1.  We have audited the attached Balance Sheet of BHARATI SHIPYARD
 LIMITED (the Company) as at March 31, 2011, 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 significant estimates made
 by the 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 (Auditor''s Report) Order, 2003, as
 amended by the Companies (Auditor''s Report) Amendment Order, 2004
 (hereinafter referred to as the order), issued by the Central
 Government of India in terms of sub-section (4A) of Section 227 of the
 Companies Act, 1956, hereinafter referred to as the Act, and on the
 basis of such checks as we considered appropriate, we annex hereto 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
 of the Company as on 31st March, 2011 and taken on record by the Board
 of Directors, we report that, none of the directors are prima facie,
 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;
 and
 
 vi. 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 :
 
 (a) in the case of the Balance Sheet, of the state of affairs of the
 Company as at March 31, 2011;
 
 (b) in the case of the Profit and Loss Account, of the profit of the
 Company for the year ended on that date; and
 
 (c) 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
 Referred to in paragraph 3 of our report of even date
 
 (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 a major portion of
 fixed assets as at March 31, 2011 was conducted by the management
 during the year. In our opinion, the frequency of verification is
 reasonable having regard to the size of the Company and the nature of
 its assets. No material discrepancies were noticed on such physical
 verification.
 
 (c) No substantial part of fixed assets has been disposed off during
 the year which will affect the going concern principle.
 
 (ii) (a) Physical verification of inventories has been conducted at
 reasonable intervals by the management.
 
 (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) In our opinion, the Company is maintaining proper records of
 inventory and during the course of our audit no material discrepancies
 were noticed on physical verification of inventories.
 
 (iii) (a) The Company has granted advances to 11 (eleven) parties,
 consisting of 1 (one) subsidiary, 9 (nine) private limited companies
 and 1 (one) public company listed in the register maintained under
 Section 301 of the Act. The maximum amount involved during the year is
 Rs. 8,434.53 lakhs; and the year-end balance of loan granted to such
 parties is Rs. 9,750.61 lakhs.
 
 (b) In our opinion and according to the information and explanation
 given to us, the rate of interest and other terms and conditions on
 which loans have been given to the company are not, prima facie,
 prejudicial to the interest of the Company.
 
 (c) There is no stipulation for repayment of principal and interest on
 the above loans and hence, the question of repayment being irregular
 does not arise.
 
 (d) There is no stipulation for repayment of principal amount of the
 above loans and hence, the question of overdue principal amount does
 not arise.
 
 (e) The company has received unsecured loan from two Directors listed
 in the register maintained under section 301 of the Act.  The maximum
 amount involved during the year is Rs. 240.15 lakhs; and the year-end
 balance of loan granted to such parties is Rs. 240.15 lakhs.
 
 (f) In our opinion and according to the information and explanation
 given to us, above loans are interest free and terms and conditions on
 which loans have been given to the company are not, prima facie,
 prejudicial to the interest of the Company.
 
 (g) There is no stipulation for repayment of principal on the above
 loans and hence, the question of repayment being irregular does not
 arise.
 
 (iv) In our opinion, there is an internal control system, commensurate
 with the size of the Company and the nature of its business, for the
 purchase of inventory and fixed assets and for the sale of goods.
 During the course of our audit, we have not observed any major weakness
 in the internal controls.
 
 (v) (a) Based on the audit procedures applied by us and according to
 the information and explanations provided by the management, we are of
 the opinion that the particulars of the contracts or arrangements that
 need to be entered into the register maintained under section 301 of
 the Act, have been so entered.
 
 (b) In our opinion and according to the information and explanation
 given to us, the transactions made in pursuance of contracts or
 arrangements entered in the contracts maintained under Section 301 of
 the Act 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 that time.
 
 (vi) In our opinion and according to the information and explanations
 given to us, the Company has not accepted any deposit from public as
 defined under section 58A and 58AA of the Act and the rules framed
 there under, during the year under review.
 
 (vii) In our opinion, the company has an in-house internal audit system
 commensurate with its size and nature of its business.
 
 (viii) As informed to us, the maintenance of cost records under section
 209 (1) (d) of the Act has not been prescribed by the Central
 Government in respect of the activities carried on by the Company.
 
 (ix) (a) According to the information and explanation given to us and
 according to books and records produced and examined by us, the Company
 is generally regular in depositing with the appropriate authorities
 undisputed statutory dues including Provident Fund, Employee''s State
 Insurance, Income Tax, Sales Tax, Wealth Tax, Custom Duty, Excise Duty,
 Cess and any other material statutory dues, wherever applicable.
 According to the information and explanations given to us, no
 undisputed amounts payable in respect of the aforesaid dues were
 outstanding as at 31-03-2011 for a period of more than six months from
 the date they become payable.
 
 (b) According to the information and explanation given to us, the dues
 in respect of sales tax, income tax, custom duty, excise duty, cess
 that have not been deposited with the appropriate authorities on
 account of dispute and the forum where the disputes are pending are
 given below.
 
 Name of the   Nature of    Financial Year to   Amount   Forum where
                                                         dispute is
 Statute       the dues     which matter 
                            pertains            Rs. (in 
                                                Lakhs)   pending
 
 The Central   Central       1996 – 97          140.00   The Appellate
 Sales Tax 
 Act,          Sales Tax                                 Tribunal Sales
                                                         Tax
 1956
 
 (x) The Company has no accumulated losses at the end of the financial
 year and it has not incurred any cash losses in the current or in the
 immediately preceding financial year.
 
 (xi) According to the information and explanation given to us, the
 Company has not defaulted in repayment of dues to the banks.
 
 (xii) According to the information and explanation given to us, the
 Company has not granted any loans and advances on the basis of security
 by way of pledge of shares, debentures and other securities.
 
 (xiii) In our opinion, considering the nature of the business carried
 on during the year, the Company is not a chit fund or nidhi /mutual
 benefit fund /society. In view of the above, the said clause (xiii) of
 the order is not applicable to the Company.
 
 (xiv) In our opinion and according to the information and explanations
 given to us, the Company is not a dealer or trader in securities. It
 has only invested in shares of subsidiaries, other body corporate and
 units of mutual funds for which proper records have been maintained and
 timely entries have been made therein. The said investments are held in
 company''s name.
 
 (xv) In our opinion and according to the information and explanation
 given to us, the terms and conditions on which the Company has given
 corporate guarantee for loan taken by others from financial institution
 are not prima facie, prejudicial to the interest of the Company.
 
 (xvi) In our opinion and according to the information and explanations
 given to us, the term loans have been applied for the purpose for which
 they were raised.
 
 (xvii) According to the information and explanation given to us and on
 the 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
 investments. No long term funds have been used to finance short term
 assets.
 
 (xviii) During the year the Company has made preferential allotment of
 1,370,000 Equity shares of Rs 10/- each at premium of Rs. 70/- to the
 promoters of the Company, which in our opinion is not prejudicial to
 the interest of the company.
 
 (xix) According to the information and explanation given to us, the
 Company has not issued debentures during the year.
 
 (xx) As informed to us, the Company has not raised any money by public
 issues during the year.
 
 (xxi) In our opinion and according to information and explanations
 given to us, no material fraud on or by the Company has been noticed or
 reported during the year.
 
 For M/s. DPH & Co.                     For M/s. Bhuta Shah & Co.
 
 Chartered Accountants                  Chartered Accountants
 
 CA. Ashwin Patel                       CA. Mitesh Kothari
 
 Partner                                Partner
 
 Membership No.127052                   Membership No. 110822
 
 Firm Reg. No. 128862W                  Firm Reg. No. 101474W
 
 Date: 20th July, 2011
 
 Place: Mumbai