1.  We have audited the attached Balance Sheet of Gujarat Industries
 Power Company Limited (the Company) as at 31st March 2011 and also
 the 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 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 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 of India in terms of section 227 (4A) of the
 Companies Act, 1956, and on the basis of such checks as we considered
 appropriate and according to 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:
 
 (a) 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;
 
 (b) 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;
 
 (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;
 
 (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, to the extent applicable;
 
 (e) on the basis of written representations received from the Directors
 of the Company and 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 clause (g) of sub-section (1)
 of section 274 of the Companies Act, 1956;
 
 (f) in our opinion and to the best of our information and according to
 the explanations given to us, the said accounts read together 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 31st March 2011;
 
 ii. in the case of the Profit and Loss Account, of the Profit of the
 Company for the year ended on that date;
 
 iii. in the case of cash flow statement, of the Cash Flow for the year
 ended on that date.
 
 ANNEXURE TO THE AUDITORS'' REPORT
 (referred to in paragraph (3) thereof)
 
 i. (a) The Company has maintained proper records showing full
 particulars, including quantitative details and situation of fixed
 assets.
 
 (b) Fixed assets have been physically verified by the management during
 the year as per the phased programme of physical verification of fixed
 assets.  As informed to us, the programme is such that all the fixed
 assets will get physically verified in three years time. In our
 opinion, the same is reasonable having regard to the size of the
 Company and the nature of its assets. According to the information and
 explanation given to us, no material discrepancies were noticed on such
 verification.
 
 (c) The company has not disposed off a substantial part of fixed assets
 during the year and therefore, do not affect the going concern
 assumption.
 
 ii. (a) The inventory has been physically verified by the management at
 the year end.
 
 (b) In our opinion and according to the information and explanations
 given to us, 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 has maintained proper records of its inventories. No
 material discrepancies were noticed on physical verification of
 inventory as compared to book records.
 
 iii. The Company has neither granted any loans nor taken any loans,
 secured or unsecured, to or from companies, firms or other parties
 listed in the register maintained under Section 301 of the Companies
 Act, 1956. Therefore, the provisions of clause (iii) of the Order are
 not applicable to the Company.
 
 iv. In our opinion and according to the information and explanations
 given to us, having regard to the explanations that some of the items
 are of a special nature and their prices cannot be compared with
 alternative quotations, there are adequate internal control procedures
 commensurate with the size of the Company and the nature of its
 business with regard to
 
 purchase 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 internal controls.
 
 v. In our opinion and according to the information and explanations
 given to us, there are no transactions made by the company in pursuance
 of contracts or arrangements required to be entered in the register
 maintained under Section 301 of the Companies Act, 1956.
 
 vi. In our opinion and according to information and explanations given
 to us, the Company has complied with the provisions of Sections 58A and
 58AA or any other relevant provisions of the Companies Act, 1956 and
 the Companies (Acceptance of Deposits) Rules, 1975 with regard to the
 deposits accepted from the public. As informed to us, 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.
 
 vii. In our opinion, the Company has an internal audit system
 commensurate with its size and nature of its business.
 
 viii. We have broadly reviewed the books of accounts and records
 maintained by the Company pursuant to the Order made by the Central
 Government for the maintenance of cost records under Section 209 (1)
 (d) of the Act and are of the opinion that prima-facie the prescribed
 accounts and records have been made and maintained. We have not,
 however made a detail examination of the records.
 
 ix. (a) The Company is regular in depositing with appropriate
 authorities undisputed statutory dues including provident fund,
 investor education and protection fund, employees'' state insurance,
 income tax, sales tax, custom duty, excise duty, cess and other
 material statutory dues applicable to it. According to the information
 and explanations given to us, no undisputed amounts payable in respect
 of statutory dues were in arrears as at 31st March,2011 for a period of
 more than six months from the dates they become payable.
 
 (b) According to the information and explanations given to us, there
 are no dues of customs duty, wealth tax, service tax, excise duty and
 cess, which have not been deposited on account of any dispute.
 
 In respect of Stamp Duty and Income Tax as at 31st March, 2011 which
 have not been deposited on account of any dispute, the details are as
 under:
 
 Particulars    Forum where      Period to                 Amount
 
                the dispute is   which the                  (Rs.in 
                 pending          amount                    lakhs)
 
                                  relates
 
 Stamp Duty     Dy. Collector,    1996-97                   452.60 
                Stamp Duty 
                Valuation Office,
                Baroda
 
 Income Tax     Commissioner of 
                Income               A.Y.                     6.40
                Tax of Appeals,
                Baroda            2003-04
 
 Income Tax     Commissioner of 
                Income               A.Y.                     9.20
                Tax of Appeals,
                Baroda             2000-01
 
 x. In our opinion, the Company has no accumulated losses. The Company
 has not incurred any cash losses during the financial year covered by
 our audit and during the immediately preceding financial year.
 
 xi. In our opinion and according to the information and explanations
 given to us, the Company has not defaulted in repayment of dues to the
 financial institution or bank.
 
 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 and therefore, the provisions of clause (xii) of the Order
 are not applicable to the Company.
 
 xiii. In our opinion, the Company is not a chit fund or a nidhi/ mutual
 benefit fund/ society. Therefore, the provisions of clause (xiii) of
 the Order are not applicable to the Company.
 
 xiv. In our opinion and according to the information and explanations
 given to us, the Company is not dealing in or trading in shares,
 securities, debentures and other investments. The Company is investing
 surplus funds in marketable securities and bonds. 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 investments in marketable securities 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 institution and therefore, the provisions of clause (xv)
 of the Order are not applicable to the Company.
 
 xvi. In our opinion and according to the information and explanations
 given to us, the term loans have been applied for the purpose for which
 they were raised.
 
 xvii. According to the information and explanations given to us and on
 overall examination of the Balance Sheet of the Company, we report that
 the funds raised on short term basis have not been used for long term
 investment.
 
 xviii. 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 the parties and companies
 covered in the register maintained under section 301 of the Companies
 Act, 1956.
 
 xix. According to the information and explanations given to us, during
 the period of audit, the Company has not issued any secured debentures.
 
 xx. The Company has not raised any money by public issue during the
 year and therefore, the provisions of clause (xx) of the Order are not
 applicable to the Company.
 
 xxi. 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 VCA & Associates
 
                                                Chartered Accountants
 
                                                       F R N: 114414W
 
 Place: Vadodara.                                       Ashok Thakkar
 
 Date : 24th May, 2011.                                      Partner
 
                                                 Membership No. 48169