Firstsource Solutions

We have audited the attached Consolidated Balance Sheet of Firstsource
 Solutions Limited (the Company or the Parent Company) and its
 subsidiaries (as per the list appearing in Schedule 1 to the
 consolidated financial statements) [collectively referred to as the
 Group] as at 31 March 2009, the Consolidated Profit and Loss Account
 and the Consolidated Cash Flow Statement of the Group for the year
 ended on that date, annexed thereto. The audit was conducted in
 accordance with the terms of engagement as specified by the Board of
 Directors of the Parent Company.
 
 These consolidated financial statements are the responsibility of the
 Companys management. Our responsibility is to express an opinion on
 these consolidated financial statements based on our audit. 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 consolidated
 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.
 
 1. Without qualifying our opinion, we draw attention to Schedule 32 to
 the consolidated financial statements. During the year, the Company has
 changed the accounting policy relating to premium payable on redemption
 of Foreign Currency Convertible Bonds CFCCB or the bonds).
 Accordingly, the premium payable on redemption of FCCB is now amortised
 on a pro-rata basis over the period of the bonds by debiting Securities
 premium account as against the earlier policy of charging the entire
 premium payable on redemption to the Securities premium account upfront
 in the year of issue of the bonds. Had the Company continued to follow
 the earlier policy, the balance in Securities premium account as at 31
 March 2009 would have been lower by Rs. (000) 3,305,913 and Current
 liabilities (Premium payable on redemption of FCCB) would have been
 higher by Rs. (000) 3,305,913.
 
 2.  Without qualifying our opinion, we draw attention to Schedule 32 to
 the consolidated financial statements that describes the early adoption
 by the Group of Accounting Standard (AS-30), Financial Instruments:
 Recognition and Measurements, read with AS 31, Financial Instruments -
 Presentation, as applicable, along with prescribed limited revisions to
 other accounting standards, issued by the Institute of Chartered
 Accountants of India, as in managements opinion, it more appropriately
 reflects the nature/substance of the related transactions. AS-30, along
 with limited revisions to the other accounting standards, has not
 currently been notified by the National Advisory Council for Accounting
 Standards (NACAS).
 
 The Group has accounted for assets and liabilities as per requirements
 of AS-30 including prescribed limited revisions to other accounting
 standards. On 1 July 2008, the Company designated the FCCB as hedging
 instrument to hedge its net investments made through a subsidiary in a
 non-integral foreign operation. Accordingly, the translation loss on
 the FCCB, which is determined to be effective hedge of net investment
 made in non-integral foreign operation, aggregating to Rs. (000)
 1,778,551 for the year ended 31 March 2009 has been recognised in
 Translation Reserve. Also, the Company has accounted for embedded
 derivative option included in FCCB and revalued the same as at
 year-end. Further, the difference between present value of non -
 interest bearing deposits and original amount of deposit has been
 disclosed as Unamortized cost under Loans and Advances, which is
 charged to the Profit and Loss Account over the period of the related
 lease. Correspondingly, interest income accrued on the interest free
 deposits, using the implicit rate of return, over the period of lease
 is recognized under Interest income.
 
 In accordance with the transitional provisions of AS-30, income of Rs.
 (000) 691,875 on account of reduction in option valuation of FCCB and
 charge of Rs. (000) 5,21 5 on account of fair valuation of deposits
 have been accounted through General Reserve.
 
 Had the Group not early adopted AS-30 and the related limited
 revisions, profit after taxation for the year ended 31 March 2009 would
 have been lower by Rs. (000) 1,534,365, Reserves and Surplus would have
 been lower by Rs. (000) 717,524, Unsecured loans would have been lower
 by Rs. (000) 469,683, Current liabilities would have been higher by Rs.
 (000) 1,192,982 and Current assets would have been higher by Rs. (000)
 5,775.
 
 3.  As more fully explained in Schedule 22 to the consolidated
 financial statements, an application has been made to the Central
 Government seeking approval for remuneration to the Managing Director
 and the Joint Managing Director of the Parent Company in excess of the
 limits prescribed under the Act, for which approval is awaited.
 
 4.  We report that the consolidated financial statements have been
 prepared by the Groups management in accordance with the requirements
 of Accounting Standard (AS-21) Consolidated Financial Statements,
 and, read with paragraph 2 above, other accounting standards issued by
 the Institute of Chartered Accountants of India and other accounting
 principles generally accepted in India.
 
 5.  In our opinion, and to the best of our information and according to
 the information and explanations given to us, read with paragraphs 1
 and 2 above and subject to paragraph 3 above, these consolidated
 financial statements give a true and fair view in conformity with the
 accounting principles generally accepted in India:
 
 i.  in the case of the Consolidated Balance Sheet, of the state of
 affairs of the Group as at 31 March 2009;
 
 ii.  in the case of the Consolidated Profit and Loss Account, of the
 profit of the Group for the year ended on that date; and
 
 iii.  in the case of the Consolidated Cash Flow Statement, of the cash
 flows of the Group for the year ended on that date.
 
 ANNEXURE TO THE AUDITORS REPORT - 31 MARCH 2009
 
 (Referred to in our report of even date)
 
 1.  (a) The Company has maintained proper records showing full
 particulars including quantitative details and situation of fixed
 assets.
 
 (b) The Company has a regular programme of physical verification of its
 fixed assets by which all fixed assets are verified in a phased manner
 annually. In our opinion, this periodicity of physical verification is
 reasonable having regard to the size of the Company and the nature of
 its assets. No material discrepancies were noticed on such
 verification.
 
 (c) Fixed assets disposed off during the year were not substantial and,
 therefore, do not affect the going concern assumption.
 
 2.  The Company is a service Company, primarily rendering contact
 centre, transaction processing and debt collection services. It does
 not hold any physical inventories. Accordingly, paragraph 4(ii) of the
 Order is not applicable.
 
 3.  (a) The following are the particulars of loans granted by the
 Company to parties covered in the register maintained under Section 301
 of the Act:
 
 Name of Party   Relationship   Amount     Year end   Maximum balance
                 with Company   Rs. (000) balance    oustanding
                                           Rs.(000)  Rs. (000)
 FirstRing Inc.,
 USA            Subsidiary     885,250.45  885,250.45  885,250.45
 
 (b) In our opinion, the rate of interest and other terms and conditions
 on which the loan has been granted to the party listed in the register
 maintained under Section 301 of the Act are not, prima facie,
 prejudicial to the interest of the Company.
 
 (c) In accordance with the terms of the loan, interest and principal
 are repayable on demand. According to the information and explanations
 given to us, payment of interest and repayment of principal have not
 been demanded during the year.
 
 (d) According to the information and explanations given to us, there is
 no overdue amount of loans granted to parties listed in the register
 maintained under Section 301 of the Act.
 
 (e) According to the information and explanations given to us, 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, paragraphs 4(iii)(f) and 4(iii)(g) of the
 Order 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 with regard
 to purchase of fixed assets and with regard to the sale of services.
 The activities of the Company do not involve purchase of inventory and
 sale of goods.  We have not observed any major weakness in the internal
 control system during the course of the audit.
 
 5.  (a) Based on the audit procedures applied by us and according to
 the information and explanations provided by the management, we are of
 the opinion that the transactions that need to be entered into the
 register maintained under Section 301 of the Act have been so entered.
 
 (b) In our opinion, and according to the information and explanations
 given to us, the transactions made in pursuance of contracts and
 arrangements referred to in (a) above and exceeding the value of Rs. 5
 lakh in respect of any party during the year are for the Companys
 specialized requirements for which suitable alternate sources are not
 available to obtain comparable quotations. However, on the basis of
 information and explanations provided, the prices appear reasonable.
 
 6.  The Company has not accepted any deposits from the public.
 
 7.  In our opinion, the Company has an internal audit system
 commensurate with its size and the nature of its business.
 
 8.  The Central Government has not prescribed the maintenance of cost
 records under Section 209(1 )(d) of the Act for any of the services
 rendered by the Company.
 
 9. (a) According to the information and explanations given to us and on
 the basis of our examination of the records of the Company, amounts
 deducted/accrued in the books of account in respect of undisputed
 statutory dues including Provident Fund, Employees State Insurance,
 Income tax, Wealth tax, Service tax, Customs duty, Cess and other
 material statutory dues have been generally regularly deposited during
 the year with the appropriate authorities. As explained to us, the
 Company did not have any dues on account of Sales tax, Excise duty and
 Investor Education and Protection Fund.
 
 There were no dues on account of cess under Section 441A of the Act,
 since the date from which the aforesaid section comes into force has
 not yet been notified by the Central Government.
 
 According to the information and explanations given to us, no
 undisputed amounts payable in respect of Provident Fund, Employees
 State Insurance, Income tax, Sales tax. Wealth tax. Service tax,
 Customs duty, Cess and other material statutory dues were in arrears as
 at 31 March 2009 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
 following dues of Income tax have not been deposited by the Company on
 account of disputes:
 
  Name of the Statute             Nature of the           Amount
                                  Dues                    Rs (000)
 
 Income-tax Act,             Transfer pricing           40,929.13
 1961 demand
 
 Income-tax Act,            Assessment under            39,728.49
 1961                       Section 143
 
 Income-tax Act,            Assessment under            15,621.20
 1961                       Section 143 (3)
 
 Service Tax Rules,         Demand notice               23,574.28
 1994
 
 Period to which the        Forum where dispute is 
 amount relates             pending
 
 2002-03                    Commissioner of Income Tax
                            - Appeals
 
 2003-04                    Commissioner of Income Tax
                            - Appeals
 
 2004-05                    Deputy Commissioner of
                            Income Tax 
 
 2007-08                    Commissioner of Service Tax
 
 10.  The Company does not have any accumulated losses at the end of the
 financial year and has not incurred cash losses in the financial year
 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 its
 bankers, bondholders or to any financial institutions.
 
 12.  The Company has not granted loans and advances on the basis of
 security by way of pledge of shares, debentures and other securities.
 
 13.  In our opinion and according to the information and explanations
 given to us, the Company is not a chit fund/ 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 on which the Company has given
 guarantees for loans taken by others from banks or financial
 institutions are, prima facie, not prejudicial to the interest of the
 Company.
 
 16.  In our opinion and according to the information and explanations
 given to us, the term loans taken by the Company have been applied for
 the purpose for which they were raised.
 
 17.  According to the information and explanations given to us and on
 an overall examination of the Balance Sheet of the Company, we are of
 the opinion that the funds raised on short-term basis have not been
 used for long-term investment
 
 18.  In our opinion and according to the information and explanation
 given to us, the Company has not made preferential allotment of shares
 to parties covered in the register maintained under Section 301 of the
 Act.
 
 19.  According to the information and explanations given to us, the
 Company has not issued any secured debentures during the year.
 
 20.  The Company has not raised any money by public issues during the
 year.
 
 21.  According to the information and explanations given to us, no
 fraud on or by the Company has been noticed or reported during the
 course of our audit.
 
                                                        For B S R & Co.
                                                  Chartered Accountants
 
                                                         Akeel Master
 Mumbai                                                       Partner
 28 April 2009                                 Membership No.: 046768