporate Debt Restructuring Scheme. Accordingly, the Company has not been considered in default of repayment of dues to banks / financial institut >ns.

12. The Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

13. In our opinion and according to the information and explanations given to us, the Company is not a chit fund ora nidhi/mutual benefit fund/society.

14. According to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debentures and other investments.

15. According to the information and explanations given to us, the Company has provided commitment of Rs. 350 million towards consortium lending to Pipavav Shipyard Limited conditional to fulfillment of certain obligations by Pipavav Shipyard Limited and other parties. However, the Company has sought discharge from this commitment in the previous period which is still awaited.

16. in our opinion and according to the information and explanations given to us, the term loans taken by the Company have been applied for the purpose for which they were raised.

According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, we are of the opinion that the funds raised on short-term basis have not been used for long- term investment.

The Company has not made any preferential allotment of shares to companies / firms / parties covered in the register maintained under Section 301 of the Act.

19. According to the information and explanations given to us, the Company did not have any outstanding debentures during the year.

20. The Company has not raised any money by public issues.

21. According to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the course of our audit.

For BSR& Associates Chartered Accountants

Bhavesh Dhupelia

Mumbai Partner

Date: 26 February 2009 Membership No: 042070


Dec 31, 2007

We have audited the attached Balance Sheet of Gujarat Pipavav Port Limited (the Company) as at 31 December 2007, the Profit and Loss Account and the Cash Flow Statement for year ended on that date, annexed thereto. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

1. As required by the Companies (Auditors Report) Order, 2003 (the Order1) issued by the Central Government of India intermsofsub-section(4A)ofsection227oftheCompaniesAct, 1956 ftheAct), we enclose in the Annexure, a statement on the matters specified in paragraphs 4 and 5 of the said Order.

2. As more fully explained in Schedule 15 note 17, at 31 December 2007 the Company has paid managerial remuneration in excess of ceiling on remuneration prescribed under Schedule XIII of the Act by Rs9.41 million. The Company has applied to the Central Government for approval of the same.

3. Further to our comments in the Annexure referred to in paragraph 1 above, we report that:

(a) We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of the audit;

(b) Inouropinion.properbooksofaccountasrequiredbylawhavebeenkeptbythe Company so far as appears from our examination of those books;

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

(d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by th is report comply with the Accounting Standards referred to in sub-section (3C) of section 211 of the Act;

(e) On the basis of written representations received from the directors of the Company as at 31 December 2007 and taken on record by the Board of Directors, we report that none of the directors is disqualified as at 31 December 2007 from being appointed as director in terms of clause (g) of sub-section (1) of Section 274 of the Act; and

(f) In our opinion and to the best of our information and according to the explanations given to us, subject to the effect of the matter referred to in paragraph 2 a bove the said financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(i) In the case of the Balance Sheet, of the state of affairs of the Company as at 31 December 2007;

(ii) In the case of the Profit and Loss Account, of the loss for the year ended on that date; and

(iii) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

Annexure to the Auditors Report 31 December 2007 Referred to in our report of even date

1. (a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets.

(b) The Company has a regular programme of physical verification of fixed assets, which in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification.

(c) Fixed assets disposed off during the year were not substantial, and therefore, do not affect the going concern assumption.

2. (a) The inventory ofthe stores and spare parts and fuel and lubricants has been physically verified by

management during the year. In our opinion, the frequency of such physical verification is reasonable.

(b) In our opinion, the procedures of physical verification of inventories followed by management are reasonable and adequate in relation to the size ofthe Company and the nature of its business.

(c) The Company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book records were not material.

3.The Company hasneithergranted norta kenanyloans,securedorunsecured,toorfrom companies,firms or other parties covered in the register maintained under section 301 ofthe Companies Act, 1956.

4. 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 and nature of its business with regard to the purchase of inventories and fixed assets and with regard to the services rendered. In our opinion and according to the information and explanations given to us, there is no continuing failure to correct major weaknesses in internal control system.

5. (a) In our opinion and according to the information and explanations given to us, the particulars of contracts

or arrangements referred to in section 301 ofthe Act have been entered in the register required to be maintained under that section.

(b) In ouropinion, and according to the information and explanations given to us, the transactions made inpursuance of contracts and arrangements referred to in (a) above and exceeding the value of Rs 5 lakh with any party during the year have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

6. The Company has not accepted any deposits from the public.

7. In ouropinion, the Company has an internal audit system commensurate with the size andnature of its business.

8. The Central Government has not prescribed the maintenance of cost records under section 209(1)(d)of the Act for any of the services rendered by the Company.

9 (a) According to the information and explanations given to us and on the basis of our examination of the records

ofthe Company, amounts deducted/accrued in the books of account in respect of undisputed statutory dues including Income Tax, Provident Fund. Employees State Insurance, Sales-tax, Wealth tax, Service tax, Customs duty and other material statutory dues have been regularly deposited during the period by the Company with the appropriate authorities. As explained to us, the Company did not have any dues on account of Investor Education and Protection Fund and Excise duty.

There were no dues on account of Cess under section 441A of the Act since the date from which t heaforesaid section comes into force has not vet been notified bv the Central Government.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of Provident Fund, Employees State Insurance, Income tax, Sales taxrWealth tax, Service tax, Customs duty, Cess and other material statutory dues were in arrears as at 31 December 2007 for a period of more than six months from the date they became payable.

(c) According to the information and explanations given to us, there are no dues of Income tax, Sales tax , Wealth tax, Service tax, Customs duty and Cess which have not been deposited with the appropriate authorities on account of any dispute.

10. The Company has accumulated losses at the end of the financial year which is in excess of fifty per cent of its net worth. The Company has incurred cash losses in the current financial year and in the immediately preceding previous year.

11. According to the information and explanations given to us, the dues to financial institutions have been either repaid / rescheduled by the respective banks /financial institutions / debenture holders at 31 December 2007, pursuant to the Corporate Debt Restructuring Scheme. Accordingly, the Company has not been considered in default of repayment of dues to banks / financial institutions / debenture holders.

12. The Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

13. In our opinion and according to the information and explanations given to us, the Company is not a chit fund or a nidhi / mutual benefit fund/ society.

14. According to the information and explanations given to us, the Company is not dealing ortrading in shares, securities, debentures and other investments.

15. According to the information and explanations given to us, the Company has provided commitment of Rs. 350 million towards consortium lending to Pipavav Ship Dismantling and Engineering Limited conditional to fulfillment of certain obligations by Pipavav Ship Dismantling and Engineering Limited and other parties. However, the Company has sought discharge from this commitment in the previous period which is still awaited.

16. In our opinion and according to the information and explanations given to us, the term loans taken by the company have been applied for the purpose for which they were raised.

17. According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, there were no short term funds raised during the current financial year.

18. The Company has not made any preferential allotment of shares to companies/firms/parties covered in the register maintained under Section 301 of the Act.

19. According to the information and explanations given to us, the Company had not issued any Secured Debentures during the year.

20. The Company has not raised any money by public issues.

21. According to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the course of our audit.

For BSR & Associates

Chartered Accountants

Bhavesh Dhupelia

Mumbai Partner

17th March 2008 Membership No: 042070

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