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Auditor Report of Kirloskar Brothers Ltd.

Mar 31, 2017

TO THE MEMBERS OF KIRLOSKAR BROTHERS LIMITED

Report on the Standalone Financial Statements

We have audited the accompanying standalone Ind AS financial statements of Kirloskar Brothers Limited (“the Company”), which comprise the Balance Sheet as at 31st March 2017, the Statement of Profit and Loss (including Other Comprehensive Income), the Cash Flow Statement and the Statement of Changes in Equity for the year then ended and a summary of the significant accounting policies and other explanatory information.

Management''s Responsibility for the Standalone Ind AS Financial Statements

The Company''s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (“the Act”) with respect to the preparation of these standalone Ind AS financial statements that give a true and fair view of the financial position, financial performance, cash flows and changes in equity of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) specified under Section 133 of the Act, read with the Companies (Accounts) Rules, 2014 and amendments thereof.

This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone Ind AS financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these standalone Ind AS financial statements based on our audit. We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under. We conducted our audit of the standalone Ind AS financial statements in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the standalone Ind AS financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the standalone Ind AS financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the standalone Ind AS financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company''s preparation of the standalone Ind AS financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company''s Directors, as well as evaluating the overall presentation of the standalone Ind AS financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone Ind AS financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone Ind AS 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 including the Ind AS, of the state of affairs (financial position) of the Company as at 31st March 2017, and its profit (financial performance including other comprehensive income), its cash flows and the changes in equity for the year ended on that date.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2016 (“the Order”), issued by the Central Government of India in terms of sub-section (11) of Section 143 of the Companies Act, 2013, we give in the “Annexure A'', a statement on the matters specified in paragraphs 3 and 4 of the Order.

2. As required by Section 143 (3) of the Act, we report that:

(a) We have sought and 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 it appears from our examination of those books.

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

(d) In our opinion, the aforesaid standalone Ind AS financial statements comply with the Indian Accounting Standards specified under Section 133 of the Act, read with the Companies (Accounts) Rules, 2014 and amendments thereof.

(e) On the basis of the written representations received from the directors as on 31st March 2017 taken on record by the Board of Directors, none of the directors is disqualified as on 31st March 2017 from being appointed as a director in terms of Section 164 (2) of the Act.

(f) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in “Annexure B”.

(g) With respect to the other matters to be included in the Auditor''s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed pending litigations and the impact on its financial position - refer note 24 to the standalone Ind AS financial statements.

ii. The Company has made provision, as required under the applicable law or Indian accounting standards, for material foreseeable loses on long term contracts - refer note 34 to the standalone Ind AS financial statements.

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

iv. The Company has provided the disclosure regarding Specified Bank Notes (SBN) in Note 40 to the standalone Ind AS financial statements as per notification no. G.S.R. 308(E), dated 30th March

2017 issued by the Ministry of Corporate Affairs and these are in accordance with the books of account maintained by the Company.

Annexure A to the Independent Auditors'' Report

Referred to in paragraph 1 under the heading, “Report on Other Legal and Regulatory Requirements” of our report on even date:

(i) (a) The Company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets.

(b) The fixed assets are being physically verified by the management at regular intervals based on the programme of verification which in our opinion is reasonable. During the current year, no physical verification of assets was undertaken.

(c) According to the information and explanation provided to us, the title deeds of immovable properties are held in the name of the Company.

(ii) Physical verification of inventory has been conducted by the management during the current year. In our opinion, the interval of such verification is reasonable. Discrepancies noticed on physical verification were not material and the same have been properly dealt with in the books of account.

(iii) The Company has not granted any loans, secured or unsecured to companies, firms, limited liability partnerships or other parties covered in the register maintained under Section 189 of the Companies Act, 2013, except to a subsidiary company is earlier years and an associate in the current year as mentioned below.

Name of Party

Opening balance (T) Min

Year End balance (Rs.) Min

Maximum balance (Rs.) Min

The Kolhapur Steel Limited (TKSL) -subsidiary company

13.210

13.210

13.210

KBL Synerge LLP - associate

Nil

1.500

1.500

a) According to the information and explanations provided to us, the unsecured loan given to TKSL in earlier years was under an Order from Board for Industrial and Financial Reconstruction (BIFR), without any specific terms including charge of interest or repayment. Therefore, in our opinion the loan cannot be treated as prejudicial to the Company''s interest. Further, in our opinion, the terms of the loan given to the associate are not prejudicial to the Company''s interest;

b) According to the information and explanations provided to us, there is no schedule for repayment of principal and payment of interest that had been stipulated for the unsecured loan given to TKSL and therefore we are not able to comment on the regularity of the repayments or receipts. The schedule for repayment of principal and payment of interest has been stipulated for the loan to the associate and the repayments is as per said schedule:

c) According to the information and explanations provided to us, no amount is overdue.

(iv) According to information and explanation provided to us, for the transaction covered under the sections 185 and section 186 of the Companies Act, 2013, the Company has complied with the provisions of the said sections.

(v) According to information and explanation provided to us, the Company has not accepted deposits, hence the directives issued by the Reserve Bank of India and the provisions of Sections 73 to 76 or any other relevant provisions of the Companies Act and the rules framed there under, are not applicable to it. According to information and explanation provided to us, no order has been passed by Company Law Board or National Company LawTribunal or Reserve Bank of India or any court or any other tribunal in the current year.

(vi) We have broadly reviewed the books of account relating to materials, labour and other items of cost maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under sub-section (I) of Section 148 of the Companies Act, 2013 and we are of the opinion that, prima facie; the prescribed accounts and records have been made and maintained. We have not however made a detailed examination of records with a view to determine whether they are accurate and complete.

(vii) (a) The Company is generally regular in depositing undisputed statutory dues including provident fund, employees'' state insurance, income-tax, sales-tax, service tax, duty of customs, duty of excise, value added tax, cess and any other statutory dues with the appropriate authorities. According to the information and explanation provided to us, no undisputed amounts payable in respect of statutory dues were in arrears as at 31st March 2017, for a period of more than six months from the date they became payable.

(b) According to the information and explanation provided to us, there are no dues of income tax, sales tax, service tax, duty of customs, duty of excise, value added tax or cess which have not been deposited because of any dispute except the following:

Name of Statute

Nature of Dues

Amount in Mil. Rs.

Period to which amount relates

Forum where dispute is pending

Sales Tax Act of various States

Sales tax

30.986

2002-03, 2013-14

Appellate Tribunal

14.155

1989-2006

High Court

90.879

1993-94, 2000-01, 2008-09, 2011-12, 2012-13, 2013-14 ,2014-15, 2015-16

Commissioner

11.000

2000-01,2010-11,2011-12, 2012-13, 2014-15

Deputy Commissioner (Appeals)

Central Sales Tax Act, 1956

Central Sales Tax

0.310

1993-94

High Court

2.586

2011-12

Assistant Commissioner (Appeals)

3.634

2012-13

Assistant Commissioner

Finance Act,1994

Service Tax

7.521

2011-12

Appellate Tribunal

898.656

2012-13

Commissioner

Central Excise

Excise

23.951

2003-04 and 2006-10

CESTAT

Act, 1944

duty

0.808

2008-09, 2014-15

Assistant Commissioner

0.144

1990-91

Deputy Commissioner

Income Tax

Act,1961

Income Tax

10.316

2003-04

High Court

20.565

2001-2002

Appellate Tribunal

98.865

08-09 ,09-10, 10-11

Commissioner

(viii) Based on our audit procedures and according to the information and explanation provided to us, the Company has not defaulted in repayment of dues to a financial institution, bank or government. The Company does not have any debenture holders.

(ix) According to information and explanation provided to us, the Company has not raised moneys by way of initial public offer or further public offer (including debt instruments). According to the information and explanations provided to us, term loans availed by the Company were, prima facie; applied for the purpose for which the loans were obtained.

(x) Based upon the audit procedures performed by us and according to the information and explanations provided to us, no fraud by the Company or any fraud on the Company by its officers or employees has been noticed or reported to us during the year.

(xi) According to the information and explanation provided to us, the managerial remuneration has been paid and provided in accordance with the requisite approvals mandated by the provisions of Section 197 read with Schedule V to the Companies Act.

(xii) he Company is not a Nidhi Company and accordingly, Clause (xii) of the Order is not applicable to the Company.

(xiii) According to the information and explanation provided to us, all transactions with the related parties are in compliance with Sections 177 and 188 of Companies Act, 2013 wherever applicable and the details have been disclosed in the standalone Ind AS financial statements as required by the applicable Indian Accounting Standards.

(xiv) According to the information and explanation provided to us, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year under review.

(xv) According to the information and explanation provided to us, the Company has not entered into any non-cash transactions with directors or persons connected with him.

(xvi) According to the information and explanation provided to us, the Company is not required to be registered under Section 45-IA of the Reserve Bank of India Act, 1934.

Annexure B to the Independent Auditors'' Report

Referred to in paragraph 2 (f) under the heading, “Report on Other legal and Regulatory Requirements” of our report on even date:

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (“the Act”)

We have audited the internal financial controls over financial reporting of Kirloskar Brothers Limited (“the Company”) as of 31st March 2017 in conjunction with our audit of the standalone Ind AS financial statements of the Company for the year ended on that date.

Management''s Responsibility for Internal Financial Controls

The Company''s management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India. These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to company''s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013.

Auditors'' Responsibility

Our responsibility is to express an opinion on the Company''s internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the “Guidance Note”) and the Standards on Auditing, to the extent applicable to an audit of internal financial controls, both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the standalone financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company''s internal financial controls system over financial reporting.

Meaning of Internal Financial Controls Over Financial Reporting

A Company''s internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of standalone financial statements for external purposes in accordance with generally accepted accounting principles. A Company''s internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of standalone financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company''s assets that could have a material effect on the standalone financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting

Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at 31st March 2017, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India..

For M/s RG.BHAGWAT

Chartered Accountants

Firm''s Registration No.: 101118W

Abhijeet Bhagwat

Partner

Membership No. 136835

Pune: 17th May 2017


Mar 31, 2016

We have audited the accompanying standalone financial statements of Kirloskar Brothers Limited
("the Company"), which comprise the Balance Sheet as at 31st March, 2016, the Statement of Profit
and Loss, the Cash Flow Statement for the year then ended, and a summary of the significant
accounting policies and other explanatory information.

Management''s Responsibility for the Standalone Financial Statements

The Company''s Board of Directors is responsible for the matters stated in Section 134(5) of the
Companies Act, 2013 ("the Act") with respect to the preparation of these standalone 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 accounting principles generally accepted in India,
including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the
Companies(Accounts) Rules, 2014. This responsibility also includes maintenance of adequate
accounting records in accordance with the provisions of the Act for safeguarding of the assets of
the Company and for preventing and detecting frauds and other irregularities; selection and
application of appropriate accounting policies; making judgments and estimates that are reasonable
and prudent; and design, implementation and maintenance of adequate internal financial controls,
that were operating effectively for ensuring the accuracy and completeness of the accounting
records, relevant to the preparation and presentation of the standalone financial statements that
give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditors'' Responsibility

Our responsibility is to express an opinion on these standalone financial statements based on our
audit. We have taken into account the provisions of the Act, the accounting and auditing standards
and matters which are required to be included in the audit report under the provisions of the Act
and the Rules made there under. We conducted our audit in accordance with the Standards on Auditing
specified under Section 143(10)of the Act. Those Standards require that we comply with ethical
requirements and plan and perform the audit to obtain reasonable assurance about whether the
standalone financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the
disclosures in the standalone financial statements. The procedures selected depend on the
auditor''s judgment, including the assessment of the risks of material misstatement of the
standalone financial statements, whether due to fraud or error. In making those risk assessments,
the auditor considers internal financial control relevant to the Company''s preparation of the
standalone financial statements that give a true and fair view in order to design audit procedures
that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of
the accounting policies used and the reasonableness of the accounting estimates made by the
Company''s Directors, as well as evaluating the overall presentation of the standalone financial
statements.

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

Opinion

In our opinion and to the best of our information and according to the explanations given to us,
the aforesaid standalone 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, of the state of affairs of the Company as at 31st March, 2016 and its
profit and its cash flows for the year ended on that date.


Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2016 ("the Order"), issued by the
Central Government of India in terms of sub-section (11) of section 143 of the Companies Act, 2013,
we give in the "Annexure A", a statement on the matters specified in paragraphs 3 and 4 of the
Order, to the extent applicable.

2. As required by Section 143 (3) of the Act, we report that:

(a) We have sought and 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 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 aforesaid standalone financial statements comply with the Accounting
Standards specified under Section 133 of the Act, read with Rule 7 of the Companies(Accounts)
Rules, 2014.

(e) On the basis of the written representations received from the directors as on 31st March, 2016
taken on record by the Board of Directors, none of the directors is disqualified as on 31st March,
2016 from being appointed as a director in terms of Section 164 (2) of the Act.

(f) With respect to the adequacy of the internal financial controls over financial reporting of the
Company and the operating effectiveness of such controls, refer to our separate Report in ''Annexure
B".

(g) With respect to the other matters to be included in the Auditor''s Report in accordance with
Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our
information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financial position in its
standalone financial statements - refer note part C-1 to the standalone financial statements.

ii. The Company has made provision, as required under the applicable law or accounting standards,
for material foreseeable losses on long term contracts - refer note part C - 21 to the standalone
financial statements. The Company did not have any derivative contracts.

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor
Education and Protection Fund by the Company.


Referred to in paragraph 1 under the heading, "Report on Other Legal and Regulatory Requirements"
of our report on even date:

(i) (a) The Company is maintaining proper records showing full particulars, including quantitative
details and situation of fixed assets.

(b) The fixed assets are being physically verified by the management at regular intervals based on
the programme of verification which in our opinion is reasonable. All the major fixed assets have
been verified by the management in the current year. Discrepancies noticed on such physical
verification were not material and the same have been properly dealt with in the books of account.

(c) According to information and explanation provided to us and based on audit procedures conducted
by us, the title deeds of immovable properties are held in the name of the company.

(ii) Physical verification of inventory has been conducted by the management during the current
year. In our opinion, the interval of such verification is reasonable. Discrepancies noticed on
physical verification were not material and the same have been properly dealt with in the books of
account.

(iii) The company has not granted any loans, secured or unsecured to companies, firms, Limited
Liability Partnerships or other parties covered in the register maintained under section 189 of the
Companies Act, 2013 in the current year except an unsecured short term loan to its subsidiary
company.

Name of Party Opening balance (Rs,) Year End
balance (Rs,) Maximum
balance (Rs,)

The Kolhapur
Steel Limited
CTKSL) - 13,214,020/- 13,214,020/- 13,214,020/-

subsidiary
company

Kirloskar
Corrocoat
Private
Limited- Nil Nil 14,000,000/-

subsidiary company

(a) According to the information and explanations provided to us, the unsecured loan given to TKSL
in earlier years was under an Order from Board for Industrial and Financial Reconstruction (BIFR),
without any specific terms including charge of interest or repayment. Therefore in our opinion the
loan cannot be treated as prejudicial to the Company''s interest;

(b) According to the information and explanations provided to us, there is no schedule of repayment
of principal and payment of interest that had been stipulated for the unsecured loan given to TKSL
and therefore we are not able to comment on the regularity of the repayments or receipts;

(c) According to the information and explanations provided to us, no amount is overdue.

(iv) According to the information and explanations provided to us, in respect of loans,
investments, guarantees, and security; provisions of section 185 and 186 of the Companies Act, 2013
have been complied with.

(v) According to information and explanation provided to us, the Company has not accepted deposits,
hence the directives issued by the Reserve Bank of India and the provisions of sections 73 to 76 or
any other relevant provisions of the Companies Act and the rules framed there under, are not
applicable to it. According to information and explanation provided to us, no order has been passed
by Company Law Board or National Company Law Tribunal or Reserve Bank of India or any court or any
other tribunal.


vi) We have broadly reviewed the books of account relating to materials, labour and other items of
cost maintained by the Company pursuant to the rules made by the Central Government for the
maintenance of cost records under sub-section (I) of section 148 of the Companies Act, 2013 and we
are of the opinion that prima facie the prescribed accounts and records have been made and
maintained. We have not however made a detailed examination of records with aview to determine
whether they are accurate and complete.

(vii) (a) The Company is generally regular in depositing undisputed statutory dues including
provident fund, employees'' state insurance, income-tax, sales-tax, service tax, duty of customs,
duty of excise, value added tax, cess and any other statutory dues with the appropriate
authorities. According to the information and explanation provided to us, no undisputed amounts
payable in respect of statutory dues were in arrears as at 31st March, 2016, for a period more than
six months from the date they became payable.

(b) According to the information and explanation provided to us, there are no dues of income tax,
sales tax, service tax, duty of customs, duty of excise, value added tax or cess which have not
been deposited on account of any dispute except the ones mentioned below:

Name of Statute Nature of Amount Period to
which amount
relates Forum where
dispute is
Dues (Rs,) pending

Sales Tax
Act of Sales tax 30,986,087 2002-03,
2013-14 Appellate
Tribunal
various
States 17,455,168 1989-2006 High Court

110,971,854 1993-94,
2000-01,
2008-09,
2011- Commissioner
12,2012-13,
2013-14,
2014-15,
2015-16

1,085,666 2005-06,
2009-10 Assistant
Commissioner

9,920,464 2000-01,
2010-11,
2011-12,
2012- Deputy
Commissioner
13,2014-15 (Appeals)

Central
Sales Tax Central 411,716 1993-94 High Court
Act, 1956 Sales Tax 4,554,619 2011-12 Assistant
Commissioner
(Appeals)

4,275,653 2012-13 Assistant
Commissioner

Finance
Act, 1994 Service
Tax 75,103,186 2011-12 Appellate
Tribunal

898,655,774 2012-13 Commissioner

Central
Excise Excise 24,150,737 2003-04
and 2006-10 CESTAT
Act, 1944 duty 1,125,847 2005-06 Appellate
Tribunal

503,201 1995-96 Commissioner

808,361 2008-09,
2010-11 Assistant
Commissioner
144,418 1990-91 Deputy
Commissioner

Income Tax Income
Tax 328,418,580 FY 08-09
,09-10,10-11 Assessing
Officer (AO)
Act, 1961

(viii) Based on the audit procedures conducted by us and according to the information and
explanation provided to us, the Company has not defaulted in repayment of dues to a financial
institution, bank or government. The Company does not have any debenture holders.

(ix) According to information and explanation provided to us, the Company has not raised moneys by
way of initial public offer or further public offer (including debt instruments). According to the
information and explanations given to us, term loans availed by the company were, prima facie;
applied for the purpose for which the loans were obtained.


(x) Based on the audit procedures conducted by us and according to the information and explanations
provided to us by the management, no fraud by the Company or any fraud on the Company by its
officers or employees has been noticed or reported to us during the year.

(xi) According to the information and explanation provided to us, the managerial remuneration has
been paid and provided in accordance with the requisite approvals mandated by the provisions of
section 197 read with Schedule V to the Companies Act.

(xii) The Company is not a Nidhi Company and accordingly Clause (xii) of the Order is not
applicable to the Company.

(xiii) According to the information and explanation provided to us and based on the audit
procedures conducted by us, all transactions with the related parties are in compliance with
sections 177 and 188 of Companies Act, 2013 wherever applicable and the details have been disclosed
in the Financial Statements as required by the applicable accounting standards.

(xiv) According to the information and explanation provided to us, the Company has not made any
preferential allotment or private placement of shares or fully or partly convertible debentures
during the year under review.

(xv) According to the information and explanation provided to us, the Company has not entered into
any non-cash transactions with directors or persons connected with him.

(xvi) According to the information and explanation provided to us, the Company is not required to
be registered under section 45-IAof the Reserve Bank of India Act, 1934.


To the Independent Auditors'' Report of even date on the standalone financial statements of
Kirloskar Brothers Limited

Report on the Internal Financial Controls Under Clause (i) of Sub-section 3 of Section 143 of the
Companies Act, 2013 ("the Act")

We have audited the internal financial controls over financial reporting of Kirloskar Brothers
Limited ("the Company") as of 31st March, 2016 in conjunction with our audit of the standalone
financial statements of the Company for the year ended on that date.

Management''s Responsibility for Internal Financial Controls

The Company''s management is responsible for establishing and maintaining internal financial
controls based on the internal control over financial reporting criteria established by the Company
considering the essential components of internal control stated in the Guidance Note on Audit of
Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered
Accountants of India. These responsibilities include the design, implementation and maintenance of
adequate internal financial controls that were operating effectively for ensuring the orderly and
efficient conduct of its business, including adherence to company''s policies, the safeguarding of
its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the
accounting records, and the timely preparation of reliable financial information, as required under
the Companies Act, 2013.

Auditor''s Responsibility

Our responsibility is to express an opinion on the Company''s internal financial controls over
financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note
on Audit of Internal Financial Controls Over Financial Reporting (the "Guidance Note") and the
Standards on Auditing, to the extent applicable to an audit of internal financial controls, both
issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance Note
require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether adequate internal financial controls over financial reporting
was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the
internal financial controls system over financial reporting and their operating effectiveness. Our
audit of internal financial controls over financial reporting included obtaining an understanding
of internal financial controls over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk. 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.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our qualified audit opinion on the Company''s internal financial controls system over
financial reporting.

Meaning of Internal Financial Controls Over Financial Reporting

A company''s internal financial control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting
principles. A company''s internal financial control over financial reporting includes those policies
and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that receipts
and expenditures of the company are being made only in accordance with authorizations of management
and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company''s assets that could have
a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting

Because of the inherent limitations of internal financial controls over financial reporting,
including the possibility of collusion or improper management override of controls, material
misstatements due to error or fraud may occur and not be detected. Also, projections of any
evaluation of the internal financial controls over financial reporting to future periods are
subject to the risk that the internal financial control over financial reporting may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.

Qualified opinion

According to the information and explanations given to us and based on our audit, the following
material weaknesses have been identified in the operating effectiveness of the Company''s internal
financial controls over financial reporting as at 31st March, 2016:

a) The Company''s internal financial controls over accurate and timely estimation of costs relating
to project business were not operating effectively which could potentially lead to incorrect
revenue recognition.

b) The Company''s internal financial controls for timely assessment of the eligibility of claims
receivable were not operating effectively, which could potentially lead to incorrect balances being
stated in the balance sheet and consequently its effect on Profit or Loss.

A ''material weakness'' is a deficiency, or a combination of deficiencies, in internal financial
control over financial reporting, such that there is a reasonable possibility that a material
misstatement of the company''s annual or interim financial statements will not be prevented or
detected on a timely basis.

In our opinion, the Company has, in all material respects, maintained adequate internal financial
controls over financial reporting as of 31st March, 2016, based on, the internal control over
financial reporting criteria established by the Company considering the essential components of
internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial
Reporting issued by the Institute of Chartered Accountants of India, and except for the possible
effects of the material weaknesses described above on the achievement of the objectives of the
control criteria, the Company''s internal financial controls over financial reporting were operating
effectively as of 31st March, 2016.

We have considered the material weakness identified and reported above in determining the nature,
timing, and extent of audit tests applied in our audit of the 31st March, 2016 standalone financial
statements of the Company and these material weaknesses do not affect our opinion on the standalone
financial statements of the Company.

For M/s P G Bhagwat

Chartered Accountants

Firm''s Registration No.: 101118W

Abhijeet Bhagwat

Partner

Membership No.: 136835

Pune :10th May 2016


Mar 31, 2015

We have audited the accompanying standalone financial statements of KIRLOSKAR BROTHERS LIMITED ("the Company"), which comprise the Balance Sheet as at 31st March, 2015, the Statement of Profit and Loss, the Cash Flow Statement for the year then ended, and a summary of the significant accounting policies and other explanatory information.

Management''s Responsibility for the Standalone Financial Statements

The Company''s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these standalone 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 accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies(Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, 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.

Auditors'' Responsibility

Our responsibility is to express an opinion on these standalone financial statements based on our audit. We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made thereunder. We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. 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 involves performing procedures to obtain audit evidence about the amounts and the 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 financial control relevant to the Company''s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on whether the Company has in place an adequate internal financial controls system over financial reporting and the operating effectiveness of such controls. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company''s Directors, 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 on the standalone financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone 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, of the state of affairs of the Company as at 31st March, 2015, and its profit and its cash flows for the year ended on that date.

Emphasis of Matter

We draw attention to the matter in Note Part C-26 to the financial statements regarding justification given by the management for non-provision for diminution in the value of its long term investment in The Kolhapur Steel Limited, its subsidiary company. As explained in the note, in the opinion of the management, diminution in the value is temporary in nature for the reasons given therein.

Our opinion is not modified in respect of this matter.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2015 ("the Order"), issued by the Central Government of India in terms of sub-section (11) of section 143 of the Companies Act, 2015, we give in the Annexure a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.

2. As required by Section 143 (3) of the Act, we report that:

(a) We have sought and 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 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 aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

(e) The matter described in the Emphasis of Matter para is unlikely to have an adverse effect on the functioning of the Company.

(f) On the basis of the written representations received from the directors as on 31st March, 2015 taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2015 from being appointed as a director in terms of Section 164 (2) of the Act.

(g) There are no qualifications, reservations or adverse remarks relating to maintenance of accounts and other matters connected therewith.

(h) With respect to the other matters to be included in the Auditor''s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financial position in its financial statements - Refer Note Part C-1 to the financial statements;

ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses on long-term contracts - Refer Note Part C-21 to the financial statements .The Company does not have any derivative contracts;

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

Re: Kirloskar Brothers Limited Referred to in paragraph 1 under the heading, "Report on Other Legal and Regulatory Requirements" of our report on even date:

(i) (a) The Company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets.

(b) The fixed assets are been physically verified by the management at regular intervals based on its programme of verification which is in our opinion is reasonable having regard to the size of the Company and the nature of its assets. During the current year no physical verification of assets was undertaken.

(ii) (a) Physical verification of inventory has been conducted by the management during the current year. In our opinion, the interval of such verification is reasonable.

(b) In our opinion the procedures of physical verification of inventory followed by the 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. Discrepancies noticed on physical verification were not material and the same have been properly dealt with in the books of account.

(iii) According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under section189 of the Companies Act in the current year. The balance of unsecured loan given to its subsidiary company in earlier years is mentioned below.

Name of Opening Balance (Rs.) Year End Balance (Rs.) Maximum balance (Rs.) Party

The Kolhapur 13,214,020/- 13,214,020/- 13,214,020/- Steel Limited

(a) According to the information and explanations given to us, the terms of the loan agreement do not specify a fixed schedule for the receipt of the principal amount and interest.

(b) According to the information and explanations given to us, there is no amount overdue on account of the principal or interest.

(iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business, for the purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit we have not observed any major weaknesses or continuing failure to correct major weaknesses in internal control system.

(v) According to information and explanations given to us, the Company has not accepted deposits, hence the directives issued by the Reserve Bank of India and the provisions of sections 73 to 76 or any other relevant provisions of the Companies Act and the rules framed there under, are not applicable to it. According to information and explanations given to us no order has been passed by Company Law Board or National Company Law Tribunal or Reserve Bank of India or any court or any other tribunal.

(vi) We have broadly reviewed the books of account relating to materials, labour and other items of cost maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under sub-section (1) of section 148 of the Companies Act, 2013 and we are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have not however made a detailed examination of records with a view to determine whether they are accurate and complete.

(vii) (a) The Company is generally regular in depositing undisputed statutory dues including provident fund, employees'' state insurance, income-tax, sales-tax, wealth tax, service tax, duty of customs, duty of excise, value added tax, cess and any other statutory dues with the appropriate authorities.

According to the information and explanations given to us, no undisputed amounts payable in respect of statutory dues were in arrears as at 31st March, 2015, for a period more than six months from the date they became payable.

(b) According to the information and explanations given to us, dues of income tax, sales tax, wealth tax, service tax, duty of customs, duty of excise, value added tax or cess which have not been deposited on account of any dispute are mentioned below:

Name of the Nature of Amount Period to which the amount Statue Dues relates

Sales Tax Act Sales tax 1,732,100/- 2002-03,2003-04 of various 90,294,591/- 1989-93, 1994-96 & 2004-09 states 8,061,546/- 2006-07& 2008-10 12,180,943/- 2006-07,2008-09,2011-2012, 2012-2013 35,385,332/- 1993-2010 4,791,506/- 1992-2013

34,429,002/- 2012-13

Central Sales Central 411,716/- 1993-94 Tax Act 1956 Sales Tax 1,310,219/- 2008-09, 2011-12

14,902,889/- 2007-08,2009-11

Finance Act, Service 84,053,761/- 2008-09,2011-12 1994 Tax 1,136,792/- 2012-13

902,518,982/- 2012-13

CentralExcise Excise 24,050,737/- 2003-04 & 2006-10 Act 1944 Duty 1,125,847/- 2005-06

503,201/- 1995-96

808,361/- 2008-09, 2010-11 144,418/- 1990-91

Income tax Income 328,418,580/- AY 2008-09,2009-10,2010-11 Act, 1961 Tax

Name of the Statue Forum where dispute is pending

Sales tax Act Appellate Tribunal High Court of various Sales

Appellate Commissioner Commissioner

Assistant Commissioner

Appellate Assistant Commissioner

Deputy Commissioner (Appeals)

Centrol Sales Tax Act High Court 1956 Assistant Commissioner (A)

Assistant Commissioner

Financial Act 1944 Appellate Tribunal

Commissioner CESTAT

Centrol Excise CESTAT Act 1944 Appellate Tribunal

Commissioner Assistant Commissioner Deputy Commissioner

Income tax Act 1961 Assessing Officer (AO)

(c) According to the information and explanations given to us, there are no amounts required to be transferred to investor education and protection fund in accordance with the relevant provisions of the Companies Act, 1956 (1 of 1956) and rules made thereunder.

(viii) The Company has no accumulated losses at the end of 31st March, 2015.The Company has not incurred cash losses in the current financial year and in the immediately preceding financial year.

(ix) In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to a financial institution or bank. The Company does not have any debenture holders.

(x) In our opinion and according to the information and explanations given to us, the terms and conditions of guarantees given by the Company for loans taken by its subsidiary companies from banks and financial institutions are prima facie; not prejudicial to the interests of the Company.

(xi) According to the information and explanations given to us, term loans availed by the Company were prima facie; applied for the purpose for which the loans were obtained.

(xii) Based upon the audit procedures performed by us and according to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the year.

For M/s P G Bhagwat Chartered Accountants Firm''s Registration No.: 101118W

Abhijeet Bhagwat Partner Membership No.:136835

Pune : 27th April, 2015


Mar 31, 2014

We have audited the accompanying financial statements of Kirloskar Brothers Limited, which comprise the Balance Sheet as at March 31st, 2014, the Profit and Loss Statement and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management''s Responsibilityforthe Financial Statements

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 Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 ("the Act"). 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. Auditors'' 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 involves 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 purpose of expressing an opinion on the effectiveness of the company''s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the 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 March 31st, 2014;

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

(c) in the case of the Cash Flow Statement, of the cash flows 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 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 purpose 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, Profit and Loss Statement, 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 Statement, and Cash Flow Statement comply with the Accounting Standards referred to in subsection (3C) of section 211 of the Companies Act, 1956;

e. on the basis of written representations received from the directors as on March 31st,2014, and taken on record by the Board of Directors, none of the directors is disqualified as on March 31st,2014, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

ANNEXURE Re: Kirloskar Brothers Limited Referred to in paragraph 1 under the heading, "Report on Other Legal and Regulatory Requirements" of our report on even date:

(i) (a) The Company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets.

(b) The fixed assets are physically verified by the management at regular intervals based on the programme of verification which in our opinion is reasonable having regard to the size of the Company and the nature of its assets. During the current year no physical verification of assets was undertaken.

(c) The Company has not disposed off substantial part of its fixed assets during the current year.

(ii) (a) Physical verification of inventory has been conducted by the management during the year. In our opinion, the interval of such verification is reasonable.

(b) In our opinion, the procedures of physical verification of inventory followed by the 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. Discrepancies noticed on physical verification were not material and have been properly dealt with in the books of account.

(iii) (a) According to the information and explanation given to us, the Company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under section 301 of the Act during the current year. The balance of loan given in the earlier years is mentioned below

Name of Party Relationship with Company Year End Balance (Rs.) Maximum balance (Rs.)

The Kolhapur Steel Limited Subsidiary 13,214,020/- 15,714,020/-

(b) In our opinion and according to the information and explanations given to us, the rate of interest and other terms and conditions of the unsecured loan given by the Company is prima facie not prejudicial to the interest of the Company

(c) In our opinion and according to the information and explanation given to us, the receipt of the principal amount and interest are as per the terms of the loan agreement.

(d) According to the information and explanations given to us, there is no overdue amount on account of the principal or interest.

(e) The Company has taken unsecured loans from its subsidiary Company and joint venture during the current year.

Name of Party Amount (Rs.) Year End Balance (Rs.) Maximum balance (Rs.)

Kirloskar Corrocoat Private Limited 15,000,000/- 15,000,000/- 15,000,000/-

KirloskarEbara Pumps Limited 145,000,000/- Nil 145,000,000/-

(f) In our opinion and according to the information and explanations given the rate of interest and other terms and conditions of the unsecured loans taken by the Company is prima facie not prejudicial to the interest of the Company.

(g) In our opinion and according to the information and explanation given to us, the payment of the principal amount and interest are as per the terms of the loan agreements.

(iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business, for the purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit we have not observed any major weaknesses or continuing failure to correct major weaknesses in internal control system.

(v) (a) According to the information and explanations given to us, the particulars of contracts or arrangements referred to in section 301 of the Companies Act, 1956 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 by the management, the transactions made in pursuance of such contracts or arrangements have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

(vi) In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits from the public during the current year and does not have any outstanding public deposits, hence the provisions of sections 58A, 58AA or any other relevant provisions of the Act and the rules framed thereunder and the directives issued by the Reserve Bank of India are not applicable to the Company.

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

(viii) We have broadly reviewed the books of account relating to materials, labour and other items of cost maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under section 209 (1) (d) of the Companies Act, 1956 and we are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have not however made a detailed examination of records with a view to determine whether they are accurate and complete.

(ix) (a) The Company is regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees'' State Insurance, Income-tax, Sales-tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, cess and other material statutory dues applicable to it with the appropriate authorities.

According to the information and explanations given to us, no undisputed amounts payable in respect of statutory dues were in arrears, as at 31 st March, 2014, for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us, dues of income tax, sales tax, wealth tax, service tax, custom duty, excise duty and cess which have not been deposited on account of any dispute are mentioned below:

Name of the Nature of Amount (Rs.) Period to which the amount Forum where dispute is pending Statue Dues relates

Sales Tax Act Sales 1,547,100/- 2002-04 Appellate Tribunal of various tax 90,294,591/- 1989-93, 1994-96 & 2004-09 High Court states 8,061,546/- 2006-07& 2008-10 Appellate Commiss -ioner 10,311,908/- 2005-07 & 2008-10 Commissioner

570,452/- 1993-94, 2000-2001 Assistant Commissioner

4,791,506/- 1992-93 Appellate Assist -ant Commissioner

47,836,003/- 2012-13 Commercial Tax officer

24,419,974/- 2009-10 Deputy Commission -er (Appeals)

Central Sales Central 411,716/- 1993-94 High Court TaxAct, 1956 Sales 1,310,219/- 2008-11 Assistant Commiss -ioner (Appeals) Tax 3,734,848/- 2007-08 & 2010-11 Assistant Commis -sioner 78,010/- 2009-11 Deputy Commiss -ioner

Finance Act, Service 1,073,346,705/- 2011-13 Appellate Tribunal 1994 Tax 11,36,792/- 2012-13 Commissioner

Central Excise Excise 24,050,737/- 2003-04 & 2006-10 CESTAT Act, 1944 Duty 1,125,847/- 2005-06 Appellate Tribunal

503,201/- 1995-96 & 2010-13 Commissioner

439,391/- 2008-09 Assistant Commissioner

144,418/- 1990-91 Deputy Commiss -ioner

(x) The Company has no accumulated losses at the end of 31 st March, 2014. The Company has not incurred cash losses in the current financial year and in the immediately preceding financial year.

(xi) Based on our audit procedures and according to the information and explanations given to us by the management, we are of the opinion that the Company has not defaulted in repayment of dues to a financial institution or bank. The Company does not have any debenture holders.

(xii) According to the information and explanations given to us the Company has not granted loans and advances on the basis of security byway of pledge of shares, debentures and other securities.

(xiii) In our opinion, the Company is not a chit fund, nidhi, mutual benefit fund or society. Accordingly, the provisions of clause 4 (xiii) (a), (b), (c) and (d) of the Order are not applicable to the Company.

(xiv) According to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debentures and other investments. Accordingly, provisions of clause (xiv) of the Order are not applicable to the Company.

(xv) In our opinion and according to the information and explanations given to us, the terms and conditions of guarantees given by the Company for loans taken by subsidiary companies from banks and financial institutions are not prima facie; prejudicial to the interests of the Company.

(xvi) According to the information and explanations given to us by the management, term loans availed by the Company were, prima facie; applied for the purpose for which the loans were obtained.

(xvii) According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, the funds raised on short-term basis on an overall basis have not been used for long- term investment.

(xviii) The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Companies Act, 1956.

(xix) According to the information and explanations given to us, the Company has not issued any debentures during the current year and does not have any outstanding debentures. Accordingly, clause (xix) of the Order is not applicable to the Company.

(xx) According to the information and explanations given to us, the Company has not raised money by any public issue during the current year.

(xxi) According to the information and explanations given to us by the management, no fraud on or by the Company has been noticed or reported during the year.

For M/s P. G. BHAGWAT

Chartered Accountants Firm''s Registration No: 101118W

Abhijeet Bhagwat

Partner Membership No.: 136835 Ahmedabad : April 22, 2014


Mar 31, 2013

Report on the Financial Statements

We have audited the accompanying financial statements of Kirloskar Brothers Limited, which comprise the Balance Sheet as at March 31st, 2013, the Profit and Loss Statement and 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

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 Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 (" the Act"). 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 involves 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. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the 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 March 31, 2013;

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

(c) in the case of the Cash Flow Statement, of the cash flows 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 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 purpose 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, Profit and Loss Statement 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 Statement and Cash Flow Statement comply with the Accounting Standards referred to in subsection (3C) of section 211 of the Companies Act, 1956;

e. on the basis of written representations received from the directors as on March 31, 2013, and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2013, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

ANNEXURE Re: Kirloskar Brothers Limited

Referred to in paragraph 1 under the heading, "Report on Other Legal and Regulatory Requirements" of our report on even date:

(i) (a) The Company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets.

(b) The fixed assets have been physically verified by the management during the current year based on the regular programme of verification which in our opinion is reasonable having regard to the size of the company and the nature of its assets. According to the information and explanations given to us, discrepancies noticed on physical verification were not material and have been properly dealt with in the books of account.

(c) The Company has not disposed off substantial part of its fixed assets during the current year.

(ii) (a) Physical verification of inventory has been conducted by the management during the year. In our opinion, the interval of such verification is reasonable.

(b) In our opinion, the procedures of physical verification of inventory followed by the 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. Discrepancies noticed on physical verification were not material and have been properly dealt with in the books of account.

(iii) (a) According to the information and explanation given to us, the Company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under section 301 of the Act during the current year. The balance of loan given in the earlier years is mentioned below :

Name of Party Relationshipwith Company Year End Balance (Rs.) Maximum balance (Rs.)

The Kolhapur Steel Limited Subsidiary 15,714,020/- 45,714,020/-

(b) In our opinion and according to the information and explanations given to us, the rate of interest and other terms and conditions of the unsecured loan given by the Company is prima facie not prejudicial to the interest of the Company.

(c) In our opinion and according to the information and explanation given to us, the receipt of the principal amount and interest are as per the terms of the loan agreement.

(d) According to the information and explanations given to us, there is no overdue amount on account of the principal or interest.

(e) The Company taken unsecured loan from its subsidiary Company during the current year.

Name of Party Relationshipwith Company Year End Balance (Rs.) Maximum balance (Rs.)

Hematic Motors Private Limited 120,000,000/- 120,000,000/- 120,000,000/-

(f) In our opinion and according to the information and explanations given the rate of interest and other terms and conditions of the unsecured loan taken by the Company is prima facie not prejudicial to the interest of the Company.

(g) In our opinion and according to the information and explanation given to us, the payment of the principal amount and interest are as per the terms of the loan agreement.

(iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business, for the purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit we have not observed any major weaknesses or continuing failure to correct major weaknesses in internal control system.

(v) (a) According to the information and explanations given to us, the particulars of contracts or arrangements referred to in section 301 of the Companies Act, 1956 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 by the management, the transactions made in pursuance of such contracts or arrangements have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

(vi) In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits from the public during the current year and does not have any outstanding public deposits, hence the provisions of sections 58A, 58AA or any other relevant provisions of the Act and the rules framed thereunder and the directives issued by the Reserve Bank of India are not applicable to the Company.

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

(viii) We have broadly reviewed the books of account relating to materials, labour and other items of cost maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under section 209 (1) (d) of the Companies Act, 1956 and we are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have not however made a detailed examination of records with a view to determine whether they are accurate and complete.

(ix) (a) The Company is regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees'' State Insurance, Income-tax, Sales-tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, cess and other material statutory dues applicable to it with the appropriate authorities.

According to the information and explanations given to us, no undisputed amounts payable in respect of statutory dues were in arrears, as at 31st March, 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, dues of income tax, sales tax, wealth tax, service tax, custom duty, excise duty and cess which have not been deposited on account of any dispute are mentioned below:

Name of the Nature of Amount (Rs.) Statue Dues

Sales Tax Act of Sales tax 1,559,318 various states 59,308,504

812,900

10,311,908

691,139

4,791,506

Central Sales Central 411,716 Tax Act, 1956 Sales Tax

1,310,219

3,734,848

240,513

Finance Act, Service Tax 170,837,723 1994 467,366,032

Central Excise Excise Duty 24,050,737 Act, 1944 1,125,847

503,201

439,391

144,418

Name of the Statute Period to which the amount Forum where dispute is pending relates

Sales Tax Act of various states 1982-83 & 2002-04 Appellate Tribunal

1989-93, 1994-96 & 2004-08 High Court

2006-07 Appellate Commissioner

2005-07 & 2008-10 Commissioner

1993-94 & 1999-2001 Assistant Commissioner

1992-93 Appellate Assistant Commissioner

Central Sales Tax Act 1956 1993-94 High Court

2008-11 Assistant Commissioner (Appeals)

2007-08 & 2010-11 Assistant Commissioner

1986-87 Assistant Commissioner

Finance Act 1994 2011-12 Appellate Tribunal

2012-13 Commissioner

Central Excise Act 1944 2003-04 & 2006-10 CESTAT

2005-06 Appellate Tribunal

1995-96 & 2010-13 Commissioner

2008-09 Assistant Commissioner

1990-91 Deputy Commissioner

(x) The Company has no accumulated losses at the end of 31st March, 2013. The Company has not incurred cash losses in the current financial year and in the immediately preceding financial year.

(xi) Based on our audit procedures and according to the information and explanations given to us by the management, we are of the opinion that the Company has not defaulted in repayment of dues to a financial institution or bank. The Company does not have any debenture holders.

(xii) According to the information and explanations given to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

(xiii) In our opinion, the Company is not a chit fund, nidhi, mutual benefit fund or society. Accordingly, the provisions of clause 4 (xiii) (a), (b), (c) and (d) of the Order are not applicable to the Company.

(xiv) According to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debentures and other investments. Accordingly, provisions of clause (xiv) of the Order are not applicable to the Company.

(xv) In our opinion and according to the information and explanations given to us, the terms and conditions of guarantees given by the Company for loans taken by subsidiary companies from banks and financial institutions are not prima facie; prejudicial to the interests of the Company.

(xvi) According to the information and explanations given to us by the management, term loans availed by the Company were, prima facie; applied for the purpose for which the loans were obtained.

(xvii) According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, the funds raised on short-term basis on an overall basis have not been used for long-term investment.

(xviii) The Company has not made any preferential allotment of shares to parties and companies covered in the Register maintained under section 301 of the Companies Act, 1956.

(xix) According to the information and explanations given to us, the Company has not issued any debentures during the current year and does not have any outstanding debentures. Accordingly, clause (xix) of the Order is not applicable to the Company.

(xx) According to the information and explanations given to us, the Company has not raised money by any public issue during the current year.

(xxi) According to the information and explanations given to us by the management, no fraud on or by the Company has been noticed or reported during the year.

For M/s P. G. BHAGWAT

Chartered Accountants

Firm''s Registration No: 101118W

Abhijeet Bhagwat

Partner

Pune : May 27, 2013 Membership No.: 136835


Mar 31, 2012

1. We have audited the attached balance sheet of Kirloskar Brothers Limited as at 31st March, 2012, the profit and loss statement and the cash flow statement of the company 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 the 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 [as amended by Companies (Auditor's Report) (Amendment) Order, 2004] issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956, we enclose in the annexure a statement on the matters specified in paragraph 4 and 5 of the said Order.

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

(i) 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;

(ii) 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;

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

(iv) in our opinion, the balance sheet, profit and loss statement 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 Companies Act, 1956;

(v) on the basis of the written representations received from the directors as on 31st March, 2012, and taken on record by the board of directors, we report that none of the directors are disqualified as on 31st March, 2012 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956;

(vi) in our opinion and to the best of our information and according to the explanations given to us, the accounts, read together with the notes thereon, give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(a) in the case of the balance sheet, of the state of affairs of the company as at 31st March, 2012 ;

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

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

ANNEXURE Re: Kirloskar Brothers Limited

Referred to in paragraph 3 of our report of even date : (i) (a) The company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets.

(b) The fixed assets have been physically verified by the management at reasonable intervals. According to the information and explanation given to us, no material discrepancies were noticed on such verification.

(c) The company has not disposed off substantial part of its fixed assets during the current year.

(ii) (a) Physical verification of inventory has been conducted by the management during the year. In our opinion, the interval of such verification is reasonable.

(b) The procedures of physical verification of inventory followed by the 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 and any material discrepancies noticed on physical verification have been properly dealt with in the books of account.

(iii) (a) The company has not granted any loans, secured or unsecured, to companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Accordingly, the provisions of clause 4 (iii) (b), (c) and (d) of the Order are not applicable to the company. (e) According to the information and explanation given to us, the company has not taken any loans, secured or unsecured, from companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Accordingly, the provisions of clause 4 (iii) (f) and (g) of the Order are not applicable to the company. (iv) In our opinion and according to the information and explanation given to us, there is an adequate internal control system commensurate with the size of the company and the nature of its business, for the purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit we have not observed any continuing failure or continuing failure to correct major weaknesses in internal control system. (v) (a) According to the information and explanation given to us, the particulars of contracts or arrangements referred to in section 301 of the Companies Act, 1956 have been entered in the register required to be maintained under that section. (b) In our opinion and according to the information and explanation given to us, the transactions made in pursuance of such contracts or arrangements have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

(vi) In our opinion and according to the information and explanation given to us, the company has complied with the directives issued by the Reserve Bank of India and the provisions of sections 58A, 58AA or any other relevant provisions of the Act and the rules framed thereunder. As informed to us no order has been passed by Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal. (vii) In our opinion, the company has an internal audit system commensurate with its size and nature of its business.

(viii) We have broadly reviewed the books of account relating to materials, labour and other items of cost maintained by the company pursuant to the rules made by the Central Government for the maintenance of cost records under section 209 (1) (d) of the Companies Act, 1956 and we are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have not however made a detailed examination of records with a view to determine whether they are accurate and complete.

(ix) (a) The company is regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees' State Insurance, Income-tax, Sales-tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, cess and other material statutory dues applicable to it with the appropriate authorities. According to the information and explanation given to us, no undisputed amounts payable in respect of statutory dues were in arrears, as at 31st March, 2012, for a period of more than six months from the date they became payable.

(b) According to the information and explanation given to us, there are no dues of Income Tax, Sales Tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty and cess which have not been deposited on account of any dispute other than those mentioned in the Appendix to this report. (x) The company has no accumulated losses at the end of 31st March, 2012. The company has not incurred cash losses in the financial year and in the immediately preceding financial year.

(xi) Based on our audit procedures and according to the information and explanation given to us, we are of the opinion that the company has not defaulted in repayment of dues to a financial institution or bank. The company does not have debenture holders.

(xii) According to the information and explanation given to us the company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

(xiii) In our opinion, the company is not a chit fund, nidhi, mutual benefit fund or society and thus the provisions of clause 4 (xiii) (a), (b), (c) and (d) of the Order are not applicable to the company.

(xiv) According to the information and explanation given to us the company is not dealing or trading in shares, securities, debentures and other investments.

(xv) In our opinion, the terms and conditions on which the company has given guarantees for loans taken by others from bank or financial institutions are not prejudicial to the interest of the company.

(xvi) In our opinion and according to the information and explanation given to us, term loans were applied for the purpose for which the loans were obtained.

(xvii) According to the information and explanation given to us, the funds raised on short-term basis have not been used for long-term investment.

(xviii) The company has not made any preferential allotment of shares to parties and companies covered in the Register maintained under section 301 of the Companies Act, 1956.

(xix) According to the information and explanation given to us, the company has not issued any debentures during the current year.

(xx) According to the information and explanation given to us, the company has not raised money by any public issue during the current year.

(xxi) According to the information and explanation given to us, no fraud on or by the company has been noticed or reported during the year.

Appendix (Referred to in clause (ix) (b) of the annexure to the Auditors' Report.)

Sr. Nature of Dues Amount in Rs. Forum where dispute is pending

1 Central Sales Tax 240,513 Additional Commissioner 244,203 Joint Commissioner of Sales Tax (Appeals) 1,310,219 Assistant Commissioner (Appeals)

4,791,506 Appellate Assistant Commissioner

411,716 State High Court

14,424,941 Deputy Commissioner (Appeals)

2 State Sales Tax 19,240,611 Appellate Tribunal

5,537,281 High Court

245,404 Assistant Commissioner

7,695,933 Deputy Commissioner (Appeals)

3 Excise Duty 583,809 Assistant Commissioner

13,240,251 Commissioner

23,118,135 Appellate Tribunal

135,539 Commissioner (Adjudication)

1,354,660 Commissioner (Appeals)

4 Service Tax 170,837,723 Appellate Commissionerate



For M/s P. G. BHAGWAT

Chartered Accountants Firm's Registration No: 101118W

Abhijeet Bhagwat

Partner Membership No.: 136835 Pune : 25th April, 2012


Mar 31, 2011

1. We have audited the attached balance sheet of Kirloskar Brothers Limited as at 31st March, 2011, the profit and loss account and also the cash flow statement of the company 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 the 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 [as amended by Companies (Auditors Report) (Amendment) Order, 2004] issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956, we enclose in the annexure a statement on the matters specified in paragraph 4 and 5 of the said Order.

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

(i) 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;

(ii) 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;

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

(iv) 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 Companies Act, 1956;

(v) on the basis of the written representations received from the directors as on 31st March, 2011, and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March 2011, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956;

(vi) in our opinion and to the best of our information and according to the explanations given to us, the accounts, read together with the notes thereon, give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(a) in the case of the balance sheet, of the state of affairs of the company as at 31st March, 2011;

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

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

ANNEXURE Re: Kirloskar Brothers Limited Referred to in paragraph 3 of our report of even date :

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

(b) The fixed assets have been physically verified by the management at reasonable intervals. According to information and explanation given to us, no material discrepancies were noticed on such verification.

(c) The fixed assets, which were disposed off during the year, do not form substantial part of the fixed assets owned by the company.

(ii) (a) The inventory was physically verified during the year by the management. In our opinion, the frequency of verification is reasonable.

(b) The procedures of physical verification of inventory followed by the 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.

(iii) (a) The company has not granted any loans secured or unsecured to companies, firms or other parties covered in the register maintained as per section 301 of the Companies Act, 1956. Accordingly, the provisions of clause 4 (iii) (b) (c) and (d) are not applicable to the company. (e) The company has not taken any loans, secured or unsecured from companies, firms or other parties covered in the register maintained as per section 301 of the Companies Act, 1956. Accordingly, the provisions of clause 4 (iii) (f) and (g) are not applicable to the company.

(iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the company and the nature of its business with regard to purchase of inventory and fixed assets and for the sale of goods and services. During the course of audit we have not observed any continuing failure to correct major weaknesses in internal control system.

(v) (a) According to the information and explanations given to us, the particulars of contracts or arrangements referred to in section 301 of the Companies Act, 1956 have been entered in the register to be maintained under that section.

(b) According to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangements have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

(vi) In our opinion and according to the information and explanations given to us, the company has complied with the directives issued by the Reserve Bank of India and the provisions of section 58A, 58AA or any other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 with regard to the deposits accepted from the public. As informed to us, no order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal.

(vii) In our opinion, the company has an internal audit system commensurate with the size and nature of its business.

(viii) We have broadly reviewed the books of account relating to materials, labour and other items of cost maintained by the company pursuant to the rules made by the Central Government for the maintenance of cost records under section 209 (1) (d) of the Companies Act, 1956 and we are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have not however made a detailed examination of records with a view to determine whether they are accurate and complete.

(ix) (a) The company is regular in depositing with appropriate authorities undisputed statutory dues including provident fund, investor education and protection fund, employees state insurance, income tax, sales tax, wealth tax, service tax, custom duty, excise duty, cess and other material statutory dues applicable to it. According to information and explanation given to us, no undisputed amounts payable in respect of statutory dues were in arrears, as at 31st March, 2011 for a period of more than six months from the date they became payable.

(b) According to information and explanation given to us, there are no dues of income tax, sales tax, wealth tax, service tax, custom duty, excise duty and cess which have not been deposited on account of any dispute other than those mentioned in the Appendix to this report.

(x) The company has no accumulated losses as at 31st March, 2011. The company has not incurred cash losses during the financial year and in the immediately preceding financial year.

(xi) In our opinion and according to information and explanations given to us, the company has not defaulted in repayment of dues to a financial institution or bank. The company has no debenture holders.

(xii) According to information and explanation given to us, the company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities. Accordingly, the provisions of clause 4 (xii) of the Companies (Auditors Report) Order, 2003 are not applicable to the company.

(xiii) In our opinion, the company is not a chit fund or a nidhi/mutual benefit fund/society. Accordingly, the provisions of clause 4 (xiii) of the Companies (Auditors Report) Order, 2003 are not applicable to the company.

(xiv) According to information and explanation given to us, the company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4 (xiv) of the Companies (Auditors Report) Order, 2003 are not applicable to the company.

(xv) In our opinion, the terms and conditions on which the company has given guarantees for loans taken by others from banks or financial institutions are not prejudicial to the interest of the company.

(xvi) In our opinion, the term loans have been applied for the purpose for which they were raised.

(xvii) According to information and explanation given to us, we report that no funds raised on short-term basis have been used for long-term investment.

(xviii) According to information and explanation given to us, the company has not made any preferential allotment of any shares to parties and companies covered under section 301 of the Companies Act, 1956.

(xix) According to information and explanation given to us, the company has not issued any debentures. Accordingly, the provisions of clause 4 (xix) of the Companies (Auditors Report) Order, 2003 are not applicable to the company.

(xx) According to information and explanation given to us, the company has not made any public issue to raise money. Accordingly, the provisions of clause 4 (xx) of the Companies (Auditors Report) Order, 2003 are not applicable to the company.

(xxi) According to information and explanation given to us, no fraud on or by the company has been noticed or reported during the course of our audit.

For M/s P. G. BHAGWAT

Chartered Accountants

Pankaja Bhagwat

Partner Membership No.: 86155 Firms Registration No: 101118W Pune : 26th April 2011


Mar 31, 2010

1. We have audited the attached balance sheet of Kirloskar Brothers Limited as at 31st March, 2010, the profit and loss account and also the cash flow statement of the company 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 the 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 [as amended by Companies (Auditors Report) (Amendment) Order, 2004] issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956, we enclose in the annexure a statement on the matters specified in paragraph 4 and 5 of the said order.

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

(i) 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;

(ii) 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;

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

(iv) 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 Companies Act, 1956;

(v) on the basis of the written representations received from the directors as on 31st March, 2010, and taken on record by the board of directors, we report that none of the directors is disqualified as on 31st March 2010 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956;

(vi) in our opinion and to the best of our information and according to the explanations given to us, the accounts, read together with the notes thereon, give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(a) in the case of the balance sheet, of the state of affairs of the company as at 31st March, 2010;

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

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

ANNEXURE

Re: Kirloskar Brothers Limited

Referred to in paragraph 3 of our report of even date

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

(b) The fixed assets have been physically verified by the management at reasonable intervals. According to information and explanation given to us, no material discrepancies were noticed on such verification.

(c) The fixed assets, which were disposed off during the year, do not form substantial part of the fixed assets owned by the company.

(ii) (a) The inventory was physically verified during the year by the management. In our opinion, the frequency of verification is reasonable.

(b) The procedures of physical verification of inventory followed by the 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.

(iii) (a) The company has not granted any loans secured or unsecured to companies, firms or other parties covered in the register maintained as per section 301 of the Companies Act, 1956.

Accordingly, the provisions of clause 4 (iii) (b) (c) and (d) are not applicable to the company.

(b) The company has not taken any loans, secured or unsecured from companies, firms or other parties covered in the register maintained as per section 301 of the Companies Act, 1956.

Accordingly, the provisions of clause 4 (iii) (f) and (g) are not applicable to the company.

(iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the company and the nature of its business with regard to purchase of inventory and fixed assets and for the sale of goods and services. During the course of audit we have not observed any continuing failure to correct major weaknesses in internal control system.

(v) (a) According to the information and explanations given to us, the particulars of contracts or arrangements referred to in Section 301 of the Companies Act, 1956 have been entered in the registerto be maintained under that section.

(b) According to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangements have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

(vi) In our opinion and according to the information and explanations given to us, the company has complied with the directives issued by the Reserve Bank of India and the provisions of section 58A, 58AA or any other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 with regard to the deposits accepted from the public. As informed to us, no order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal.

(vii) In our opinion, the company has an internal audit system commensurate with the size and nature of its business.

(viii) We have broadly reviewed the books of account relating to materials, labour and other items of cost maintained by the company pursuant to the rules made by the Central Government for the maintenance of cost records under section 209 (1) (d) of the Companies Act, 1956 and we are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have not however made a detailed examination of records with a view to determine whether they are accurate and complete.

(ix) (a) The company is regular in depositing with appropriate authorities undisputed statutory dues including provident fund, investor education and protection fund, employees state insurance, income tax, sales tax, wealth tax, service tax, custom duty, excise duty, cess and other material statutory dues applicable to it.

According to information and explanation given to us, no undisputed amounts payable in respect of

statutory dues were in arrears, as at 31sl March, 2010 for a period of more than six months from the date they became payable.

(b) According to information and explanation given to us, there are no dues of income tax, sales tax, wealth tax, service tax, custom duty, excise duty and cess which have not been deposited on account of any dispute other than those mentioned in the Appendix to this report.

(x) The company has no accumulated losses as at 31st March, 2010. The company has not incurred cash losses during the financial year and in the immediately preceding financial year.

(xi) In our opinion and according to information and explanations given to us, the company has not defaulted in repayment of dues to a financial institution or bank. The company has no debenture hplders.

(xii) According to information and explanation given to us, the company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities. Accordingly, the provisions of clause 4 (xii) of the Companies (Auditors Report) Order, 2003 are not applicable to the company.

(xiii) In our opinion, the company is not a chit fund or a nidhi/mutual benefit fund/society. Accordingly, the provisions of clause 4 (xiii) of the Companies (Auditors Report) Order, 2003 are not applicable to the company.

(xiv) According to information and explanation given to us, the company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4 (xiv) of the Companies (Auditors Report) Order, 2003 are not applicable to the company.

(xv) In our opinion, the terms and conditions on which the company has given guarantees for loans taken by others from banks or financial institutions are not prejudicial to the interest of the company.

(xvi) In our opinion, the term loans have been applied for the purpose for which they were raised.

(xvii) According to information and explanation given to us, we report that no funds raised on short-term basis have been used for long-term investment.

(xviii) According to information and explanation given to us, the company has not made any preferential allotment of any shares to parties and companies covered under section 301 of the Companies Act, 1956.

(xix) According to information and explanation given to us, the company has not issued any debentures. Accordingly, the provisions of clause 4 (xix) of the Companies (Auditors Report) Order, 2003 are not applicable to the company.

(xx) According to information and explanation given to us, the company has not made any public issue to raise money. Accordingly, the provisions of clause 4 (xx) of the Companies (Auditors Report) Order, 2003 are not applicable to the company.

(xxi) According to information and explanation given to us, no fraud on or by the company has been noticed or reported during the course of ouraudit.

For M/s P. G. BHAGWAT Chartered Accountants Pankaja Bhagwat Partner Membership No.: 86155 Pune: April 26,2010 Firms Registration No: 101118W

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