Gammon Infrastructure Projects

We have audited the attached Balance Sheet of Gammon Infrastructure
 Projects Limited as at March 31, 2008 and the related Profit and loss
 Account and 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.
 
 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.
 
 As required by the Companies (Auditors Report) Order, 2003 (as
 amended) issued by the Central Government of India in terms of
 sub-section (4A) of section 227 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.
 
 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 purpose of our
 audit.
 
 (ii) In our opinion, proper books of accounts as required by law have
 been kept by the company so far as it appears from our examination of
 the books.
 
 (iii) The Balance Sheet, Profit and loss Account and the Cash Flow
 Statement dealt with by this report are in agreement with the books of
 accounts.
 
 (iv) In our opinion, the Balance Sheet, Profit and loss Account and the
 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.
 
 (v) 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 directors is disqualified as on March 31, 2008 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 accounts and the other notes thereon
 give the information required by the Companies Act, 1956 in the manner
 so require and give a true and fair view.
 
 (a) in the case of Balance Sheet of the state of affairs of the Company
 as at March 31, 2008 and;
 
 (b) in the case of Profit and loss Account of the profit for the year
 ended on that date;
 
 (c) in the case of the Cash Flow Statement, of the cash flows for the
 year ended on that date.
 
 ANNEXURE TO THE AUDITORS REPORT
 
 (Referred to in our report of even date)
 
 (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 at
 reasonable intervals and no material discrepancies were noticed on such
 verification;
 
 (c) There was no substantial disposal of fixed assets during the year.
 
 (ii) (a) The management has conducted physical verification of
 inventory at reasonable intervals during the year.
 
 (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 and as per
 the report of the site auditors provided to us, no material
 discrepancies were noticed on such verification.
 
 (iii) (a) The Company has taken a loan from a party covered in the
 Register maintained under Section 301 of the Companies Act 1956. The
 maximum balance outstanding during the year and the balance of the loan
 outstanding at year end is Rs. 29,30,00,000/-. In our opinion and
 according to the information and explanations given to us, the rate of
 interest and terms and conditions of the loans are not prima facie
 prejudicial to the interests of the company.
 
 (b) The loan taken is re-payable on demand. As informed, the lender has
 not demanded repayment during the year, thus, there has been no default
 on the part of the Company. The payment of interest has been regular
 
 (c) 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.
 
 (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 rendering of
 services. During the course of our audit, no major weakness has been
 noticed in the internal control system in respect of these areas.
 
 (v) (a) In our opinion and according to the information and
 explanations given to us, the transactions that need to be entered into
 a register in pursuance of section 301 of the Act have been so entered.
 
 (b) In respect of transactions made in pursuance of such contracts or
 arrangements entered into during the financial year and exceeding the
 value of Rupees five lakhs, because of the unique and specialized
 nature of the items involved and in the absence of any comparable
 prices, we are unable to comment whether the transactions were made at
 prevailing market prices at the relevant time.
 
 (vi) The Company has not accepted any deposits from the public during
 the year under review, and consequently the directives issued by the
 Reserve Bank of India and the provisions of sections 58A and 58AA of
 the Act and the rules framed there under are not applicable.
 
 (vii) The Company has an internal audit system, the scope and coverage
 of which, in our opinion requires to be enlarged to be commensurate
 with the size and nature of its business.
 
 (viii) To the best of our knowledge and as explained, the Central
 Government has not prescribed maintenance of cost records under clause
 (d) of sub-section (1) of section 209 of the Companies Act, 1956.
 
 (a) The Company is generally regular in depositing Provident Fund,
 Income tax and service tax dues with the appropriate authorities though
 there has been a slight delay in a few cases. The provisions of the
 investor education and protection fund, employees state insurance,
 sales-tax, customs duty and excise duty are not applicable to the
 Company.
 
 (b) According to the information and explanations given to us, there
 are no arrears of outstanding statutory dues as at the last day of the
 financial year for a period of more than six months from the date they
 became payable except in one case of tax deducted at source amounting
 to Rs. 45,68,055 which was since paid after the balance sheet date.
 
 (c) According to the information and explanations given to us there are
 no dues of income tax, sales-tax, wealth tax, service tax, customs
 duty, excise duty and cess which have not been deposited on account of
 any dispute.
 
 (x) The Company does not have any accumulated losses at March 31, 2008
 and has not incurred cash losses in current year and the previous year.
 
 (xi) The Company does not have any borrowings from banks and Financial
 institutions and therefore clause (xi) of para 4 of the Order is not
 applicable.
 
 (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) The Company is not a chit fund or a nidhi/mutual benefit
 fund/society and accordingly clause (xiii) of para 4 of the Order is
 not applicable.
 
 (xiv) The Company has maintained proper records of securities and other
 investments, held as investments and the said investments are in the
 name of the company except as detailed in Note No. C (a) to C (c) of
 the notes to the financial statements.
 
 (xv) According to the information and explanations given to us the
 Company has not given guarantee for loans taken by others from bank or
 financial institutions.
 
 (xvi) The Company has not taken any term loans and therefore clause
 (xvi) of para 4 of the Order is not applicable.
 
 (xvii) According to the information and explanations given to us and on
 an over all examination of the Balance Sheet of the Company and the
 necessary representations from the management, we report that the
 Company has applied short term funds being the borrowings from the
 holding company amounting to Rs. 29.30 crores which is repayable on
 demand towards long term purposes. The Company has made a public issue
 the proceeds of which we are informed by the management would be used
 to repay the borrowing from the holding company.
 
 (xviii) The Company has not made any preferential allotment of shares
 during the year to parties covered in the Register maintained under
 section 301 of the Act and therefore clause (xviii) of the said Order
 is not applicable.
 
 (xix) The Company has not issued any debentures and accordingly clause
 (xix) of the said Order is not applicable.
 
 (xx) The Company has during the year raised money by way of an initial
 public offering during the year.  The amounts collected by the Company
 are held in an escrow account at March 31, 2008 and disclosed in the
 financial statements.
 
 (xxi) Based on the audit procedures performed and 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 Natvarlal Vepari & Co.  For S. R. Batliboi & Associates
       Chartered Accountants       Chartered Accountants
 
       N. Jayendran                Amit Majmudar
       (Partner)                    (Partner)
       M. No. 40441                M. No. 36656
 Mumbai, Dated : May 21, 2008   Mumbai, Dated : May 21, 2008