1.  We have audited the attached Balance Sheet of BGR ENERGY SYSTEMS
 LIMITED as at March 31, 2011 and the related Profit and Loss account and
 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.
 
 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 signifcant 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’), as amended, 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
 specifed in paragraphs 4 and 5 of the said Order.
 
 4.  Further to our comments in the report referred to in paragraph 3
 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 it appears from our examination of those
 books;
 
 c) The Balance Sheet, Profit and Loss Account and the 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 the
 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;
 
 e) On the basis of the written representations received from the
 directors, as on March 31, 2011, and taken on record by the Board of
 Directors, we report that none of the directors are disqualified as on
 March 31, 2011 from being appointed as a director in terms of clause
 (g) of sub-section (1) of Section 274 of the Act;
 
 f) In our opinion, there were no dues on account of cess under Section
 441A of the Act, since the aforesaid section has not yet been made
 effective by the Central Government of India as on March 31, 2011; and
 
 g) In our opinion and to the best of our information and according to
 the explanations given to us, the said 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:
 
 (i) in the case of the Balance Sheet, of the state of affairs of the
 Company as at March 31, 2011;
 
 (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 fow statement, of the cash fows for the
 year ended on that date.
 
 ANNEXURE TO THE AUDITORS’ REPORT
 
 Annexure referred to in paragraph 3 of the Auditors’ Report to the
 Members of BGR ENERGY SYSTEMS LIMITED for the year ended March 31,
 2011. We report that:
 
 (i) (a) The Company is maintaining proper records showing full
 particulars, including quantitative details and situation of fxed
 assets;
 
 (b) The Company has conducted physical verifcation of fxed assets at
 reasonable intervals and no material discrepancies were noticed on such
 verifcation; and
 
 (c) In our opinion, the fxed assets disposed off during the year were
 not substantial and therefore, do not affect the going concern
 assumption.
 
 (ii) (a) The management has conducted physical verifcation of inventory
 at reasonable intervals during the year;
 
 (b) In our opinion, the procedures of physical verifcation of inventory
 followed by the management are reasonable and adequate in relation to
 the size of the company and the nature of its business; and
 
 (c) The Company is maintaining proper records of inventory.  There are
 no major material discrepancies noticed on physical verifcation between
 book stock and physical stock.
 
 (iii) (a) The Company has granted interest free unsecured loans to 6
 parties covered in the register maintained under Section 301 of the
 Act. The maximum amount involved during the year and the
 year-end-balance of these loans amounts to Rs. 1,432.45 lakhs and Rs.
 1,418.33 lakhs respectively;
 
 (b) In our opinion and as per the information and explanations given to
 us, the terms and conditions of the said loans are not prima facie
 prejudicial to the interest of the company;
 
 (c) In our opinion and on verifcation of the books of account, in
 respect of the above mentioned loans, there has been no regular
 repayment of the principal amount during the year;
 
 (d) In our opinion, in respect of the above mentioned loans, reasonable
 steps have been taken by the company for recovery of the principal
 amount due. The outstanding principal amount as on March 31, 2011 is Rs.
 1,418.33 lakhs;
 
 (e) According to the information and explanations given to us, the
 Company has not availed any loans, secured or unsecured, from
 companies, frms or other parties covered in the register maintained
 under Section 301 of the Companies Act, 1956. In view of the foregoing,
 the question of reporting on Clauses 4(iii)(f) and 4(iii)(g) of the
 said Order does not arise.
 
 (iv) In our opinion and according to the information and explanations
 given to us, there exists an adequate internal control system
 commensurate with the size of the Company and the nature of its
 business, for the purchase of inventory, fxed assets and for the sale
 of goods and services. Further, on the basis of our examination of the
 books and records of the Company, and according to the information and
 explanations given to us, we have neither come across nor have been
 informed of any continuing failure to correct major weaknesses in
 aforesaid internal control system.
 
 (v) (a) As per the information and explanations furnished by the
 management, we are of the opinion that the particulars of contracts or
 arrangements referred to in Section 301 of the Act that need to be
 entered into the register maintained u/s. 301 have been entered; and
 
 (b) 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) The Company has not accepted any deposits from the public within
 the meaning of Sections 58A, 58AA or any of the relevant provisions of
 the Act and rules framed thereunder.
 
 (vii) In our opinion, the Company has an internal audit system
 commensurate with the size of the Company and nature of its business.
 
 (viii) There is no order or notifcation by the Central Government
 prescribing maintenance of cost records by the Company u/s.  209 (1)(d)
 of the Companies Act, 1956.
 
 (ix) (a) In our opinion and according to the information given to us
 and on the basis of our examination of the records of the Company,
 amounts deducted/accrued in the books of account in respect of
 undisputed statutory dues including Provident Fund, Employees’ State
 Insurance, Profession Tax, Income-tax, Sales-tax, VAT, Works Contract
 Tax, Wealth Tax, Service tax, Customs Duty, Excise Duty, Cess and other
 statutory dues have generally been regularly deposited during the year
 by the company with the appropriate authorities. As explained to us,
 the Company did not have any dues on account of Investor Education and
 Protection Fund.
 
 According to the information and explanations given to us, no
 undisputed amounts payable in respect of Provident Fund, Employees’
 State Insurance, Profession Tax, Income-tax, Sales-tax, VAT, Works
 Contract Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, Cess
 were in arrears as at March 31, 2011 for a period of more than six
 months from the date they became payable; and
 
 (b) As per the information and explanations provided to us, the
 following are the details of Disputed Tax Liabilities and the forum in
 which they are pending:
 
 Financial   amount   Type of Tax    Forum in which the 
 year        Rs. in     Liability      appeal is lying in
              lakhs
 
 1997-98      39.23   Sales Tax      Honorable High Court,
                                     Andhra Pradesh
 
 1998-99       0.12   Sales Tax      Commercial Tax Officer,
                                     Andhra Pradesh
 
 1999-00       0.11   Sales Tax      Commercial Tax Officer,
                                     Tamilnadu
 
 2001-02       2.21   Sales Tax      Sales Tax Appellate
                                     Tribunal, Tamilnadu
 
 2004-05       5.57   Sales Tax      Sales Tax Appellate
                                     Tribunal, Vishakapatnam,
                                     Andhra Pradesh
 
 2005-06       9.95   Sales Tax      Appellate Deputy
                                     Commissioner, Guntur,
                                     Andhra Pradesh
 
 2005-06      16.96   Central Sales  Sales Tax Appellate
                       Tax           Tribunal, Vishakapatnam,
                                     Andhra Pradesh
 
 2005-06      39.98   Sales Tax      Deputy Commissioner
                                     Appeals, Ernakulam,
                                     Kerala
 
 2006-07       2.59   Sales Tax      Sales Tax Appellate
                                     Tribunal, Vishakapatnam,
                                     Andhra Pradesh
 
 2006-07       2.69   Sales Tax      Appellate Deputy
                                     Commissioner, Guntur,
                                     Andhra Pradesh
 
 2007-08       7.43   Sales Tax      Sales Tax Appellate
                                     Tribunal, Vishakapatnam,
                                     Andhra Pradesh
 
 2007-08      41.75   Service Tax    Commissioner Appeals,
                                     Central Excise, Chennai,
                                     Tamilnadu
 
 2007-08      19.37   Sales Tax      Appellate Deputy
                                     Commissioner, Kota,
                                     Rajasthan
 
 2007-08       2.11   Sales Tax      Appellate Deputy
                                     Commissioner, Guntur,
                                     Andhra Pradesh
 
 2007-08    3779.69   Income Tax     Commissioner Appeals,
                                     Guntur, Andhra Pradesh
 
 2008-09      13.17   Entry Tax      Honorable High Court of
                                     Rajasthan
 
 (x) The Company does not have any accumulated losses at the end of the
 financial year. The Company has not incurred cash losses during the
 financial year covered by the audit and in the immediately preceding
 financial year.
 
 (xi) In our opinion and according to the information given to us, the
 Company has not defaulted in repayment of dues to any financial
 institution or banks.
 
 (xii) In our opinion and according to the explanations given to us, the
 Company has not granted any loans or advances on the basis of security
 by way of pledge of shares, debentures or other securities.
 
 (xiii) The Company is not a chit fund/nidhi/mutual beneft fund/
 society. Therefore, the provisions of clause (xiii) of paragraph 4 of
 the Order are not applicable to the Company.
 
 (xiv) The Company is not dealing or trading in shares, securities,
 debentures and other investments.
 
 (xv) The Company has given guarantee for loans taken by others from
 banks or financial institutions, the terms and conditions whereof, in
 our opinion, are not prejudicial to the interest of the Company.
 
 (xvi) During the year, the Company has availed term loans for acquiring
 various fxed assets. As per the information and explanations provided
 to us, we are of the opinion that these loans were applied for the
 purpose for which the same were availed.
 
 (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 by the Company.
 
 (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.
 
 (xix) The Company has not issued any debentures.
 
 (xx) The Company has raised net proceeds of Rs. 19012 lakhs by way of
 initial public offering (IPO) during the year ended March 31, 2008.
 During the year, the Company has utilized the balance proceeds of Rs.
 6512 lakhs towards augmenting working capital requirements being one of
 the objects of issue.  The Company has disclosed the end use of money
 by way of notes to accounts in point 18 of Schedule 14 B.
 
 (xxi) Based on the audit procedures performed and on the basis of
 information and explanations given to us, we report that no fraud by
 the Company has been noticed or reported during the year. However, an
 instance of theft of Intellectual property, information and data has
 been reported, as referred to in note 20 of notes to accounts in
 Schedule 14B.
 
 
                                     For MANOHAR CHOWDHRY & ASSOCIATES
 
                                                 Chartered Accountants
 
                                                        FR No: 001997S
 
                                                              G R HaRI
 
 Place : Chennai                                               Partner
 
 Date : May 26, 2011                                      M.No. 206386