1.  We have audited the attached Balance Sheet of GODREJ INDUSTRIES
 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 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 in terms of Section 227(4A) of the Companies
 Act, 1956, we annex hereto 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 purpose 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 such
 books and proper returns adequate for the purposes of our audit have
 been received from the branches not visited by us. The Branch Auditors
 Report has been forwarded to us and has been appropriately dealt with.
 
 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
 and with the audited returns from the branches.
 
 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) Without qualifying our opinion, we draw attention to Note 10 (b) of
 Schedule 20 – Notes to Accounts regarding a loan and interest thereon
 of Rs. 84.86 crores (previous year Rs. 81.13 crores), (net of provision
 of Rs. 5.47 crores (previous year Rs. 3.29 crores)) to a Trust for
 purchase of the Companys shares from the market equivalent to the
 options granted under an Employee Stock Option Plan. As at March 31,
 2011, the market value of the shares held by the ESOP Trust is lower
 than the holding cost of these shares by Rs. 25.47 crores (previous
 year Rs. 34.56 crores) (net of provision of Rs. 5.47 crores (previous
 year Rs. 3.29 crores)). The repayment of the loans granted to the ESOP
 Trust and the interest payable by the Trust on the said loans is
 dependent on the exercise of options by the employees during the
 exercise period and / or the market price of the underlying equity
 shares of the unexercised options at the end of the exercise period. In
 the opinion of the management, the fall in the value of the underlying
 equity shares is on account of market volatility and the loss, if any,
 can be determined only at the end of the exercise period, in view of
 which, provision for the diminution is not considered necessary in the
 financial statements.
 
 f) Reference is invited to Note 8 (a) of Schedule 20 - Notes to
 Accounts, regarding the recoverability of advances given to certain
 individuals amounting to Rs. 10.33 crores (previous year Rs. 10.33
 crores) being contingent upon the transfer and / or disposal of the
 shares pledged against the loan. The said shares were lodged for
 transfer, which application was rejected and the Company has preferred
 an appeal to the Company Law Board. The investee company had in the
 mean while moved the High Court but the matter was referred back to the
 Company Law Board where the matter is awaiting hearing. The impact
 thereof on the profit for the year and the reserves as at March 31,
 2011, could not be ascertained.
 
 g) In our opinion and to the best of our information and according to
 the explanations given to us, the said accounts subject to paragraph
 (f) above, and 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 flows of the
 Company for the year ended on that date.
 
 5. On the basis of the 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 disqualified 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 Auditors Report
 
 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 further report that:
 
 1.  Fixed Assets:
 
 a) The Company is generally maintaining proper records showing full
 particulars, including quantitative details and situation of fixed
 assets, except in case of certain continuous process plants where
 item-wise values are not available and in case of furniture, fittings
 and equipment where the records maintained show quantitative details
 with their situation and values based on valuation by an approved
 valuer.
 
 b) The Company has a program for physical verification of fixed assets
 at periodic intervals. In our opinion, the period of verification is
 reasonable having regard to the size of the Company and the nature of
 its assets. The discrepancies reported on such verification are not
 material and have been properly dealt with in the books of account.
 
 c) In our opinion, there have been no significant disposals of fixed
 assets during the year which affect the going concern assumption.
 
 2.  Inventory:
 
 a) The Management has conducted physical verification of inventory at
 reasonable intervals.
 
 b) In our opinion, the procedures of physical verification of
 inventories 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 verification between physical inventories 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.  Loans and Advances:
 
 a) The Company had granted unsecured loans to two companies listed in
 the register maintained under section 301 of the Companies Act, 1956,
 of which two loans of Rs. 2.59 crores were outstanding at the year end.
 The maximum amount of loans granted to the said companies during the
 year was Rs. 6.74 crores.
 
 b) In our opinion and according to the information and explanations
 given to us, the rate of interest and other terms and conditions on
 which the unsecured loans have been granted to the parties listed in
 the register maintained under section 301 of the Companies Act, 1956,
 are not prima facie prejudicial to the interest of the Company.
 
 c) The loans outstanding at the year end are at call and have not been
 recalled during the year. The companies are generally regular in
 payment of interest.
 
 d) There are no overdue amounts exceeding Rs. one lakh.
 
 e) The Company has taken unsecured loans from two companies listed in
 the register maintained under section 301 of the Companies Act, 1956,
 of which one loan of Rs. 2.50 crores was outstanding at the year end.
 The maximum amount of loans taken from the said companies during the
 year was Rs. 5.50 crores.
 
 f) In our opinion and according to the information and explanations
 given to us, the rate of interest and other terms and conditions of
 loans taken are prima facie not prejudicial to the interest of the
 Company.
 
 g) The loans outstanding at the year end are at call and have not been
 recalled during the year. The company is generally regular in payment
 of interest.
 
 h) There are no overdue amounts exceeding Rs. one lakh.
 
 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, for the
 purchases of inventory, 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
 system.
 
 5.  Transactions that need to be entered in the register maintained
 under section 301 of the Companies Act, 1956:
 
 a) Based upon the audit procedures applied by us and according to the
 information and explanations given to us, we are of the opinion that
 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, the transactions made in pursuance of such contracts or
 arrangements entered in the register maintained under section 301 of
 the Companies Act, 1956 and exceeding the value of Rs. 500,000 in
 respect of any party during the year, have been made at prices which
 are reasonable, having regard to prevailing market prices at the
 relevant time, where comparable market prices exist. We have been
 informed that many of the items are of a special nature and their
 prices cannot be compared with alternative quotations.
 
 6.  In our opinion and according to the information and explanations
 given to us, the Company has complied with the directives issued by the
 Reserve Bank of India and the provisions of section 58A and 58AA or any
 other relevant provisions of the Act and the rules framed there under
 in respect of 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 of the Company and nature of its business.
 
 8.  In our opinion and to the best of our knowledge and according to
 the information given to us, the Central Government has not prescribed
 maintenance of cost records under section 209 (1) (d) of the Companies
 Act, 1956 for any of the products of the Company.
 
 9.  Statutory Dues
 
 a) According to the information and explanation given to us, the
 Company is generally regular in depositing undisputed statutory dues,
 including dues pertaining to Investor Education and Protection Fund,
 Provident Fund, Employees State Insurance, Income-tax, Sales-tax,
 Wealth Tax, Service Tax, Custom Duty, Excise duty, Cess and any other
 statutory dues with the appropriate authorities. We have been informed
 that there are no undisputed dues which have remained outstanding as at
 the end of the financial year, for a period of more than six months
 from the date they became payable.
 
 b) According to the information and explanations given to us and the
 records examined by us, there are no dues of income-tax, sales tax,
 wealth tax, service tax, customs duty, excise duty or cess outstanding
 on account of any dispute, other than the following
 
 
 Name of         Nature of Dues    Amount      Period to which
 Statute                           (Rs. in     the amount relates
                                    Crores)
 
 Central Excise  Excise Duty / 
 Act, 1944       Service             0.08      2002-03, 2006-07, 
                 Tax demands                   2010-11
                 relating to 
                 disputed            1.39      1996-97, 2005-06,
                 classification,               2009-10, 2010-11
                 post                         
                 manufacturing       0.03      2009-10  
                 expenses,
                 assessable values,  0.73      1982-83, 1998-99,
                 etc.                          1999-02, 1993-94 
   
                                     5.83      1978-79, 1976-85, 
                                               1995-96 
 
                                     3.91      1993-97 
 
 Custom Duty     Custom Duty         0.24      1978-83, 1991-92,
                 demands relating               2003-04 
                 to lower charge,
 
                                     0.09      1987-93 
 
                 differential duty,  0.25      1978-79, 2003-04
                 classifications 
                 etc.
 
                                     1.09      1978-93 
 
 Sales Tax       Sales Tax demands  11.66      1996-97, 1997-98,
                                               2001-02,2002-06
                 relating to
                 purchase 
                 tax on Branch
                 Transfer / Non      0.42      1996-00, 2001-02, 
                                               2003-05,2006-07
                 Forms, etc. at
                 various levels.     5.83      2000-03, 2004-05, 
                                               2006-07  
 
                                     0.71      1990-92, 1994-96, 
                                               1997-98, 2003-05
 
                                     0.10      2003-04 
 
 Others:
 
 Octroi          Octroi demand       12.84      1984-2002
                 relating to
                 classification 
                 issue               0.04      1997-99  
                 on import of Palm
                 Stearine and 
                 interest            0.24      1997-2003  
                 thereon.
 
                                     0.01      2000-01
 
 Stamp Duty      Stamp Duties        1.82      2000-01 
                 claimed on 
                certain Authority
                properties which
                are under appeal 
                by the Company.
 
 
 
 Name of           Forum where dispute
 Statute           is pending
 
 Central Excise    Assistant Commissioner
 Act, 1944  
                   Commissioner
 
                   Deputy Commissioner
 
                   CESTAT
 
                   High Court
 
                   The Supreme Court
 
 Custom Duty       Assistant Commissioner
 
                   Commissioner
 
                   CESTAT
 
                   High Court
 
 Sales Tax         Sales Tax Officer
 
                   Assistant Commissioner
 
                   Commissioner
 
                   Tribunal
 
                   High Court
 
 
 Others:
 Octroi            The Bombay High Court
 
                   Dy. Commissioner
 
                   Tribunal
 
                   The Supreme Court
 
 Stamp Duty        Controlling Revenue
                   Authority     
 
 10.  The Company does not have accumulated losses as at the end of the
 financial year, nor has it incurred cash losses in the current
 financial year, or in the immediately preceding financial year.
 
 11.  According to the information and explanations given to us and
 based on the documents and records produced before us, there has been
 no default in repayment of dues to banks, financial institutions or
 debenture holders.
 
 12.  According to the information and explanations given to us and
 based on the documents and records produced before us, the Company has
 maintained adequate documents and records in respect of loans and
 advances granted on the basis of security by way of pledge of shares
 and other securities, except for the shares referred to in Note 8 (b)
 of Schedule 20 - Notes to Accounts, which have not been transferred in
 the name of the Company.
 
 13.  In our opinion and according to the information and explanations
 given to us, the nature of activities of the Company does not attract
 any special statute applicable to chit fund and nidhi / mutual benefit
 fund / societies.
 
 14.  In our opinion, the Company has maintained proper records of the
 transactions and contracts in respect of investments purchased and sold
 during the year and timely entries have been made therein. The
 investments made by the Company are held in its own name except for the
 shares referred to in Note (d) of Schedule 6.
 
 15.  According to the information and explanations given to us and the
 records examined by us, the terms and conditions of guarantees given by
 the Company for loans taken by others from banks or financial
 institutions are not prima facie prejudicial to the interest of the
 Company.
 
 16.  According to the information and explanations given to us and the
 records examined by us, on an overall basis, the term loan obtained by
 the Company was applied for the purpose for which the loan was
 obtained.
 
 17.  According to the information and explanations given to us and on
 an overall examination of the Balance Sheet, the Cash Flow Statement
 and other records examined by us, the Company has not used funds raised
 on short term basis for long term investment.
 
 18.  The Company has not made any preferential allotment of shares to
 any parties or companies covered in the register maintained under
 section 301 of the Companies Act, 1956.
 
 19.  The Company did not issue any debentures during the year.
 
 20.  The Company has not raised any money through a public issue during
 the year.
 
 21.  Based upon the audit procedures performed by us, to the best of
 our knowledge and belief and according to the information and
 explanations given to us by the Management, 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 Regn. No.: 104607W
 
                                                  Daraius Z. Fraser
                                                            Partner 
                                                      M. No.: 42454
 
 Mumbai: May 30, 2011.