1.  We have audited the attached Balance Sheet of Cadila Healthcare
 Limited (the company) as at 31st March, 2011, Profit and Loss Account
 and also the Cash Flow Statement for the year ended on that date
 annexed thereto. 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 issued
 by the Central Government of India in terms of section 227(4A) of the
 Companies Act, 1956, we enclose in the Annexure, 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 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 section 211(3C) of the Companies Act, 1956;
 
 e) on the basis of the written representations received from the
 directors and taken on record by the Board of Directors, we report that
 none of the director is disqualified as on 31 st March, 2011 from being
 appointed as a director in terms of section 274 (1)(g) of the Companies
 Act, 1956;
 
 f) in our opinion, and to the best of our information and according to
 explanations given to us, the said financial statements, read together
 with the significant accounting policies and 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 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 Cash Flow Statement,
 of the cash flows for the year ended on that date.
 
 Annexure to the Auditors Report
 
 With reference to the Annexure referred to in paragraph 3 of the
 Auditors Report to the Members of Cadila Healthcare Limited on the
 financial statements for the year ended 31st March, 2011, we report
 that:
 
 1.  (a) The company has maintained proper records showing full
 particulars, including quantitative details and situation of fixed
 
 assets.
 
 (b) Some of the fixed assets were physically verified during the year
 by the management in accordance with programme of verification, which
 in our opinion provides for physical verification of all the fixed
 assets at reasonable intervals. According to the information and
 explanations given to us, no material discrepancies were noticed on
 such verification.
 
 (c) Fixed assets disposed off during the year, in our opinion, do not
 constitute substantial part of Fixed Assets of the Company and such
 disposal has not affected the going concern status of the company.
 
 2.  (a) The inventories has been physically verified by the management
 during the year. In our opinion, the frequency of such
 
 verification is reasonable, having regard to the size of the Company
 and nature of its business.
 
 (b) In our opinion, the procedures for the physical verification of
 inventory followed by management are reasonable and adequate in
 relation to the size of the company and the nature of its business.
 
 (c) In our opinion and according to the information and explanation
 given to us, the company has maintained proper records of inventory. No
 material discrepancies were noticed on physical verification of
 inventory.
 
 3.  The company has neither granted nor taken any loans, secured or
 unsecured, to Companies, firms or other parties covered in the register
 maintained under section 301 of the Companies Act,1956. Accordingly,
 clause (iii)(b) to (iii)(d) of paragraph 4 of the Order are not
 applicable to the company for the current year.
 
 4.  In our opinion and according to the information and explanations
 given to us, there is adequate 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 and
 services. During the course of our audit, we have not observed any
 continuing failure to correct major weaknesses in the internal control
 systems.
 
 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 Companies Act, 1956, 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, transactions made in pursuance of such contracts or
 arrangements and exceeding Rs. Five Lacs, in respect of any party
 during the year, have been made at prices, which are reasonable having
 regard to prevailing market price at the relevant time.
 
 6.  The company has not accepted any deposits from the public as per
 provisions of sections 58A, 58AA or other relevant provisions of the
 Companies Act, 1956 and the rules framed there under.
 
 7.  The company has an internal audit system, which, in our opinion is
 commensurate with its size and the nature of its business.
 
 8.  We have broadly reviewed the books of accounts maintained by the
 Company pursuant to the Rules made by the Central Government for
 maintenance of cost records under section 209(1) (d) of the Companies
 Act, 1956, 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 same.
 
 9.  (a) According to the information and explanations given to us and
 on the basis of our examination of the books of account, the
 
 company has been generally regular in depositing undisputed statutory
 dues including Provident Fund, Investor Education and Protection Fund,
 Employees State Insurance, Income-tax, Sales-tax, Wealth tax, Service
 tax, Custom duty, Excise duty, Cess and any other statutory dues during
 the year with the appropriate authorities. Moreover, as at 31st March,
 2011, there are no such undisputed dues payable for a period of more
 than six months from the date they became payable.
 
 (b) According to the information and explanations given to us, the
 particulars of dues of Income tax, Sales tax, Excise duty and Service
 tax and other material statutory dues as at 31st March, 2011 which have
 not been deposited on account of any dispute, are as follows:
 
 Name of the      Nature of   Amounts  Period to  Forum where the
 Statute            dues      involved which the  dispute is pending
                              (Rs.in   amount
                             Millions) relates
 
 The Income Tax 
 Act, 1961       Income Tax      66.27    2005-06  Income Tax Appellate
                                                    Tribunal
 
                                  0.2     1995-96  Deputy Commissioner 
                                                   of Income Tax (OSD)
 
 The Central 
 Sales Tax and    Sales Tax      83.59    1996-97  Commissioner of 
                                            to     Sales Tax 
 Local Sales 
 Tax Acts                                 1999-00,
                                          2001-02,
                                          2004-05 
                                             to 
                                          2007-08
 
                                          1997-98
                                  9.06    2001-02   Tribunal
 
 The Central 
 Excise Act      Excise Duty,     0.04    1985-86,  ACCE/DCCE/JCCE/
                                                    Add.Comm.
 and the Service 
 Tax Act         Service Tax              1987-88,
                                          1988-89,
                                          1992-93
 
                                  4.61 Various cases 
                                         for the      Commissioner 
                                                      (Appeals)
                                        period 1995 
                                          to 1998,
                                          2006-07,
                                          2007-08,
                                          2008-09
 
                                 23.69  Various cases 
                                          for the      CESTAT
                                        period 1995 
                                          to 2000,
                                          2003-04,
                                          2005-06,
                                          2006-07,
                                          2007-08,
                                          2008-09
 
                                  2.19  Jan. 95 to 
                                         Nov. 95       High Court
 
 10. The company does not have any accumulated losses at the end of the
 financial year and has not incurred cash losses during the financial
 year and during the immediately preceding financial year.
 
 11. The company has not defaulted in repayment of dues to financial
 institution or bank or debenture holder.
 
 12. The company has not granted any loans and advances on the basis of
 security by way of pledge of shares during the year.
 
 13. The company is not a chit fund company/nidhi/mutual benefit
 fund/society.
 
 14. According to the information and explanations given to us, the
 company is not dealing or trading in shares, securities, debentures and
 other investments.
 
 15.  In our opinion and according to the information and explanations
 given to us, the terms and conditions of guarantees / letter of comfort
 given by the company for loans taken by subsidiaries and other parties
 from banks are not prima facie, prejudicial to the interest of the
 company.
 
 16. Term loans obtained by the Company were applied for the purposes
 for which the loans were obtained.
 
 17. According to the Cash-flow statement and other records examined by
 us and the information and explanations given to us, on an overall
 basis, funds raised on short-term basis have not, prima facie, been
 used during the year 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 Companies Act, 1956.
 
 19. The company has created securities in respect of non-convertible
 debentures issued so far.
 
 20. The company has not raised any money by public issues during the
 year.
 
 21.  To the best of our knowledge and belief, and according to the
 information and explanations given to us, no fraud on or by the company
 was noticed or reported during the year.
 
 For MUKESH M. SHAH & CO.
 
 Chartered Accountants
 
 Firm Registration No.: 106625W
 
 Mukesh M. Shah
 
 Partner
 
 Membership Number : 30190
 
 Place : Ahmedabad
 Date   : May 6, 2011