1) We have audited the attached Balance Sheet of The Bombay Dyeing and
 Manufacturing Company Limited as at March 31, 2011 and also the Profit
 and Loss Account and Cash Flow Statement of the Company for the year
 ended on that date, both 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. These Standards require that we plan and
 perform the audit to obtain reasonable assurance about whether the fi
 nancial 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 signifi cant 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 (Auditor''s Report) Order, 2003, issued
 by the Central Government of India in terms of section 227 (4A) of the
 Companies Act, 1956, we annex hereto a statement on the matters specifi
 ed in paragraphs 4 and 5 of the said Order.
 
 4) Without qualifying our report, we draw attention to the following:
 
 i) Note 7 of Schedule 19 Notes to Accounts, regarding the sale of a
 portion of the proposed residential tower (2009-10: commercial
 building) under construction and recognition of revenue arising from
 sale of the undivided interest in the underlying freehold land
 amounting to Rs. 70.57 crore (2009-10: Rs. 256.29 crore) in the Profit
 and Loss Account with a corresponding release from revaluation reserve.
 
 ii) Note 14 of Schedule 19 Notes to Accounts, regarding the managerial
 remuneration paid to one of the Jt. Managing Directors being in excess
 of the minimum remuneration under Schedule XIII to the Companies Act,
 1956 and subject to the approval of the Central Government. The Company
 has made an application to the Central Government for such approval,
 which is pending.
 
 5) 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
 Companies Act, 1956;
 
 e) In our opinion and to the best of our information and according to
 the explanations given to us, the said accounts read with the notes
 thereon, give the information required by the Companies Act, 1956 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 of the
 Company for the year ended on that date; and
 
 iii) in the case of the Cash Flow Statement, of the cash fl ows for the
 year ended on that date.
 
 6) On the basis of written representations received from the Directors
 of the Company as on March 31, 2011, and taken on record by the Board
 of Directors, we report that none of the Directors of the Company is
 disqualifi ed 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
 Companies Act, 1956.
 
 Annexure to the Auditor''s Report
 
 Annexure to the report of the Auditors to the members of The Bombay
 Dyeing and Manufacturing Company Limited on the accounts for the year
 ended March 31, 2011 (referred to in paragraph 3 of our report of even
 date)
 
 1.  (a) The Company has maintained records showing particulars,
 including quantitative details and situation of fixed assets.  The
 records of certain assets need to be assimilated to make identifi
 cation possible.
 
 (b) The Company has a program for physical verifi cation of fixed
 assets at periodic intervals. In our opinion the period of verifi
 cation is reasonable, having regards to the size of the Company and the
 nature of its assets. The reconciliation in respect of the fixed
 assets verifi ed during the year is in progress; discrepancies, if any,
 will be adjusted on completion of reconciliation.
 
 (c) The fixed assets disposed off during the year are not substantial
 and therefore do not affect the going concern assumption.
 
 2.  (a) The inventory has been physically verifi ed by the management
 during the year. In our opinion, the frequency of verifi cation is
 reasonable.
 
 (b) The procedures of physical verifi cation of inventories followed by
 the management are generally reasonable and adequate in relation to the
 size of the Company and nature of its business.
 
 (c) The Company is generally maintaining proper records of inventory.
 The discrepancies noticed on verifi cation between physical stock and
 book records were not material in relation to the operations of the
 Company and the same have been properly dealt with in the books of
 account.
 
 3.  (a) According to the information and explanations given to us, the
 Company has not granted any loans, secured or unsecured to Companies,
 fi rms or other parties covered in the register maintained under
 Section 301 of the Companies Act, 1956 except an interest free
 shareholders'' deposit of Rs.15.22 crore with a joint venture company,
 as stated in Note 10 of Schedule 19. Sub-clauses (b), (c) and (d) of
 cause 4 (iii) of the Order are not applicable to the Company.
 
 (b) According to the information and explanation given to us, the
 Company has taken unsecured loans aggregating Rs.  190 crore from three
 companies covered in the register maintained under section 301 of the
 Companies Act, 1956.  The maximum principal amount involved during the
 year is Rs. 190 crore and the balance outstanding as at the year end
 was Rs. 10 crore.
 
 (c) In our opinion and according to the information and explanation
 given to us, the rate of interest and other terms and conditions on
 which the loans have been taken from companies listed in the register
 maintained under section 301 of the Companies Act, 1956 were not prima
 facie prejudicial to the interest of the company.
 
 (d) In our opinion and as per the records examined by us, the payment
 of principal amount and interest thereon is regular.
 
 4.  In our opinion and according to the information and explanations
 given to us, the Company has internal control procedures which are
 generally adequate, commensurate with the size of the Company and
 nature of its business, with regard to purchases of inventory, fixed
 assets, and for the sale of goods and services. The Company is also
 implementing steps for further strengthening of the same. On the basis
 of our examination of the books and records and the information and
 explanations given to us, we have not come across any continuing
 failure to correct major weakness in the internal control system.
 
 5.  (a) According to the information and explanations given to us, we
 are of the opinion that the particulars of contracts or arrangements
 that need to be entered into the register maintained under section 301
 of the Companies Act, 1956 have generally been so entered.
 
 (b) According to the information and explanation given to us,
 transactions in pursuance of such contracts or arrangements entered
 into the register maintained under section 301 of the Companies Act,
 1956 and exceeding the value of rupees fi ve lakhs in respect of any
 party have been made at prices which are reasonable having regard to
 the prevailing market prices or at prices for which similar
 transactions have been made with other parties, except for the
 transactions where a comparison of prices could not be made since there
 was no similar transactions with other parties or transactions of a
 special nature where comparable alternative quotation were not
 available.
 
 6.  In our opinion and according to the information and explanations
 given to us, the Company has complied with the provision of sections
 58A, 58AA or any other applicable provisions of the Companies Act,1956
 and the Companies (Acceptance of Deposits) Rules, 1975 with regard to
 the deposits accepted from the public. 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.
 
 7.  In our opinion, the Company has an internal audit system,
 commensurate with the size and nature of its business.
 
 8.  We have broadly reviewed, without carrying out a detailed
 examination, the books of account maintained by the company pursuant to
 the Notifi cation issued /order made by the Central Government for the
 maintenance of cost records under section 209 (1) (d) of the Companies
 Act, 1956 in respect of the Textile and Polyester Staple Fibre
 divisions of the Company and are of the opinion that prima facie the
 prescribed records have been maintained and the prescribed accounts are
 in the process of being made up.
 
 9.  (a) According to the records of the Company, undisputed statutory
 dues including Provident fund, Investor Education and Protection Fund,
 Employees State Insurance, Income tax, Sales tax, Wealth tax, Service
 tax, Excise duty, Customs duty, Cess and other material statutory dues
 applicable to it have been regularly deposited with the appropriate
 authorities. According to the information and explanations given to us,
 no undisputed amounts were in arrears, as on 31st March 2011 for a
 period of more than six months from the date they became payable.
 
 (b) According to the information and explanations given to us, there
 are no dues of Sales tax, Income tax, Custom duty, Wealth tax, Service
 tax, Excise duty or cess which have not been deposited on account of
 any dispute, except as stated below :
 
 No.  Name of the 
      statute       Nature of 
                       Dues    Amount   Period to 
                                        which        Forum where dispute
                                                     is pending
                              (Rs. in 
                               crores)  the amount 
                                        relates
 
 1 Income Tax Act, 
   1961             Tax 
                    Deducted at   3.21     2007-08   Commissioner of 
                                                     Income Tax - TDS
                    Source        3.86     2008-09   (Appeals)
 
 2 Bombay Sales 
   Tax Act,         Sales Tax     4.95     2004-05   Maharashtra Sales
                                                     Tax Tribunal, 
   1959.                                             Mumbai
 
 3 Central Sales 
   Tax Act,         Sales Tax     0.67     2004-05   Maharashtra Sales 
                                                     Tax Tribunal, 
   1956.                                             Mumbai
 
 4 The Customs Act, 
   1962             Customs Duty  0.64        1989   Deputy Commissioner
                                                     of Customs,
                                                     Nhava Sheva
                    Customs Duty  0.25        1997   Commissioner of 
                                                     Customs(Appeals),
                                                     Mumbai
 
 5 The Central 
   Excise Act,       Excise Duty  0.10    1989-90 to 
                                           1995-96   Commissioners of 
                                                     Central Excise, 
   1944                                              Mumbai
 
                     Excise Duty  0.68    1997-98 to 
                                           2000-01   Customs, Excise and
                                                     Service Tax
                                                     Appellate Tribunal 
                                                    (CESTAT), Mumbai
 
                     Excise Duty  0.01    1999-00 to 
                                           2000-01   Customs, Excise and         
                                                     Service Tax 
                                                     Appellate Tribunal 
                                                    (CESTAT), Mumbai
 
                     Service Tax  0.77      April, 
                                            2003 to  Customs, Excise and  
                                                     Service Tax
                                            March, 
                                             2006    Appellate Tribunal
                                                    (CESTAT), Mumbai
 
 10.  The Company does not have any accumulated losses at the end of the
 financial year. Also, the Company has not incurred cash losses during
 the financial year covered by our audit and in the immediately
 preceding financial year.
 
 11.  In our opinion and according to the information and explanations
 given to us, the Company has not defaulted in repayment of dues to
 banks, financial institution or debenture holders.
 
 12.  In our opinion and according to the information and explanations
 given to us, the Company has maintained adequate records where the
 company has granted loans and advances on the basis of security by way
 of pledge of shares.
 
 13.  The company is not a chit fund or a nidhi / mutual benefit fund /
 society. Therefore, the provision of clause 4 (xiii) of the said Order
 are not applicable to the Company.
 
 14.  According to the information and explanations given to us, proper
 records have been maintained of the transactions and contracts and
 timely entries have been made therein where the Company is dealing or
 trading in shares, securities, debentures and other investments and
 such securities are held by the Company in it''s own name except to the
 extent of the exemption granted under section 49 of the Companies Act,
 1956.
 
 15.  In our opinion and according to the information and explanations
 given to us, the terms and conditions on which the Company has given
 any guarantees for loans taken by others from banks or financial
 institutions are not prima facie prejudicial to the interest of the
 Company.
 
 16.  In our opinion and according to the information and explanations
 given to us, the term loans have/are being applied for the purpose for
 which they were obtained.
 
 17.  In our opinion and according to the information and explanations
 given to us and on an overall examination of the balance sheet of the
 Company, in our opinion, no funds raised on short term basis have been
 used for long term investment.
 
 18.  According to the information and explanations given to us, the
 company has made preferential allotment of shares to a company covered
 in the register maintained under section 301 of the Act. In our
 opinion, the price at which shares have been issued is not prejudicial
 to the interest of the company.
 
 19.  The Company has not issued any debentures during the year.
 
 20.  The Company has not raised any money by public issues during the
 year. Accordingly, the question of disclosure of end use of such monies
 does not arise.
 
 21.  Based on the audit procedures performed and information and
 explanations given by the management, we report that no fraud on or by
 the company has been noticed or reported during the year.
 
                                                 For and on behalf of
 
                                                Kalyaniwalla & Mistry
 
                                                Chartered Accountants
 
                                                Firm Reg. No. 104607W
 
                                                       Viraf R. Mehta
 
                                                              Partner
 
                                                 Membership No: 32083
 
 Place: Mumbai
 
 Date: May 24, 2011