Bajaj Auto

We have audited the attached Balance Sheet of BAJAJ AUTO LIMITED, as at
 31 March 2009 and also the annexed Profit and Loss Account and the
 statement of Cash Flows of the company for the year ended on that date.
 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.
 
 (1) We conducted our audit in accordance with auditing standards
 generally accepted in India. Those Standards require that we plan and
 perform the audit to obtain reasonable assurance about whether the
 financial statements are free of material misstatements. An Audit
 includes examining, on a test basis, evidence supporting the amounts
 and disclosures in 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.
 
 (2) As required by the Companies (Auditor’s Report) Order, 2003 (CARO,
 2003), issued by the Central Government of India in terms of Section
 227(4A) of the Companies Act, 1956, we annexe hereto a Statement on the
 matters specified in paragraphs 4 of the said Order;
 
 (3) Further to our comments in Annexure referred to in paragraph 2
 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 the
 Books of the company;
 
 (c) The Balance Sheet, Profit and Loss Account and the Cash Flow
 Statement dealt with by the report are in agreement with the Books of
 Account of the company;
 
 (d) In our opinion, the Balance Sheet, the Profit and Loss Account and
 the Cash Flow Statement dealt with by this report comply with the
 Accounting Standards referred to in Section 211 (3C) of the Companies
 Act, 1956, to the extent applicable.
 
 (e) On the basis of the written representations received from the
 Directors as at 31 March 2009, and taken on record by the Board of
 Directors, we report that none of the Directors are disqualified as on
 31 March 2009 from being appointed as a director in terms of clause (g)
 of sub-section (1) of section 274 of the Companies Act, 1956.
 
 (f) Without qualifying our opinion, we draw reference to
 
 1] Note No. 10 a) – relating to change in the method of accounting for
 compensation payable for voluntary retirement of workmen by recognising
 the same as an expense over a period of two years, as against the past
 practice of recognising the same as an expense in the year of
 retirement and hence Rs 1,833 million has been carried forward for
 recognition as an expense in the subsequent year, as detailed in the
 note.
 
 2] Note No. 10 b) – relating to change in the method of recognising
 gains and losses of derivative instruments to hedge highly probable
 forecast transactions, by applying the principles of hedge accounting
 as detailed in the note.
 
 (g) In our opinion and to the best of our information and according to
 the explanations given to us, the said Financial Statements, read
 together with the notes thereon, give the information required by the
 Companies Act, 1956, in the manner so required and present 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 the affairs of
 the company as at 31 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 of the company for the year ended on that
 date
 
 Annexure to the Auditors’ Report:
 
 Statement referred to in Paragraph 2 of the Auditors’ Report of even
 date to the Members of BAJAJ AUTO LIMITED on the Accounts for the year
 ended 31 March 2009.
 
 On the basis of the records produced to us for our verification /
 perusal, such checks as we considered appropriate, in terms of
 information and explanations given to us on our enquiries, we state
 that:
 
 i) (a) The company has maintained proper records showing full
 particulars including quantitative details and situation of fixed
 assets.
 
 (b) As explained to us, considering the nature of the Fixed Assets and
 to ensure minimum disruptions in production schedules, the fixed assets
 have been physically verified by the management at reasonable intervals
 during the year in accordance with the verification policy adopted by
 the company, whereby all the assets are verified, in a phased manner,
 once in a block of three years. According to the information and
 explanations given to us and the records produced to us for our
 verification, discrepancies noticed on such physical verification were
 not, in our opinion, material and the same have been properly dealt
 with in the Books of Account.
 
 (c) As per the information and explanations given to us on our
 enquiries the disposal of assets during the year were not substantial
 and would not have an impact on the operations of the company.
 
 ii) (a) The inventories have been physically verified by the management
 at reasonable intervals during the year and partially at the close of
 the year;
 
 (b) The procedures of physical verification of inventories followed by
 the management as explained to us are, in our opinion, reasonable and
 adequate in relation to the size of the company and the nature of its
 business;
 
 (c) According to the records produced to us for our verification, which
 in our opinion were adequately maintained, the discrepancies noticed on
 physical verification of inventories referred to above, as compared to
 book records, though not material, have been properly dealt with in the
 books of account;
 
 iii) (a) As per the information and explanations given to us and the
 records produced to us for our verification, the company has not
 granted loans, secured or unsecured, to any company, firms or other
 parties covered in the register maintained under section 301 of the
 Companies Act, 1956.
 
 (b) 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.
 
 iv) In our opinion and according to the information and explanations
 given to us, there are adequate internal control systems commensurate
 with the size of the company and the nature of its business with regard
 to the purchase of inventory and fixed assets and for the sale of goods
 and services, if any. As per the information given to us, no major
 weaknesses in the internal controls have been identified by the
 management or the internal audit department of the company during the
 year. During the course of our audit, nothing had come to our notice
 that may suggest a major weakness in the internal control systems of
 the company;
 
 v) (a) On the basis of the audit procedures performed by us and
 according to the information and explanations given to us and on our
 enquiries on this behalf and the records produced to us for our
 verification, the particulars of contracts and arrangements required to
 be entered into the register in pursuance of section 301 of the
 Companies Act, 1956 have been so entered.
 
 (b) The transactions effected in pursuance of such contracts and
 arrangements, as the case may be, aggregating in excess of Rs.500,000/-
 in respect of each party during the year, have been, in our opinion, as
 per the information and explanations given to us, made at prices which
 are reasonable having regard to prevailing market prices as available
 with the company for such transactions or prices at which transactions,
 if any, for similar goods have been made with other parties at the
 relevant time;
 
 vi) In our opinion, the company has complied with the directives issued
 by the Reserve Bank of India and the provisions of Section 58A of the
 Companies Act,1956, other relevant provisions of the said Act including
 the Companies (Acceptance of Deposits) Rules, 1975, where applicable,
 with regard to the deposits accepted by it from the public. Since the
 company has not defaulted in repayments of deposits, compliance of
 Section 58AA or obtaining any order from the Company Law Board,
 National Company Law Tribunal or Reserve Bank of India or any other
 Court or Tribunal, does not arise;
 
 vii) On the basis of the internal audit reports broadly reviewed by us,
 we are of the opinion that, the company has an adequate internal audit
 system commensurate with the size and nature of its business;
 
 viii) We have broadly reviewed the Books of Account 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 are of the opinion that prima facie the prescribed
 accounts and records have been made and maintained. We have, however,
 not made a detailed examination of the records with a view to determine
 whether they are accurate;
 
 ix) (a) According to the records of the company, the company has been
 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, Customs
 Duty, Excise duty, Cess and other Statutory dues with the appropriate
 authorities;
 
 (b) According to the records of the company and the information and
 explanations given to us & upon our enquiries in this regards, disputed
 dues in respect of Sales Tax, Income-tax, Wealth-tax, Service Tax,
 Customs Duty, Excise Duty and Cess unpaid as at the last day of the
 financial year, are as follows
 
 Statutes                   FORUM BEFORE WHOM PENDING
                    Commissioner     Tribunal         High
                    Appeals                           Court
                    Rs. In Million   Rs. In Million   Rs. In Million
 
 Sales Tax           2,511.4             0.7               63.0
 Income Tax                -               -                  -
 Wealth Tax                -               -                  -
 Service Tax               -             1.9               37.8
 Customs Duty              -             2.4               38.4
 Excise                  9.9           154.4               16.9
 Octroi                  6.9               -                  -
 
    Supreme            Total
    Court
    Rs. In Million     Rs. In Million
 
     -                2,575.1
     -                      -
     -                      -
     -                   39.7
     -                   40.8
    62.6                243.8
    18.8                 25.7
 
 x) The company has not defaulted in repayment of dues to banks. The
 company has not borrowed any sums from Financial Institutions nor
 through debentures;
 
 xi) The company has, not granted any loans and advances on the basis of
 security by way of pledge of shares, debentures and other investments
 
 xii) The company, in our opinion, has maintained proper records and
 contracts with respect to its investments wherein timely entries of
 transactions are made.
 
 xiii) No guarantees have been given by the company for loans taken from
 financial institutions and / or banks by others, are, in our opinion,
 not prejudicial to the interest of the company;
 
 xiv) The company has raised working capital funds, which are used for
 the purpose as and when needed. Internal generations have been mainly
 deployed in fixed assets and investments and partially ploughed back
 into the business.
 
 xv) As per the information and explanations given to us and on our
 enquiries on this behalf there were no frauds on or by the company
 which have been noticed or reported during the year,
 
 In view of the nature of business carried on by the company clause no
 (xiii) of CARO, 2003 is not applicable to the company. Further in view
 of the absence of conditions prerequisite to the reporting requirement
 of clauses (iii) (b), (c), (d), (x), (xvi), (xviii), (xix) and (xx) the
 said clauses are, at present, not applicable.
 
                                               For and on behalf of
                                                       DALAL & SHAH
                                              Chartered Accountants
 
                                                         Anish Amin
                                                            Partner
                                               Membership No: 40451
 Mumbai: 21 May 2009.