1.  We have audited the attached Balance Sheet of GRASIM INDUSTRIES
 LIMITED (the Company) as at 31st March, 2011, the Profit and Loss
 Account and the Cash Flow Statement of the Company for the year ended
 on that date, both annexed thereto, in which are incorporated the
 Returns from Vikram Woollens Division, audited by Branch auditors.
 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 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 misstatements. An audit
 includes examining, on a test basis, evidence supporting the amounts
 and the disclosures in the financial statements. An audit also includes
 assessing the accounting principles used and the significant estimates
 made by the 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 (CARO)
 issued by the Central Government in terms of Section 227(4A) of the
 Companies Act, 1956, we give 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 in paragraph 3
 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 it appears from our examination of
 those books and proper returns adequate for the purposes of our audit
 have been received from the Division audited by branch auditor; whose
 report has been forwarded to us and has been dealt with by us in
 preparing this report;
 
 (iii) the Balance Sheet, the Profit and Loss Account and the Cash Flow
 Statement dealt with by this report are in agreement with the books of
 account and the audited Branch Returns;
 
 (iv) in our opinion, the Balance Sheet, the Profit and Loss Account and
 the Cash Flow Statement dealt with by this report are in compliance
 with the Accounting Standards referred to in Section 211(3C) of the
 Companies Act, 1956;
 
 (v) in our opinion and to the best of our information and according to
 the explanations given to us, the said accounts 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 the Balance Sheet, of the state of affairs of the
 Company as at 31st March, 2011;
 
 (b) in the case of the Profit and Loss Account, of the profit of the
 Company for the year ended on that date and
 
 (c) 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 as on 31st March, 2011 taken on record by the Board of
 Directors, we report that none of the Directors is disqualified as on
 31st March, 2011 from being appointed as a director in terms of Section
 274(1)(g) of the Companies Act, 1956.
 
 TO THE MEMBERS OF GRASIM INDUSTRIES LIMITED (Referred to in paragraph 3
 of our report of even date)
 
 (i) Having regard to the nature of the Company’s
 business/activities/results, clauses (x) regarding cash loss incurred
 by the Company, (xiii) regarding chit fund, nidhi / mutual benefit fund
 / societies and (xiv) regarding dealing or trading in shares,
 securities, debentures and other investments, of CARO are not
 applicable.
 
 (ii) In respect of its fixed assets:
 
 (a) The Company has maintained proper records showing full particulars,
 including quantitative details and situation of the fixed assets.
 
 (b) The fixed assets were physically verified during the year by the
 Management in accordance with a 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) The fixed assets disposed off during the year, in our opinion, do
 not constitute a substantial part of the fixed assets of the Company
 and such disposal has, in our opinion, not affected the going concern
 status of the Company.
 
 (iii) In respect of its inventories:
 
 (a) As explained to us, the inventories were physically verified during
 the year by the Management except stocks lying with third parties for
 which confirmations have been obtained.
 
 (b) In our opinion and according to the information and explanations
 given to us, the procedures of physical verification of inventories
 followed by the Management were 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 explanations
 given to us, the Company has maintained proper records of its
 inventories and no material discrepancies were noticed on physical
 verification.
 
 (iv) According to the information and explanation given to us,0 the
 Company has neither granted nor taken any loans, secured or unsecured,
 to / from companies, firms or other parties listed in the Register
 maintained under Section 301 of the Companies Act, 1956, during the
 year.
 
 (v) 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 purchases of inventory and fixed assets and the sale of goods and
 services. During the course of our audit, we have not observed any
 major weakness in such internal control system.
 
 (vi) To the best of our knowledge and belief and according to the
 information and explanations given to us, there were no contracts or
 arrangements that needed to be entered in the Register maintained under
 Section 301 of the Companies Act, 1956.
 
 (vii) According to the information and explanations given to us, the
 Company has not accepted any deposit from the public in terms of the
 provisions of Sections 58A and 58AA or any other relevant provisions of
 the Companies Act, 1956.
 
 (viii) In our opinion, the Company has an adequate internal audit
 system commensurate with the size and the nature of the Company’s
 business.
 
 (ix) We have broadly reviewed the books of account maintained by the
 Company pursuant to the rules made by the Central Government for the
 maintenance of cost records under Section 209(1)(d) of the Companies
 Act, 1956 in respect of the Company’s products to which the said rules
 are applicable and are of the opinion that prima facie the prescribed
 accounts and records have been made and maintained. We have, however,
 not made a detailed examination of the records with a view to
 determining whether they are accurate or complete. To the best of our
 knowledge and according to the information and explanations given to
 us, the Central Government has not prescribed the maintenance of cost
 records for any other product of the Company.
 
 (x) According to the information and explanations given to us in
 respect of statutory dues:
 
 (a) The Company has generally been regular in depositing undisputed
 dues, including Provident Fund, Investor Education and Protection Fund,
 Employees’ State Insurance, Income-tax, Sales Tax, Value Added Tax,
 Wealth Tax, Service Tax, Custom Duty, Excise Duty, Cess and other
 material statutory dues applicable to it with the appropriate
 authorities.
 
 (b) There were no undisputed amounts payable in respect of the above
 mentioned statutory dues in arrears as at 31st March, 2011 for a period
 of more than six months from the date they became payable.
 
 (c) Details of dues of Income-tax, Sales Tax, Value Added Tax, Wealth
 Tax, Service Tax, Custom Duty, Excise Duty and Cess, to the extent
 applicable, which have not been deposited as on 31st March, 2011 on
 account of disputes and the forum where the dispute is pending are
 given below:
 
 Sr. 
 No.   Name of the 
       statute         Forum where dispute      Amount       Period
     (Nature of dues)        is pending      (Rs. in Crores)
 
 1   Sale Tax and      Supreme Court, 
                       High Court                 3.25     2004-2005
     Value Added Act 
    (Tax)              Appellate Authorities      0.18     2000-2010
 
                       Assessing Authorities      0.83     2008-2011
 
 2   Customs Act, 1962 
     (Duty)            Appellate Authorities      3.24     2001-2010
 
                       Assessing Authorities      1.18     1985-1986
 
 3   Central Excise
     Act, 1944         Supreme Court, High Court  1.00     1997-2010
     (Duty/Penalty)    Appellate Authorities      4.56     2000-2010
 
 4   Service Tax under
     the               Tribunal                   0.04     2006-2010
     Finance Act, 
     1994 (Tax)        Appellate Authorities      6.28     2000-2010
 
                       Assessing Authorities      0.54     2000-2010
 
 5   Cess under various 
     Acts              Supreme Court, High Court  7.92     1981-2004
     (Cess/Interest)   Appellate Authorities      0.10     1996-1999
 
 (xi) In our opinion and according to the information and explanations
 given to us, the Company has not defaulted in the repayment of dues to
 banks, financial institutions and debenture holders during the year.
 
 (xii) In our opinion and according to the information and explanations
 given 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 and according to the information and explanation
 given to us, the terms and conditions of the guarantees given by the
 Company for loans taken by others from banks and financial institutions
 are not prima facie prejudicial to the interests of the Company.
 
 (xiv) In our opinion and according to the information and explanations
 given to us, the term loans have been applied for the purposes for
 which they were obtained.
 
 (xv) In our opinion and according to the information and explanations
 given to us and on an overall examination of the Balance Sheet, we
 report that funds raised on short-term basis have not been used for
 long term investment.
 
 (xvi) According to the information and explanations given to us, during
 the period covered by our audit report, 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.
 
 (xvii) According to the information and explanations given to us,
 during the period covered by our audit report, the Company has not
 issued debentures.
 
 (xviii) According to the information and explanations given to us, the
 Company has not raised any money by way of public issue during the
 year.
 
 (xix) During the course of our examination of the books and records of
 the company, carried out in accordance with the generally accepted
 auditing practices in India, and according to the information and
 explanations given to us, we have neither come across any instance of
 fraud on or by the Company, noticed or reported during the year nor
 have we been informed of such case by the management.
 
 For DELOITTE HASKINS & SELLS            For G. P. KAPADIA & CO.
 
 Chartered Accountants                     Chartered Accountants
 
 (Registration No. 117366W)           (Registration No. 104768W)
 
 B. P. Shroff                                     Atul B. Desai
 
 Partner                                                Partner
 
 Membership No.: 34382                    Membership No.: 30850
 
 Place: Mumbai
 
 Date : 11th May, 2011