Hero Honda Motors

1.  We have audited the attached balance sheet of Hero Honda Motors
 Limited as at March 31,2009 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
 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 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 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.
 
 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 appears from our examination of
 those books;
 
 iii) the Balance Sheet, Profit and Loss Account and Cash Flow Statement
 dealt with by this report are in agreement with the books of account;
 
 iv) 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;
 
 v) on the basis of 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, 2009 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 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 March 31,2009;
 
 b) in the case of the Profit and Loss Account, of the prof it for the
 year ended on that date; and
 
 c) in the case of the Cash Flow Statement, of the cash flows for the
 year ended on that date.
 
 ANNEXURE REFERRED TO IN PARAGRAPH 3 OF THE AUDITORS REPORT TO THE
 MEMBERS OF HERO HONDA MOTORS LIMITED ON THE ACCOUNTS FOR THE YEAR ENDED
 MARCH 31, 2009.
 
 (i) (a) The Company is maintaining proper records showing full
 particulars, including quantitative details and situation of fixed
 assets.
 
 (b) As explained to us, the Company has a programme of physically
 verifying all of its fixed assets over a period of three years and in
 accordance therewith, physical verification of certain fixed assets of
 the Company was carried out during the year. In our opinion, the
 frequency of physical verification is reasonable having regard to the
 size of the Company and the nature of its fixed assets. The
 discrepancies noticed on such verification were not material and have
 been properly dealt with in the books of account.
 
 (c) In our opinion and according to the information and explanations
 given to us, a substantial part of the fixed assets has not been
 disposed off by the Company during the year.
 
 (ii) (a) During the year, the inventories have been physically verified
 by the management. In our opinion, the frequency of the verification is
 reasonable.
 
 (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 are reasonable and adequate in relation to
 the size of the Company and the nature of its business.
 
 (c) On the basis of our examination of the records of inventories, we
 are of the opinion that, the Company is maintaining proper records of
 inventories. The discrepancies noticed on physical verification of
 inventories as compared to book records were not material and have been
 properly dealt with in the books of account.
 
 (iii) (a) According to the information and explanations given to us,
 the Company has, during the year, not granted any loan, secured or
 unsecured to companies, firms and other parties covered in the register
 maintained under Section 301 of the Companies Act, 1956, other than
 unsecured loans aggregating Rs. 545.50 crores granted to a company
 covered in the register maintained under Section 301 of the Companies
 Act, 1956. The maximum amount due during the year was Rs. 210 crores
 and there is no amount outstanding at the year end.
 
 (b) In our opinion and according to the information and explanations
 given to us, the rate of interest and other terms and conditions of the
 loans granted by the Company, as referred to in paragraph 4(iii) (a) of
 the Companies (Auditors Report) Order, 2003 (hereinafter referred to
 as the Order) above, are, prima-facie, not prejudicial to the interest
 of the Company.
 
 (c) According to the information and explanations given to us, the
 party, to whom the loans have been granted by the Company, as referred
 to in paragraph 4(iii)(a) above, has been regular in repayment of
 principal amount as stipulated and has been regular in payment of
 interest.
 
 (d) According to the information and explanations given to us, there
 are no overdue amounts in respect of the loans granted as referred to
 in paragraph 4(iii)(a) above and interest thereon.
 
 (e) According to the information and explanations given to us, the
 Company has, during the year, not taken any loans, secured or
 unsecured, from companies, firms and other parties covered in the
 register maintained under Section 301 of the Companies Act, 1956.
 Accordingly, paragraph 4(iii) (f) and (g) of the Order are not
 applicable.
 
 (iv) 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
 inventories, fixed assets and with regard to sale of goods.  There are
 no sales of services during the year. Further, on the basis of our
 examination and according to the information and explanations given to
 us, we have neither come across nor have been informed of any instance
 of major weaknesses in the aforesaid internal control system.
 
 (v) (a) According to the information and explanations given to us, we
 are of the opinion that during the year the particulars of the
 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) According to the information and explanations given to us, the
 transactions made in pursuance of contracts or arrangements entered in
 the register maintained under Section 301 of the Companies Act, 1956,
 and exceeding the value of Rs.5 lacs in respect of any party during the
 year, having regard to the explanation that some of services/ items
 purchased are of a specialized nature for which there are no alternate
 sources of supply to enable comparison of the prices, these have been
 made at prices which are reasonable to prevailing market prices at the
 relevant time.
 
 (vi) The Company has not accepted any deposits from the public.
 
 (vii) According to the information and explanations given to us, the
 Company has an adequate internal audit system commensurate with its
 size and nature of its business.
 
 (viii) 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 and are of the opinion that, prima-facie, the prescribed
 accounts and records have been made and maintained. We have not,
 however, made a detailed examination of the records with a view to
 determining whetherthey are accurate or complete.
 
 (ix) (a) According to the information and explanations given to us and
 the records of the Company examined by us, the Company has been regular
 in depositing undisputed statutory dues including provident fund,
 investor education and protection fund, employees state insurance,
 income-tax, sales tax, wealth tax, customs duty, excise duty, cess,
 value added tax, Haryana local area development tax and other material
 statutory dues applicable to it with the appropriate authorities. We
 are informed that there are no undisputed statutory dues as at the year
 end outstanding 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 of the Company examined by us, there are no disputed dues in
 respect of wealth tax, sales tax, customs duty, and cess, which have
 not been deposited.  The following are the particulars of excise duty,
 service tax and income-tax dues not deposited/ deposited under protest
 by the Company on account of disputes as at March 31,2009:-
 
 Name of the Statute          Natureofdues               Amount*
                                                       (Rs. in crores)
 
 Central Excise Laws          Excise Duty                   9.03
 
                                                            0.14
 
                              Service Tax                   1.90
 
 Income Tax Act                Income Tax                   9.61
 
                                                          128.61
 
 Amount paid        Period to which              Forum where
 under protest      the amount relates        dispute is pending
 (Rs. in crores)
 
  0.09                2000,2002-03 to                 CESTAT
                      2004-05
 
 -                    2005-06                     Commissioner
                                                 (Appeals)
 
  0.45                2004-05 to 2005-06              CESTAT
 
  9.61                2000-01 to 2001-02            Income Tax
                                                   Appellate Tribunal
 
 52.90**              2001-02 to 2004-05            Commissioner
                                                     (Appeals)
 
 
 * Amount as per demand orders including interest and penalty wherever
 quantified in the order.  
 
 ** Balance of unpaid demand has been stayed.
 
 The following matters have been decided in favour of the Company,
 although the department has preferred appeals at higher levels:
 
 Name of the Statute         Nature of the dues        Amount
                                                  (Rs. in crores)
 
 Central Excise Laws        Excise Duty                   2.57
 
 Income Tax Act             Income Tax                    8.18
 
                                                         12.30
 
 Period to which                             Forum where dispute
 amount relates                              is pending
 
 1986-87 to 1990-91                           Supreme Court
 
 1987-88,1989-90,1992-93                      High Court
 
 1993-94, 1995-96, 1996-97
 
 1998-99,2000-01
 
 1999-00,2001-02                              Income Tax Appellate 
                                              Tribunal
 
 (x) The Company does not have accumulated losses at the end of the
 financial year March 31, 2009. Further, the Company has not incurred
 any cash losses during the financial year ended March 31, 2009 and in
 the immediately preceding financial year ended March 31, 2008.
 
 (xi) According to the records of the Company examined by us and on the
 basis of information and explanations given to us, the Company has not
 defaulted in repayment of dues to banks during the year. The Company
 has not taken any loans from financial institutions and has not issued
 debentures during the year.
 
 (xii) In our opinion and according to the information and explanations
 given to us, the Company has not granted any loans and advances during
 the year on the basis of security by way of pledge of shares,
 debentures and other securities.
 
 (xiii) According to the information and explanations given to us, the
 provisions of any special statute as specified under paragraph 4(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 or trading in shares,
 securities, debentures and other investments.
 
 (xv) According to the information and explanations given to us, the
 Company has not given any guarantees during the year for loans taken by
 others from banks or financial institutions.
 
 (xvi) In our opinion and according to the information and explanations
 given to us, the term loans have been applied for the purposes forwhich
 they were obtained.
 
 (xvii) According to the information and explanations given to us and on
 an overall examination of the balance sheet of the Company, we report
 that short term funds have not been used to finance long term
 investments.
 
 (xviii) The Company has not made any preferential allotment of shares
 during the year.
 
 (xix) The Company has not issued any debentures during the year.
 
 (xx) The Company has not raised any money by way of public issue during
 the year.
 
 (xxi) During the course of our examination of the books of account 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
 ended March 31, 2009 nor have we been informed of such case by the
 management.
 
                                For A.F. FERGUSON & CO.
                                Chartered Accountants
                                Manjula Banerji
                                Partner
                                (Membership No.: 86423)
 
 Place: New Delhi
 Date: April 21, 2009