Bajaj Hindusthan

We have audited the attached Balance Sheet of BAJAJ HINDUSTHAN LIMITED,
 as at 30th September, 2008, the Profit and Loss Account annexed thereto
 and also the Cash Flow Statement of the Company for the year ended on
 that date. 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.
 
 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 mis-statement. 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 reasonable basis for
 our opinion.
 
 2.  As required by the Companies (Auditors Report) Order, 2003 (CARO,
 2003), (as amended) issued by the Central Government of India in terms
 of Section 227(4A) of the Companies Act, 1956, we annex hereto a
 Statement on the matters specified in paragraph 4 and 5 of the said
 Order.
 
 3.  Further to our comments in the 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 such
 books;
 
 (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 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, and taken on record by the Board of Directors, we report
 that none of the Directors are disqualified, as on 30th September,
 2008, 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 attention to Note 5 (c) on
 Schedule 16 to the financial statements regarding remuneration paid to
 the managerial personnel which is in excess of the limits laid down
 under Schedule XIII to the Companies Act, 1956 and is subject to the
 approval of Central Government, for which an application has been made.
 Pending approval, the excess remuneration is being held in trust for
 the Company by the respective managerial personnel.
 
 (g) In our opinion and to the best of our information and according to
 the explanations given to us, the said 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 the affairs of
 the Company as at 30th September 2008;
 
 (b) in the case of the Profit and Loss Account, of the loss for the
 year ended on that date; and
 
 (c) in the case of Cash Flow Statement, of the cash flows for the year
 ended on that date.
 
 Annexure referred to in paragraph 2 of our Auditors Report of even
 date on the Accounts for the year ended 30th September, 2008 of Bajaj
 Hindusthan Limited.
 
 On the basis of such checks as we considered appropriate and in terms
 of information and explanations given to us, we state that:-
 
 i) The Company has maintained proper records showing full particulars
 including quantitative details and situation of fixed assets. Additions
 and deductions made during the year as per Companys practice, will be
 entered in the said records during the current year (i.e.2008-2009). As
 explained to us, fixed assets have not been physically verified by the
 Management this year also and, as such, discrepancy, if any, could not
 be ascertained;
 
 As per the information and explanation given to us on our enquiries,
 the disposal of assets during the year were not substantial so as to
 have an impact on the operations of the company, or affect its going
 concern;
 
 ii) (a) As explained to us, the inventories have been physically
 verified by the management at reasonable intervals during the year
 and/or at the close of the year;
 
 (b) As explained to us, the procedures of physical verification of the
 inventory followed by the management 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 inventory records produced to us for our
 verification, we are of the opinion that the Company is maintaining
 proper records of its inventory. Further, discrepancies noticed on
 physical verification of inventories, if any, referred to above, as
 compared to book records, though not material, have been properly dealt
 with in the books of account;
 
 iii) The Company has not taken/granted any loans, secured or unsecured
 from/to Companies, firms or other parties listed in the register
 maintained under Section 301 of the Companies Act, 1956, except loans
 granted on current account to its Subsidiaries, the rate of interest
 and terms and conditions were not prima-facie prejudicial to the
 interest of the Company. The outstanding dues as at the year end from
 Subsidiary Company amounted to Rs. 3910.92 million.
 
 iv) In our opinion and according to the information and explanations
 given to us, there are generally adequate internal control system,
 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. There was no sale of services during the year.
 During the course of our audit, no major weaknesses in internal control
 had come to our notice;
 
 v) (a) On the basis of the audit procedures applied by us, and
 according to the information and explanations given to us on our
 enquiries on this behalf and the records produced to us for our
 verification, the contracts or arrangements that need to be entered
 into the register required to be maintained under Section 301 of the
 Companies Act, 1956 have been so entered;
 
 (b) The transactions so entered, aggregating in excess of Rs.5,00,000/-
 in respect of each party during the year, have been, in our opinion, as
 per the information and explanation given to us, made at prices, which
 are reasonable, having regard to the prevailing market prices available
 with the Company for such transactions or prices at which transactions
 for similar goods have been made with other parties 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
 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. According to
 the information and explanations given 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 maintained by the
 Company pursuant to the rules made by the Central Government for
 maintenance of cost records under Section 209(1 )(d) of the Companies
 Act, 1956 in respect of Companys products to which the said rules are
 made applicable 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
 generally regular in depositing with statutory authorities, 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
 material statutory dues applicable to it. According to the information
 and explanations given to us, no undisputed amounts payable in respect
 of income tax, sales tax, wealth tax, service tax, custom duty excise
 duty and cess were outstanding, at the year end for a period of more
 than six months from the date they became payable.
 
 (b) On the basis of our examination of the documents and records of the
 Company and the information and explanations given to us upon our
 inquiries in this regard, disputed amounts payable in respect of
 Income-tax, Sales Tax, Wealth-tax, Service tax, Customs Duty and Excise
 Duty / cess not deposited with the appropriate authorities are as
 follows:
 
 Sr. STATUTES  FORUMS BEFORE WHOM PENDING                         TOTAL
 NO
              Commissioner    Tribunal       High     Supreme
              Appeals                       Court       Court
              Rs.             Rs.             Rs.         Rs.       Rs.
 
 1  Sales Tax    11,86,213    1,84,240  33,00,612        -    46,71,065
 
 2  Excise 
    Duty      26,25,50,170  6,62,29,157         -        - 32,87,79,327
 
 x) Based on the information and explanations given by the management,
 we are of the opinion that the Company has not defaulted in repayment
 of dues to financial institutions, banks or debenture holders.
 
 xi) All investments held by the Company at the close of the year are
 held in its own name.
 
 xii) The Company has given guarantee for loans taken by its subsidiary
 from a bank, the terms and conditions whereof in our opinion are not
 prima facie prejudicial to the interest of the Company.
 
 xiii) Based on the information and explanations given to us by the
 management the term loans were applied for the purpose for which the
 loans were obtained.
 
 xiv) According to the information and explanations given to us and on
 overall examination of the balance sheet of the Company, we report that
 no funds on short- term basis have been used for long- term investment.
 
 xv) According to the information and explanations given to us and
 records examined by us, in respect of secured debentures issued during
 the year, security/charge is pending for creation.
 
 xvi) As per the information and explanation given to us on our
 enquiries in this behalf, there were no frauds on or by the Company has
 been noticed or reported during the year.
 
 In view of the nature of activities 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 pre-requisite to the reporting
 requirement of clauses (x), (xii), (xviii), and (xx) the said clauses
 are, at present, not applicable
 
                                                 For and on behalf of
                                                         DALAL & SHAH
                                                Chartered Accountants
 
                                                        SHISHIR DALAL
                                                              Partner
                                                 Membership No. 37310
 Mumbai,
 December 21, 2008.