Aban Offshore

We have audited the attached Balance Sheet of M/s. Aban Offshore
 Limited, as at 31st March 2009, and also the Profit and Loss Account
 and the Cash Flow Statement for the year ended on that date annexed
 thereto. These financial statements are the responsibility of the
 Company’s Management. Our responsibility is to express an opinion on
 these financial statements based on our audit.
 
 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 misstatements. 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 the management, as well as evaluating the overall financial
 statement presentation. We believe that our audit provides a reasonable
 basis for our opinion.
 
 We report as follows:
 
 1.  As required by the Companies (Auditor’s Report) Order, 2003 (the
 ‘Order’) issued by the Central Government of India in terms of sub -
 section (4A) of Section 227 of the Companies Act, 1956, we enclose in
 the Annexure a statement on the matters specified in paragraphs 4 and 5
 of the said Order.
 
 2.  Further to our comments in the Annexure referred to in paragraph 1
 above, we report that:
 
 a.  We have obtained all the information and explanations, which to the
 best of our knowledge and belief were necessary for the purposes of 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 account and Cash Flow Statement
 dealt with by this report are in agreement with the books of account;
 
 d.  In our opinion, the Balance Sheet, Profit and Loss account and Cash
 Flow Statement dealt with by this report comply with the Accounting
 Standards referred to in sub-section (3C) of Section 211 of the
 Companies Act, 1956;
 
 e.  Based on the representations made by the Directors and taken on
 record by the Board of Directors of the Company and the information and
 explanations given to us, none of the Directors is, as at 31st March
 2009, prima-facie disqualified from being appointed as director in
 terms of clause (g) of sub-section (1) of Section 274 of the Companies
 Act, 1956 on the said date;
 
 f.  In our opinion and to the best of our information and according to
 the explanations given to us, the said financial statements 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:
 
 (i) in the case of the Balance Sheet, of the state of affairs of the
 Company as at 31st March 2009;
 
 (ii) in the case of the Profit and Loss Account, of the Profit for the
 year ended on that date; and
 
 (iii) in the case of the Cash Flow Statement, of the cash flows for the
 year ended on that date.
 
 ANNEXURE TO THE AUDITORS REPORT
 
 (Referred to in paragraph 1 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) As explained to us the fixed assets have been physically verified
 by the Management during the year in a phased manner, which in our
 opinion is reasonable, having regard to the size of the Company and
 nature of its assets. As explained to us no material discrepancies have
 come to the notice on such physical verification.
 
 (c) The fixed assets disposed off during the year, in our opinion, do
 not constitute a substantial part of the fixed assets of the Company
 and such disposal has, in our opinion, not affected the going concern
 status of the Company.
 
 (ii) (a) As explained to us the inventories have been physically
 verified during the year by the Management. In our opinion the
 frequency of verification is reasonable.
 
 (b) In our opinion and according to the information and explanations
 given to us, the procedures of physical verification of inventories
 
 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 has maintained records of inventory. The discrepancies
 noticed on verification between the physical stocks and the book
 records have been dealt with in the books of account.
 
 (iii) (a) The Company has not granted any loan secured or unsecured to
 companies, firms or other parties covered in the Register maintained
 under Section 301 of the Companies Act, 1956, during the year, except
 unsecured loans to its wholly owned foreign subsidiary as shown below:
 
 Company              Unsecured Loan Granted
                    during the year (Net of Repayments)
                                 In Rupees
 
 Aban Holdings Pte., Ltd.,
 Singapore                      1849,60,82,421/-
 
 Amount Outstanding including   Maximum Amount Outstanding
 Interest receivable and        including interest receivable
 exchange difference at the          during the Year
 end of the year
 In Rupees                               In Rupees
 
 2209,54,66,019/-*               2209,54,66,019/-
 
 * The amount excludes amount of Rs. 6 Crore that is in the nature of
 advance
 
 (b) The rate of interest and other terms and conditions of such loan
 are, in our opinion, prima facie, not prejudicial to the interest of
 the Company.
 
 (c) The repayment of principal and payment of Interest is “on demand”
 as per the loan agreement.
 
 (d) The loan given by the Company to its wholly owned foreign
 subsidiary company is repayable on demand and therefore the question of
 overdue amount does not arise.
 
 (e) The Company has not taken any loan secured or unsecured from
 Companies, firms or other parties covered in the Register maintained
 under Section 301 of the Companies Act, 1956 during the year.
 
 (f) Since the Company has not taken any loan from Companies, firms or
 other parties covered in the Register maintained under Section 301 of
 the Companies Act, 1956, 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 explanations
 given to us, there are adequate internal control procedures
 commensurate with the size of the Company and the nature of its
 business with regard to purchases of inventories and fixed assets and
 for the sale of services and wind power. Further, on the basis of our
 examination and according to the information and explanation given to
 us, we have neither come across nor have been informed of any instance
 of major weakness in the aforesaid internal control system.  (v) (a)
 According to the information and explanations given to us, we are of
 the opinion that transactions that need to be entered into the Register
 maintained under Section 301 of the Companies Act, 1956 have been
 entered in the said Register.  (b) In our opinion and according to the
 information and explanations given to us, the transactions made in
 pursuance of contracts or arrangements entered in the Register
 maintained under Section 301 of the Companies Act, 1956 have been made
 at prices which are reasonable having regard to prevailing market
 prices at the relevant time.  (vi) The Company has not accepted any
 deposits during the year from the public within the meaning of the
 provisions of Section 58A and 58AA of the Companies Act, 1956 or any
 other relevant provisions of the Act and the rules made thereunder.
 
 (vii) In our opinion, the Company has an internal audit system
 commensurate with the size and nature of its business.
 
 (viii) The Central Government has prescribed maintenance of Cost
 Records under Section 209 (1) (d) of the Companies Act, 1956 in
 
 respect of the wind power generating activity of the Company. We have
 broadly reviewed the accounts and records of the Company
 
 in this connection and 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 the same.  (ix)
 (a) According to the information and explanations given to us and on
 the basis of our examination of the books of account, the Company is
 regular in depositing with appropriate authorities undisputed statutory
 dues including Provident Fund, Investor Education and Protection Fund,
 Income Tax, Customs Duty, Sales Tax, Value Added Tax, Wealth Tax,
 Service Tax, Cess and other material statutory dues applicable to it.
 We are informed that the Employees’ State Insurance Scheme is not
 applicable to the Company. According to the information and
 explanations given to us, no undisputed amounts payable in respect of
 above were in arrears, as at 31st March 2009 for a period of more than
 six months from the date they became payable.
 
 (b) According to the information and explanations given to us, there
 are no dues of Income Tax, Customs Duty, Sales Tax, Value Added Tax,
 Wealth Tax, Service Tax and Cess, which have not been deposited with
 appropriate authorities on account of any dispute.  (x) The Company has
 no accumulated losses as at 31st March 2009 and has not incurred cash
 losses in the financial year under
 
 report or in the immediately preceding financial year.  (xi) Based on
 our audit procedures and according to the information and explanations
 given to us, the Company has not defaulted in
 
 repayment of dues to banks. The company has taken loan from a public
 financial institution during the year.The same has not
 
 become due and repayable during the year. In April 2006, the Company
 has issued 1161 Foreign Currency Convertible Bonds.
 
 620 bonds have been converted into Equity Shares upto the end of the
 year under our audit. The balance amount has not become
 
 due for payment as at the close of the year, though the balance has
 already become due for optional conversion.  (xii) Based on our
 examination of the records and the information and explanations given
 to us, the Company has not granted any
 
 loans and / or 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 or a nidhi/mutual benefit fund/ society.
 Therefore, the provisions of clause 4 (xiii) of
 
 the Order are not applicable to the Company.  (xiv) In our opinion, the
 Company is not dealing in or trading in shares, securities, debentures
 and other investments. Accordingly, the
 
 provisions of clause 4 (xiv) of the Order are not applicable to the
 Company.  (xv) The Company has given guarantees for loans taken by a
 subsidiary of its wholly owned foreign subsidiary from banks. According
 
 to the information and explanations given to us, we are of the opinion
 that the terms and conditions thereof are not prima – facie
 
 prejudicial to the interest of the Company.  (xvi) In our opinion and
 according to the information and explanations given to us, the term
 loans taken by the Company have been
 
 applied for the purposes for which they were obtained.  (xvii)
 According to the information and explanations given to us and on an
 overall examination of the Balance Sheet of the Company we
 
 report that, no funds raised on short-term basis have been used for
 long-term investment.  (xviii)The Company has allotted Equity Shares
 under Employee Stock Option Scheme to its employees and employees of
 its Indian
 
 subsidiary company in accordance with SEBI guidelines during the year.
 The price fixed by the Board for these shares is reasonable
 
 and not prejudicial to the interest of the Company.  (xix) No
 debentures have been issued by the Company during the year. Hence the
 provisions of clause 4 (xix) of the Order are not
 
 applicable to the Company.  (xx) During the year the Company has not
 raised money by way of public issue. Hence the provisions of clause 4
 (xx) of the Order are
 
 not applicable to the Company.  (xxi) During the course of our
 examination of the books of account, we have neither come across any
 instance of fraud on or by the
 
 Company, either noticed or reported during the year, nor have we been
 informed of any such case by the management.
 
 Schedules annexed to and forming part of the accounts
 
 Notes: a. 15,00,00,000, 8% Non-Convertible Cummulative Redeemable
 Preference Shares will be redeemed at par on 16-06-2011, 16-06-2012 &
 16-06-2013 in the ratio of 30:30:40 respectively.
 
 b. 15,60,00,000, 9% Non-Convertible Cumulative Redeemable Preference
 Shares will be redeemed at par at the end of 5th year from the date of
 allotment of shares as per details given below:
 
 5,50,00,000 shares will be redeemed on 29-12-2011 4,00,00,000 shares
 will be redeemed on 28-02-2012 6,10,00,000 shares will be redeemed on
 30-03-2012 The Company has call option at the end of 3rd year (2009-10)
 to call Non Convertible Cumulative Redeemable Preference Shares at par.
 
 c. 2,00,00,000, 9.25% Non-Convertible Cumulative Redeemable Preference
 Shares will be redeemed at par on 03-08-2013.
 
 The Company has call option at the end of 3rd year (2010-11) to call
 Non Convertible Cumulative Redeemable Preference Shares at par.
 
 d. In April 2006, the Company has issued 1,161 unsecured Foreign
 Currency Convertible Bonds(FCCB) of Japanese Yen (JPY) 10,000,000 each
 aggregating JPY 11.61 Billion. As per the terms of issue, the bond
 holders shall have the right to convert the Bonds into equity shares on
 or after 19th April 2007 upto and including 8th April 2011. The
 conversion price of Equity Shares of Rs.2/- each for the purpose of the
 Bond has been fixed at Rs.2,789.04 per equity share. As on 31-03-2009,
 620 bonds have been converted into 8,51,055 Equity shares. Outstanding
 Bonds as at 31-03- 2009 - 541 Bonds - (See Note 19)
 
                                       For FORD, RHODES, PARKS & CO.,
                                                Chartered Accountants
 Place : Chennai                                   CA. R. SUBRAMANIAN
 Date : 31st July, 2009                                       Partner
                                                Membership No: 016059