1.  We have audited the attached Balance Sheet of BHARAT FORGE LIMITED
 (the Company) as at 31st March, 2011, and the related Profit and Loss
 Account and Cash Flow Statement for the year ended on that date annexed
 thereto, which we have signed under reference to this report. These
 financial statements are the responsibility of the Companys
 anagement. Our responsibility is to express an opinion on these
 financial statements based on our audit.
 
 2.  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 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, as
 amended by the Companies (Auditors Report) (Amendment) Order, 2004
 (together the Order), issued by the Central Government of India in
 terms of sub-section (4A) of Section 227 of The Companies Act, 1956
 of India (the Act) and on the basis of such checks of the books and
 records of the Company as we considered appropriate and according to
 the information and explanations given to us, we give in the Annexure a
 statement on the matters specified in paragraphs 4 and 5 of the Order.
 
 4.  Further to our comments in the Annexure 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 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 Act;
 
 (e) On the basis of written representations received from the
 directors, as on 31st March, 2011 and taken on record by the Board of
 Directors, none of the directors is disqualified as on 31st March, 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 and to the best of our information and according to
 the explanations given to us, the said financial statements together
 with the notes thereon and attached thereto give, in the prescribed
 manner, the information required by the Act, 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, 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 Flow Statement, of the cash flows for the
 year ended on that date.
 
 
 
 ANNEXURE TO AUDITORS’ REPORT:
 
 Referred to in paragraph 3 of the Auditors’ Report of even date to the
 members of BHARAT FORGE LIMITED on the financial statements for the
 year ended 31st March, 2011:
 
 1.  (a) The Company is maintaining proper records showing full
 particulars, including quantitative details and situation of fixed
 assets.
 
 (b) The fixed assets are physically verified by the Management
 according to a phased programme designed to cover all the items over a
 period of three years which, in our opinion, is reasonable having
 regard to the size of the Company and the nature of its assets.
 Pursuant to the programme, a portion of the fixed assets has been
 physically verified by the Management during the year and no material
 discrepancies between the book records and such physical verification
 have been noticed.
 
 (c) In our opinion and according to the information and explanations
 given to us, a substantial part of fixed assets has not been disposed
 of by the Company during the year.
 
 2.  (a) The inventory (excluding stocks with third parties) has been
 physically verified by the Management during the year. In respect of
 inventory lying with third parties, these have substantially been
 confirmed by them. In our opinion, the frequency of verification is
 reasonable.
 
 (b) In our opinion, the procedures of physical verification of
 inventory followed by the Management are reasonable and adequate in
 relation to the size of the Company and the nature of its business.
 
 (c) On the basis of our examination of the inventory records, in our
 opinion, the Company is maintaining proper records of inventory.  The
 discrepancies noticed on physical verification of inventory as compared
 to book records were not material.
 
 3.  (a) The Company has not granted any loans, secured or unsecured, to
 companies, firms or other parties covered in the register maintained
 under Section 301 of the Act.
 
 (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 Act.
 
 4.  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 the nature of its business for the
 purchase of inventory, fixed 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, no major weakness have been noticed or
 reported.
 
 5.  (a) In our opinion and according to the information and
 explanations given to us, 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 according to the information and explanations
 given to us, the transactions made in pursuance of such contracts or
 arrangements 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 the prevailing market prices at the relevant time.
 
 6.  In our opinion and according to the information and explanations
 given to us, the Company has complied with the directives issued by
 Reserve Bank of India and the provisions of Sections 58A and 58AA or
 any other relevant provisions of the Act 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 on
 the Company in respect of the aforesaid deposits.
 
 7.  In our opinion, the Company has an internal audit system
 commensurate with its size and nature of its business.
 
 8.  We have broadly reviewed the books of account maintained by the
 Company in respect of products where, pursuant to the Rules made by the
 Central Government of India, the maintenance of cost records has been
 prescribed under clause (d) of sub-section (1) of Section 209 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.
 
 9.  (a) According to the information and explanations given to us and
 the records of the Company examined by us, in our opinion, the Company
 is regular in depositing the 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 as
 applicable with the appropriate authorities.
 
 (b) According to the information and explanations given to us and the
 records of the Company examined by us, the particulars of dues of
 income-tax, sales-tax, wealth-tax, service-tax, customs duty, excise
 duty and cess as at 31st March, 2011 which have not been deposited on
 account of a dispute, are as follows:
 
 Name of the 
 
 statute        Nature of dues   Amount   Period to which the  Forum
                                                              where the
 
                           (Rs in Millions) amount relates     dispute is 
 
                                                               pending
 
 Sales Tax            -              -            -                 -
 
 Income Tax           -              -            -                 -
 
 Wealth Tax           -              -            -                 -
 
 Service Tax  Demand received 
              from various cases   41.66      2006 to 2011 Commissioner 
 
                                                               Appeals
 
 Custom Duty  Demand received 
 
              from various cases   49.97         2004-2005 Commissioner 
                                                               Appeals
 
 Excise       Demand received from 
              various cases       142.99      2006 to 2011 Commissioner 
                                                               Appeals
 
 Property Tax Demand received from 
              various cases         3.69      2005-2011     High Court
 
 10.  The Company has no accumulated losses as at 31st March, 2011 and
 it has not incurred any cash losses in the financial year ended on that
 date or in the immediately preceding financial year.
 
 11.  According to the records of the Company examined by us and the
 information and explanation given to us, the Company has not defaulted
 in repayment of dues to any financial institution or bank or debenture
 holders during the year.
 
 12.  The Company has not granted any loans and advances on the basis of
 security by way of pledge of shares, debentures and other securities.
 
 13.  The provisions of any special statute applicable to chit fund /
 nidhi / mutual benefit fund/societies are not applicable to the
 Company.
 
 14.  As per the records produced to us for our verification and the
 information and explanations given to us, in our opinion, the Company
 has maintained proper records of transactions and contracts entered
 into for investing temporarily idle funds in investments in units of
 Mutual Funds, into which timely entries have been made. The said
 investments have been held by the Company in its own name.
 
 15.  In our opinion and according to the information and explanations
 given to us, the terms and conditions of the guarantees given by the
 Company, for loans taken by others from banks or financial institutions
 during the year, are not prejudicial to the interest of the Company.
 
 16.  In our opinion and according to the information and explanations
 given to us, on an overall basis, the term loans have been applied for
 the purposes for which they were obtained.
 
 17.  On the basis of an overall examination of the balance sheet of the
 Company, in our opinion and according to the information and
 explanations given to us, there are no funds raised on a short-term
 basis which have been used for long-term investment.
 
 18.  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.
 
 19.  The Company has created securities and registered charges in
 respect of debentures issued and outstanding at the year-end. The
 details of security are disclosed in Note No. 12 (a) (i), (ii) and
 (iii) in Schedule K to the Financial Statements.
 
 20.  The Management has disclosed the end use of money raised by way of
 Foreign Currency Convertible Bonds and Equity Shares evidencing Global
 Depository Receipts detailed in Note No. 18 in Schedule K and Foot
 Note A (iv) to Schedule A to the Financial Statements respectively,
 during the year, which have been verified by us.
 
 21.  During the course of our examination of the books and records of
 the Company, carried out in accordance with the generally accepted
 auditing practices in India, and according to the information and
 explanations given to us, we have neither come across any instance of
 fraud on or by the Company, noticed or reported during the year, nor
 have we been informed of such case by the Management.
 
                                                  For DALAL & SHAH
 
                                  Firm Registration Number 102021W
 
                                             Chartered Accountants
 
                                                        ANISH AMIN
 
                                                           Partner
 
                                           Membership Number 40451
 
 Mumbai: May 24, 2011