1.  We have audited the attached Balance Sheet of Blue Star Infotech
 Limited, (the Company) as at 31 March 2011, and also the Profit and
 Loss Account and the Cash Flow Statement for the year ended on that
 date annexed thereto (collectively referred as the financial
 statements). 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 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 (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
 specified in paragraphs 4 and 5 of the Order.
 
 4.  Further to our comments in the Annexure referred to 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 financial statements dealt with by this report are in agreement
 with the books of account;
 
 d) On the basis of written representations received from the directors,
 as at 31 March 2011 and taken on record by the Board of Directors, we
 report that none of the directors is disqualified as at 31 March 2011
 from being appointed as a director in terms of clause (g) of
 sub-section (1) of section 274 of the Act;
 
 e) In our opinion and to the best of our information and according to
 the explanations given to us, the financial statements dealt with by
 this report comply with the accounting standards referred to in
 sub-section (3C) of section 211 of the Act and the Rules framed there
 under and 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, in the case of:
 
 i) the Balance Sheet, of the state of affairs of the Company as at 31
 March 2011;
 
 ii) the Profit and Loss Account, of the profit for the year ended on
 that date; and
 
 iii) the Cash Flow Statement, of the cash flows for the year ended on
 that date.
 
 Annexure to the Auditors Report
 Annexure to the Auditors Report of even date to members of Blue Star
 Infotech Limited on the financial statements for the year ended 31
 March 2011.
 
 Based on the audit procedures performed for the purpose of reporting a
 true and fair view on the financial statements of the Company and
 taking into consideration the information and explanations given to us
 and the books of account and other records examined by us in the normal
 course of audit, we report that:
 
 i) a) The Company has maintained proper records showing full
 particulars, including quantitative details and situation of fixed
 assets.
 
 b) The fixed assets have been physically verified by the management
 during the year and no material discrepancies were noticed on such
 verification. In our opinion, the frequency of verification of the
 fixed assets is reasonable having regard to the size of the Company and
 the nature of its assets.
 
 c) In our opinion, a substantial part of fixed assets has not been
 disposed off during the year.
 
 ii) a) The Company does not have any tangible inventory. Accordingly,
 the provisions of clause 4(ii) of the Order are not applicable.
 
 iii) a) The Company has not granted any loan, secured or unsecured to
 companies, firms or other parties covered in the register maintained
 under section 301 of the Act. Accordingly, the provisions of clauses
 4(iii)(b) to (d) of the Order are not applicable.
 
 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. Accordingly, the provisions of clauses
 4(iii)(f) and 4(iii)(g) of the Order are not applicable.
 
 iv) Owing to the nature of its business, the Company does not maintain
 any physical inventories or sells any goods. Accordingly, clause 4(iv)
 of the Order with respect to purchase of inventories and sale of goods
 is not applicable. In our opinion, there is an adequate internal
 control system commensurate with the size of the Company and the nature
 of its business for the purchase of fixed assets and for the sale of
 services. During the course of our audit, no major weakness has been
 noticed in the aforesaid internal control system.
 
 v) a) In our opinion, the particulars of all contracts or arrangements
 that need to be entered into the register maintained under section 301
 of the Act have been so entered.
 
 b) Owing to the unique and specialized nature of the items involved and
 in the absence of comparable prices, we are unable to comment as to
 whether the transactions made in pursuance of such contracts or
 arrangements have been made at prevailing market prices at the relevant
 time.
 
 vi) In our opinion, the Company has not accepted any deposits from the
 public within the meaning of sections 58A and 58AA of the Act and the
 Companies (Acceptance of Deposits) Rules, 1975. Accordingly, the
 provisions of clause 4(vi) of the Order are not applicable.
 
 vii) In our opinion, the Company has an internal audit system
 commensurate with its size and the nature of its business.
 
 viii) To the best of our knowledge and belief, the Central Government
 has not prescribed maintenance of cost records under clause (d) of
 sub-section (1) of section 209 of the Act, in respect of the services
 rendered by the Company. Accordingly, the provisions of clause 4(viii)
 of the Order are not applicable.
 
 ix) a) 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, have been regularly
 deposited with the appropriate authorities. No undisputed amounts
 payable in respect of above mentioned taxes were outstanding, at the
 year end for a period of more than six months from the date they became
 payable.
 
 b) The dues outstanding in respect of sales-tax, income-tax, customs
 duty, wealth-tax, excise duty and cess on account of any dispute, are
 as follows:
    
 Name of the statute     Nature of dues                Amount
                                                      (Rs. 000)
 
 Income Tax Act, 1961    Disputed demand arising         137,009
                         on disallowances of 
                         payments to related 
                         parties, exemption 
                         claim u/s 10A and u/s 
                         80HHE, sales tax paid and 
                         consequent interest u/s 
                         234 B, C & D.
 
 Income Tax Act, 1961    Disputed demand arising on       99,241 
                         disallowances of payments 
                         to related parties, exemption 
                         claim u/s 10A and u/s 80HHE,
                         sales tax paid and consequent 
                         interest u/s 234 B, C & D.
 
 Income Tax Act, 1961    Disputed demand arising on       50,243 
                         disallowances of exemption 
                         claim u/s 10A, software 
                         development expenses, 
                         notional expenses u/s 14A 
                         and consequent interest 
                         u/s 234 B & D, etc.
 
 
 
 Name of the statute     Period to                 Forum where
                         which the                 dispute is
                         amount relates            pending
 
 Income Tax Act, 1961    Assessment Year           Commissioner of
                         2004-05                   Income Tax (Appeals)
 
 Income Tax Act, 1961    Assessment Year           Commissioner of
                         2006-07                   Income Tax (Appeals)
 
 Income Tax Act, 1961    Assessment Year           Commissioner of
                         2007-08                   Income Tax (Appeals)
 
 x) The Company has no accumulated losses at the end of the financial
 year and it has not incurred cash losses in
 
 the current and the immediately preceding financial year.
 
 xi) The Company has no dues payable to a financial institution or a
 bank or debenture holders during the year.  Accordingly, the provisions
 of clause 4(xi) of the Order are not applicable.
 
 xii) In our opinion, the Company has not granted any loans and advances
 on the basis of security by way of pledge of shares, debentures and
 other securities. Accordingly, the provisions of clause 4(xii) of the
 Order are not applicable.
 
 xiii) The Company is not a chit fund or a nidhi / mutual benefit fund /
 society. Accordingly, the provisions of clause 4(xiii) of the Order are
 not applicable.
 
 xiv) The Company is not dealing in or trading in shares, securities,
 debentures and other investments.  Accordingly, the provisions of
 clause 4(xiv) of the Order are not applicable.
 
 xv) In our opinion, the Company has not given any guarantees for loans
 taken by others from banks or financial institutions. Accordingly, the
 provisions of clause 4(xv) of the Order are not applicable.
 
 (xvi) The Company did not have any term loans outstanding during the
 year. Accordingly, the provisions of clause 4(xvi) of the Order are not
 applicable.
 
 xvii) The Company did not have any borrowings outstanding during the
 year. Accordingly, the provisions of clause 4(xvii) of the Order are
 not applicable.
 
 xviii) The Company has not made any preferential allotment of shares to
 parties or companies covered in the register maintained under section
 301 of the Act. Accordingly, the provisions of clause 4(xviii) of the
 Order are not applicable.
 
 xix) The Company has neither issued nor had any outstanding debentures
 during the year. Accordingly, the provisions of clause 4(xix) of the
 Order are not applicable.
 
 xx) The Company has not raised any money by public issues during the
 year. Accordingly, the provisions of clause 4(xx) of the Order are not
 applicable.
 
 xxi) No fraud on or by the Company has been noticed or reported during
 the year covered by our audit.
 
 
 For Walker, Chandiok & Co
 Chartered Accountants
 Firm Registration No: 001076N
 
 per Khushroo B Panthaky
 Partner
 Membership No. F-42423
 
 Mumbai, May 19, 2011