1. We have audited the attached Balance Sheet of Birla Power Solutions
 Limited (the Company) 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, which we have signed under reference to this
 report. 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.
 
 I. 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.
 
 II. As required by the Companies (Auditor''s Report) Order, 2003, as
 amended by the Companies (Auditor''s 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 said
 Order.
 
 III. 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
 beep 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 March 31,2011 and taken on record by the Board of
 Directors, none of the directors is 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 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 in particular note no.8 in regard to a
 compounding application made to the ROC, 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 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 Flow Statement, of the cash flows for the
 year ended on that date.
 
 ANNEXURE TO AUDITORS'' REPORT
 
 [REFERRED TO IN PARAGRAPH 3 OF AUDITORS'' REPORT OF EVEN DATE TO THE
 MEMBERS OF BIRLA POWER SOLUTIONS LIMITED ON THE FINANCIAL STATEMENTS
 FOR THE YEAR ENDED MARCH 31, 2011]
 
 1.  (a) The Company is maintaining proper records showing full
 particulars, including quantitative details and situation, of fixed
 assets.
 
 (b) The fixed assets of the Company have been physically verified by
 the Management during the year under a programme of verification laid
 down and no material discrepancies between the book records and the
 physical inventory have been noticed. In our opinion, the frequency of
 verification is reasonable.
 
 (c) In our opinion and according to the information and explanations
 given to us, a substantial part of fixed assets has not been disposed
 off by the Company during the year.
 
 2.  (a) The inventory has been physically verified by the management
 during the year. In respect of inventory lying with third parties,
 these have been physically verified by the management and confirmed by
 the parties. 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 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 and have been adjusted in books of
 accounts.
 
 3.  (a) The Company has granted unsecured loans to two companies
 covered in the register maintained under Section 301 of the Act. The
 maximum amount involved during the year and the year-end balance of
 such loans aggregate X 1700.30 Lacs and X 1700.24 Lacs respectively.
 
 (b) In our opinion, the rate of interest and other terms and conditions
 of such loans are not prima facie prejudicial to the interest of the
 Company.
 
 (c) In respect of the aforesaid loans, the companies are repaying the
 principal amount wherever stipulated and are also regular in payment of
 interest.
 
 (d) In respect of the aforesaid loans, there are no overdue amounts.
 
 (e) The Company has not taken an unsecured loans from any companies,
 firms or parties covered in the register maintained under Section 301
 of the Act.
 
 (f) As the company has not taken unsecured loan from companies, firms
 or parties under section 301 of the Act, the question of rate of
 interest and other terms are not applicable.
 
 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, we have neither come across nor have been
 informed of any continuing failure to correct major weaknesses in the
 aforesaid internal control system.
 
 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 Rs. five lacs 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,
 except for purchase of certain items of a specialized nature for which
 alternate quotations were not available.
 
 6.  In our opinion and according to the information and explanations
 given to us, in respect of compliance by the Company with the
 provisions of Section 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, we have to state that
 the company has invested Rs. 118.5 lacs out of the amount of 12504.3
 lacs, in liquid assets, after the period specified under Rule 3A of the
 Rules. Except for what is stated above the Company has complied with
 the provisions of Section 58A and 58AA or any other provisions of the
 Act and the Companies (Acceptance of Deposits) Rules 1975. 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, however, not 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, except for
 dues in respect of Income Tax and Sales Tax, the Company is generally
 regular in depositing the undisputed statutory dues including provident
 fund, investor education and protection fund, employees'' state
 insurance, wealth tax, service tax, excise duty, custom duty, cess and
 other material statutory dues as applicable with the appropriate
 authorities. The extent of the arrears of Sales tax dues outstanding as
 at March 31, 2011, for a period of more than six months from the date
 they became payable are as follows:
 
 Sr.  Name of       Nature      Amount    Period to
 No   the Statute   of dues   (Rs. lacs.) which the
                                          amount
                                          relates
 
 1    Sales Tax     Sales      144.84     Upto 30th
      Acts          Tax                   September
                                          2010
 
 (b) According to the information and explanations given to us and the
 records of the Company examined by us, there were no disputed dues in
 respect of Income-tax, Wealth-tax, Service-tax, Custom duty, Excise
 duty and Cess. The particulars of dues of Sales-tax as at March 31,
 2011, which have not been deposited on account of disputes, are as
 follows:
 
 Sr.   Name of        Nature      Amount     Forum where
 No.   Statute        of          Rupees     dispute is
                      Dues                   pending
 
 1     Delhi Sales    Sales       173.21     Additional  .
       Tax Act        Tax                    Commissioner
                                             Appeal in
                                             Tribunal
 
 2     Kerala Sales   Sales        92.12     Assessing
       Tax Act        Tax                    Officer
 
 3     U.P. Sales     Sales        71.36     Joint
 
       Tax Act        Tax                    Commissioner
 
                                             Appeal
 
                                             High Court
 
 4     Bihar Sales    Sales         7.69     Joint
 
       Tax Act        Tax                    Commissioner
 
                                             Commercial Tax
 
                                             Appeal
 
 5     Andhra         Sales         1.14     Assessing
       Pradesh        Tax                    Officer
       Sales Tax Act
 
 6     Orissa Sales   Sales         1.29     Joint
       Tax Act        Tax                    Commissioner
                                             Sales Tax
 
 7     Tamil Nadu     Sales        18.57     Assessing
 
       Sales Tax Act  Tax                    Officer
 
 8     West Bengal    Sales        15.38     Directorate of
       Sales Tax Act  Tax                    Commercial Tax
 
 9     Gujarat Sales  Sales         2.25     Commissioner of
       Tax Act        Tax                    Sales Tax
 
 10    Uttarakhand    Sales       489.31     Deputy
       Sales Tax Act  Tax                    Commissioner
                                             (Appeal)
 
                      Total      1872.32    
 
 10. The Company has no accumulated losses as at March 31, 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 explanations given to us, the Company has not defaulted
 in repayment of dues to any financial institution or bank or debenture
 holder as at the balance sheet date.
 
 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.  In our opinion, the Company is not a dealer or trader in shares,
 securities, debentures and other investments.
 
 15.  In our opinion and according to the information and explanations
 given to us, the Company has not given any guarantee for loans taken by
 others from banks or financial institutions during the year.
 
 16.  The Company has not obtained any term loans during the year.
 
 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 short term basis
 which have been used for long-term investment.
 
 18.  The Company has net 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 not issued any debentures during the year.
 
 20.  The management has disclosed the enduse of money raised by issue
 of Global Depository Receipts and we have verified the same.
 
 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.
 
 
                                     ForTHAKUR, VAIDYANATH AIYAR & CO.
 
                                                 Chartered Accountant
 
                                    Firm Registration Number: 000038N
 
                                                      C.V. Parameswar
 
 Place: Mumbai                                                Partner
 
 Date: 11.08.2011                                          M.No:11541