1.  We have audited the attached Balance Sheet of Dalmia Bharat Sugar
 and Industries Limited (the Company'') as at March 31, 2012 and also
 the Statement of Profit and Loss and the 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 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) (the Order) issued by the Central Government of India in terms
 of sub-section (4A) of Section 227 of the Companies Act, 1956 and on
 the basis of such checks as we considered appropriate and according to
 the information and explanations given to us, 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:
 
 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. In our opinion, the Balance Sheet, Statement of Profit and Loss
 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;
 
 iv.  The Balance Sheet, Statement of Profit and Loss and Cash Flow
 Statement dealt with by this report are in agreement with the books of
 account;
 
 v.  On the basis of the written representations received from the
 directors, as on March 31, 2012, and taken on record by the Board of
 Directors, we report that none of the directors is disqualified as on
 March 31, 2012 from being appointed as a director in terms of clause
 (g) of sub-section (1) of section 274 of the Companies Act, 1956;
 
 vi.  In our opinion and to the best of our information and according to
 the explanations given to us, the said accounts read with the
 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 :
 
 a) in the case of Balance Sheet, of the state of affairs of the Company
 as at March 31, 2012;
 
 b) in the case of Statement of Profit and Loss, of the profit for the
 year ended on that date; and
 
 c) In the case of Cash Flow Statement, of the cash flows for the year
 ended on that date.
 
 Annexure referred to in paragraph 3 of our report of even date
 
 Re: Dalmia Bharat Sugar and Industries Limited
 
 (i) (a) The Company has maintained proper records showing full
 particulars, including quantitative details and situation of fixed
 assets.
 
 (b) All fixed assets have not been physically verified by the
 management during the year but there is a regular programme of
 verification which, in our opinion, is reasonable having regard to the
 size of the Company and the nature of its assets. No material
 discrepancies were noticed on such verification as compared to book
 records.
 
 (c) Fixed assets disposed off during the year were not substantial.
 
 (ii) (a) The management has conducted physical verification of
 inventory at reasonable intervals during the year, except stocks lying
 with third parties and in transit which have been verified with
 reference to correspondence of third parties or subsequent receipt of
 goods. In our opinion, the frequency of such verification is
 reasonable.
 
 (b) 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) 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 properly dealt with in
 the books of account.
 
 (iii) (a) As informed, the Company has not granted 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, the provisions of clause 4 (iii) (b), (c) &
 
 (d) of the Order are not applicable to the Company.
 
 (b) According to the information and explanations given to us, the
 Company has taken unsecured loan from two companies covered in the
 register maintained under section 301 of the Companies Act, 1956, loan
 from the one of the companies having been squared off during the year.
 The maximum amount outstanding during the year is Rs206 Crore and the
 year end balance of such loan is Rs50 Crore.
 
 (c) In our opinion and according to the information and explanations
 given to us, the rate of interest and other terms and conditions for
 such loans are not, prima facie, prejudicial to the interest of the
 Company.
 
 (d) In respect of loans taken, repayment of the principal amount is as
 stipulated and payments of interest have been regular. There are no
 overdue amounts at the year-end as the loan is repayable on demand.
 
 (iv) 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 and fixed assets and for the sale of goods and
 services.  During the course of our audit carried out in accordance
 with the generally accepted auditing practices in India, we have not
 observed any major weakness or continuing failure to correct any major
 weakness in the internal control system of the Company in respect of
 these areas.
 
 (v) (a) According to the information and explanations provided by the
 management, we are of the opinion that the particulars of contracts or
 arrangements referred to in section 301 of the Companies Act, 1956 that
 need to be entered into the register maintained under section 301 have
 been so entered.
 
 (b) In our opinion and according to the information and explanations
 given to us, the transactions made in pursuance of such contracts or
 arrangements exceeding value of Rupees five lakh in respect of each
 party have been entered into during the financial year at prices which
 are reasonable having regard to the prevailing market prices at the
 relevant time.
 
 (vi) In our opinion and according to the information and explanations
 given to us, the Company has not accepted any deposits from the public,
 within the meaning of Sections 58A and 58AA or any other relevant
 provisions of the Companies Act, 1956 and Companies (Acceptance of
 Deposits) Rules, 1975.
 
 (vii) In our opinion, the Company has an internal audit system
 commensurate with the size and nature of its business.
 
 (viii) We have broadly reviewed the cost accounting records maintained
 by the Company pursuant to the Rules made by the Central Government
 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. However, we are not required to make a
 detailed examination of such records.
 
 (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 have generally been regularly deposited during the year with
 the appropriate authorities.
 
 (b) According to the information and explanations given to us, no
 undisputed amounts payable in respect of Provident Fund, Investor
 Education and Protection Fund, Employees'' State Insurance,
 Income-tax, Wealth-tax, Service-tax, Sales-tax, Customs Duty, Excise
 Duty, Cess and other undisputed statutory dues were outstanding, at the
 year end, for a period of more than six months from the date they
 became payable.
 
 (c) According to the records of the Company, the dues outstanding of
 Income-tax, Sales-tax, Wealth-tax, Service-tax, Customs Duty, Excise
 Duty and Cess on account of any dispute and forum where the dispute is
 pending, are as follows:
 
 Name of the 
 statute      Nature of the Dues   Amount (in  Period to 
                                               which the Forum Where 
                                                         dispute 
                                       Crore)  amount 
                                               relates   is pending
 
 Central 
 Excise Act,  Cenvat Credit on 
              Cement &                 60.89   Jun 05 to 
                                               Mar 10
                                                         CESTAT, Delhi
 1944         Steel
 
 Central 
 Excise Act,  Cenvat Credit 
              on Cement &               4.46   Sep 07 to 
                                               Mar 11    Commissioner 
                                                         (A) LTU,
 1944         Steel                                      New Delhi
 
 Central 
 Excise Act,  Cenvat Credit on 
              Cement &                  2.17   Mar 06 to 
                                               Dec 11    Dy.Commissioner
                                                         LTU,
 1944         Steel                                      New Delhi
 
 Central 
 Excise Act,  Demand on duty 
              on Bagasse              291.12   Oct 07 to 
                                               Mar 10    CESTAT, Delhi
 1944         & electricity sale
 
 Central 
 Excise Act,  Demand on duty on 
              Bagasse                   0.09   Mar 06 to 
                                               Mar 10    Commissioner 
                                                         (A) LTU,
 1944         & electricity sale                         New Delhi
 
 Central 
 Excise Act,  Demand on duty on 
              Bagasse                   0.53   Mar 06 to 
                                               Dec 11    Dy.Commissioner
                                                         LTU,
 1944         & electricity sale                         New Delhi
 
 Central 
 Excise Act,  Demand on duty on 
              Bagasse                   0.13   Apr 10 to 
                                               Dec 11    Superintendent,
                                                         LTU
 1944         & electricity sale                         New Delhi
 
 Central 
 Excise Act,  Disallowance of 
              Cenvat                    0.69   2006-07   CESTAT, Delhi
 1944         Credit
 
 Central 
 Excise Act,  Disallowance of 
              Cenvat                   30.55   Apr 10 to 
                                               May 11    Commissioner 
                                                         LTU,
 1944         Credit                                     New Delhi
 
 Central 
 Excise Act,  Disallowance of 
              Cenvat                    4.16   2002-03 
                                               to 
                                               2010-11   Commissioner  
                                                         (A) LTU,
 1944         Credit                                     New Delhi
 
 Central 
 Excise Act,  Disallowance of 
              Cenvat                    1.18   2009-10 
                                               to 
                                               2011-12   Dy.Commissioner
                                                         LTU,
 1944         Credit                                     New Delhi
 
 Central 
 Excise Act,  Disallowance of 
              Cenvat                    0.01   2010-11   Superintendent,
                                                         LTU
 1944         Credit                                     New Delhi
 
 Central 
 Excise Act,  Disallowance of 
              Cenvat                    0.02   2004      Allahabad High 
                                                         Court
 1944         Credit
 
 Finance Act, 
 1994         Disallowance of 
              Service tax               5.89   Jun 06 to 
                                               Mar 10    Ad.Commissioner 
                                                         LTU,
              credit                                     New Delhi
 
 Finance Act, 
 1994         Disallowance of 
              Service tax               9.70   2003-04 to 
                                               2011-12   Commissioner 
                                                         (A) LTU,
              credit                                     New Delhi
 
 Finance Act, 
 1994         Disallowance of 
              Service tax               4.63   2006-07 
                                               to 
                                               2011-12   Dy.Commissioner
                                                         LTU,
              credit                                     New Delhi
 
 Finance Act, 
 1994         Disallowance of 
              Service tax               0.33   2010-11 
                                               to 
                                               2011-12   Superintendent,
                                                         LTU
              credit                                     New Delhi
 
 UP VAT       VAT on interunit 
              transfer                  0.39   2005-06 
                                               to 
                                               2010-11   Dy Commissioner
                                                         Sitapur
 
 Central 
 Sales Tax    Entry Tax on sugar 
              &                         3.81   2005-06 
                                               to 
                                               2010-11   Dy Commissioner
              Molasses                                   Sitapur
 
 Central 
 Sales Tax    Entry Tax on sugar        0.03   2001-02   Allahabad High 
                                                         Court,
                                                         Lucknow Bench
 
 (x) The Company has no accumulated losses as at the end of the
 financial year and has not incurred cash losses in the current
 financial year and in the immediately preceding financial year.
 
 (xi) Based on our audit procedures and as per the information and
 explanations given by the management, we are of the opinion that the
 Company has not defaulted in repayment of dues to a financial
 institution, banks or debenture holders.
 
 (xii) According to the information and explanations given to us and
 based on the documents and records produced to us, the Company has not
 granted loans and advances on the basis of security by way of pledge of
 shares, debentures and other securities.
 
 (xiii) In our opinion, the Company is not a chit fund or a nidhi /
 mutual benefit fund / society. Therefore, the provisions of clause
 4(xiii) of the Order are not applicable to the Company.
 
 (xiv) In respect of dealing/trading in shares, securities, debentures
 and other investments, in our opinion and 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.  The shares, securities, debentures and other investments have
 been held by the Company in its own name.
 
 (xv) According to the information and explanations given to us, the
 Company has not given any guarantee for loans taken by others from bank
 or financial institutions.
 
 (xvi) Based on the information and explanations given to us by the
 management, term loans were applied for the purpose for which the loans
 were obtained, where such end use has been stipulated by the lender(s).
 
 (xvii) According to the information and explanations given to us and on
 an 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
 investment.
 
 (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 Companies Act, 1956.
 
 (xix) Based on the books and records produced to us by the management,
 securities have been created in respect of debentures issued, wherever
 required.
 
 (xx) During the period covered by our audit report, the Company has not
 raised any money by way of public issue.
 
 (xxi) Based upon the audit procedures performed for the purpose of
 reporting the true and fair view of the financial statements and as per
 the 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 S. S. Kothari Mehta & Co.
 
                                                  Chartered Accountants
                                          Firm Registration No. 000756N
 
                                                        Arun K. Tulsian
 
 Place : New Delhi                                              Partner
 
 Date : May 11, 2012                               Membership No. 89907