1.  We have audited the attached Balance Sheet of BALKRISHNA INDUSTRIES
 LIMITED, as at 31st March, 2011 and also the Profit and Loss Account
 and the Cash Flow Statement for the year ended on that date annexed
 thereto. These financial statements are the responsibility of the
 Companys management.  Our responsibility is to express an opinion on
 these financial statements based on our audit.
 
 2.  We conducted our audit in accordance with auditing standards
 generally accepted in India. Those standards require that we plan and
 perform the audit to obtain reasonable assurance about whether the
 financial statements are free of material misstatement. An audit
 includes examining, on a test basis, evidence supporting the amounts
 and disclosures in the financial statements. An audit also includes
 assessing the accounting principles used and significant estimates made
 by management, as well as evaluating the overall financial statement
 presentation. We believe that our audit provides a reasonable basis for
 our opinion.
 
 3.  As required by the Companies ( Auditors Report ) Order, 2003 (
 the Order ) issued by the Central Government of India in terms of
 sub-section (4A) of Section 227 of the Companies Act, 1956, ( the Act
 ), we enclose in the Annexure a statement on the matters specified in
 paragraphs 4 and 5 of the said Order.
 
 4.  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, 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 Act;
 
 v) On the basis of written representations received from the directors,
 as on 31 st March, 2011 and taken on record by the Board of Directors,
 we report that none of the directors is disqualified as on 31 st March,
 2011 from being appointed as a director in terms of clause (g) of sub-
 section (1) of Section 274 of the Act;
 
 vi) 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
 Accounting Policies and Notes to Accounts, appearing in Schedule R to
 the accounts, 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 31st March, 2011;
 
 b.  in the case of the Profit and Loss Account, of the PROFIT 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 to the Auditors Report
 
 Referred to in paragraph 3 of our Report of even date on the accounts
 of Balkrishna Industries Limited for the year ended 31st March, 2011.
 
 i) a) The Company has maintained proper records showing full
 particulars, including quantitative details and situation of fixed
 assets.
 
 b) As explained to us, physical verification of these fixed assets is
 being conducted in a phased programme by the management designed to
 cover all the assets over a period of three years, which in our opinion
 is reasonable having regard to the size of the Company and the nature
 of assets. According to the information and explanations given to us no
 material discrepancies were noticed on such verification.
 
 c) The fixed assets disposed off during the year, in our opinion, do
 not constitute 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 were physically verified
 during the year at intervals by the management.  The goods in the
 possession of third parties as on 31st March, 2011 have been verified
 by the management with
 
 reference to the confirmation obtained from the third parties. 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 were reasonable and adequate in relation to
 the size of the Company and the nature of its business.
 
 c) In our opinion and according to the information and explanations
 given to us, the Company has maintained proper records of its
 inventories and the discrepancies noticed on such physical verification
 between physical stocks and book records were not material considering
 the operations of the Company and the same have been properly dealt
 with in the books of account.
 
 iii) a) As per the information and explanations given to us, the
 Company in earlier year had granted unsecured loan to one party, a
 wholly owned subsidiary, covered in the register maintained under
 Section 301 of the Act. The maximum amount involved during the year was
 Rs.1,23,67,690 and the year-end balance of the loan granted was Rs.
 1,23,67,690.
 
 b) According to the information and explanations given to us, the terms
 and conditions of the loans, including that of not charging the
 interest to the subsidiary, in our opinion and having regard to the
 holding and subsidiary company relationship, are not, prima facie,
 prejudicial to the interest of the Company.
 
 c) In our opinion and as per the information and explanations given to
 us, the Company was regular in receipt of the principal amounts
 whenever demanded. However ,no such demand has been made during the
 year. Since the loan was interest free the question of receipt of
 interest does not arise.
 
 d) As per the information and explanations given to us, the outstanding
 amount of the loan given was not overdue.
 
 e) The Company has not taken any loan, secured or unsecured, from any
 party covered in the register maintained under Section 301 of the Act.
 
 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 nature of its business for the
 purchase of inventory and fixed assets and for sale of goods. During
 the course of audit, we have not observed any continuing failure to
 correct major weaknesses in internal control system.
 
 v) a) Based on the audit procedures applied by us and according to the
 information and explanations given to us, we are of the opinion that
 the particulars of contracts or arrangements referred to in Section 301
 of the Act have been entered in the register required to be maintained
 under that Section.
 
 b) In our opinion and as per 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 Act and
 exceeding the value of rupees five lakhs in respect of any party during
 the year have been made at prices which are reasonable having regard to
 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 deposits in terms of the
 provisions of Section 58A, 58AA and any other relevant provisions of
 the Act and the rules framed there under.
 
 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 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 Act 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 records with a view to determine whether
 they are accurate or complete.
 
 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 has
 been generally regular in depositing undisputed statutory dues
 including Provident Fund, Investor Education and Protection Fund,
 Employees State Insurance, Income Tax, Sales Tax, Service Tax, Custom
 Duty, Excise Duty, Cess and other material statutory dues, to the
 extent applicable, during the year with the appropriate authorities
 though there have been delays in few cases. However, as at 31st March,
 2011 there were no undisputed dues outstanding for a period of more
 than six months from the date they became payable. During the year, the
 Company was not required to deposit any dues in respect of Wealth Tax.
 
 b) According to the information and explanations given to us, the dues
 in respect of Income Tax, Sales Tax and Excise Duty that have not been
 deposited with the appropriate authorities on account of dispute and
 the forum where the disputes are pending are given below:- i
 
 Name of Statute              Nature ofDues           Amount( Rs.)
 
 Income Tax Act               Income Tax               20,95,155
 
                             (Including Interest     3,85,06,349
                              and Penalty)
                                                       52,24,035
 
 Sales Tax Act                Sales Tax                 2,58,000
                              (Including Interest    2,36,24,899
                              and Penalty)           1,49,63,925
 
 Central Excise Act          Excise Duty               14,02,970
                             (Including Interest       79,88,062
                             and Penalty)            3,46,67,873
                                                     1,11,03,180
                                                     2,21,70,315
 
 
 Name of Statute             Period to which the     Forum where dispute
                             Amount Relates          is pending
 
 Income Tax Act                  2002-03             Tribunal
 
                                 2004-05             Commissioner
 
                                 2007-08             (Appeals)
 
                                 2003-04            Assessing Authority
 
                                 2007-08
 
 Sales Tax Act                   2004-05             High Court
 
                               1996-1998             Tribunal
 
                               1999-2002
 
                               1997-1999           Commissioner (Appeals)
 
                               2002-2005
 
 Central Excise Act              2002-06             High Court
 
                                 2006-07             Govt. of India,
 
                                                    Ministry of Finance,
                                                     Department of
                                                     Revenue (Revision)
 
                               2003-2009             Tribunal
 
                               1994-1996             Commissioner
 
                               1999-2001             (Appeals)
 
                               2005-2010
 
                               1994-2004             Assessing Authority
 
 As per the information given to us, there are no dues of Service Tax,
 Custom Duty or Cess, which have not been deposited on account of any
 dispute. The Company is not liable to pay Wealth Tax.
 
 x) The Company does not have any accumulated losses at the end of the
 current financial year and has not incurred cash losses during 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, we are of the opinion that the Company has
 not defaulted in repayment of dues to banks or bond 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/society. Therefore, the provisions of clause 4 (xiii) 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, the provisions of clause 4 (xiv) of the
 Order are not applicable to the Company.
 
 xv) As per the information and explanations given to us, the Company
 has not given any guarantee for loans taken by others from bank or
 financial institutions.
 
 xvi) As per the information and explanations given to us, in our
 opinion, the term loan has been applied for the purpose for which it
 was obtained.
 
 xvii) According to the information and explanations given to us and on
 an overall examination of the balance sheet of the Company, in our
 opinion, no funds raised on short-term basis have 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 Act during the year.
 
 xix) The Company has not issued any debentures during the year.
 
 xx) During the year the Company has not raised funds by public issue.
 Therefore, the provisions of clause 4 (xx) of the Order are not
 applicable to the Company.
 
 xxi) Based upon the audit procedures performed and to the best of our
 knowledge and belief 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 Jayantilal Thakkar & Co.
 
                                                  Chartered Accountants
 
                                              ( Firm Reg. No. 104133W )
 
                                                     ASHOK J. THAKKAR
 
 Mumbai,                                                      Partner
 
 Dated : 20th May, 2011                         Membership No. 007860