1.  We have audited the attached Balance Sheet of HERO HONDA MOTORS
 LIMITED (the Company) as at March 31, 2011, the Profit and Loss
 Account and the Cash Flow Statement of the Company for the year ended
 on that date, both 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 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 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 as follows:
 
 (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, the Profit and Loss Account and the Cash Flow
 Statement dealt with by this report are in agreement with the books of
 account;
 
 (d) in ouropinion.the Balance Sheet,the Profitand 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;
 
 (e) 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:
 
 (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 as on March 31,2011 and taken on record by the Board of
 Directors, none of the Directors is disqualified as on March 31,2011
 from being appointed as a director in terms of Section 274(1)(g) of the
 Companies Act, 1956.
 
 ANNEXURE TO THE AUDITORS'' REPORT
 
 (Referred to in paragraph 3 of our report of even date)
 
 Having regard to the nature of the Company''s business/
 activities/result, clauses 4(x) and (xiii) of Companies (Auditor''s
 Report) Order, 2003 (hereinafter referred to as the Order) are
 notapplicable.
 
 (i) (a) The Company has maintained proper records showing full
 particulars, including quantitative details and situation of the 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 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) 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.
 
 (ii) (a) During the year, the inventories have been physically verified
 by the management except for inventories lying with third parties at
 the end of the year for which confirmations have been obtained in most
 of the cases. In our opinion, the frequency of 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 has maintained 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. 465 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. 155
 crores and the year end balance of loans granted was Rs. 20 crores.
 
 (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)
 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) In our opinion and according to information and explanations given
 to us, having regard to the explanations that some of the items
 purchased are of special nature and suitable alternatives sources are
 not readily available for obtaining comparable quotations, there is an
 adequate internal control system commensurate with the size of the
 Company and the nature of its business with regard to the purchases of
 inventories and fixed assets and for the sale of goods and services.
 During the course of our audit, we have not observed any major weakness
 in such internal control system.
 
 (v) In respect of contracts or arrangements entered in the Register
 maintained in pursuance of Section 301 of the Companies Act, 1956, to
 the best of our knowledge and belief and according to the information
 and explanations given to us:
 
 (a) The particulars of contracts or arrangements referred to in Section
 301 that need to be entered in
 
 the Register maintained underthesaid Section have been so entered.
 
 (b) Where each of such transaction is in excess of Rs. 5 lakhs in
 respect of any party, the transactions have been made at prices which
 are prima facie reasonable having regard to the prevailing market
 prices at the relevant time except in respect of certain purchases for
 which comparable quotations are not available and in respect of which
 we are unable to comment.
 
 (vi) The Company has not accepted any deposits from the public,
 paragraph 4(vi) of the Order is not applicable.
 
 (vii) In our opinion, the internal audit function carried out during
 the year by firms of Chartered Accountants appointed by the Management,
 have been commensurate with the size of the Company and the 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, however,
 not made a detailed
 
 examination of records with a view to determining whether they 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 other
 than delays in deposit of service tax. 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 sales tax, wealth 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, 2011:
 
 Name of the        Nature of the Dues         Amount*      Amount paid
 Statute                                (Rs. in crores)   under protest
                                                         (Rs. in crores)
 
 Central Excise     Excise Duty                 179.70             2.98 
 Laws
 
                                                  0.14             0.07
 
                    Service Tax                   1.93             0.45
 
 Income tax Act,    Income tax                   58.40           -   **
 1961
 
                                                 32.50       15.00   **
 
 
 
 
 
 Name of the Statue            Period to which      Forum where dispute
                                    the amount               is pending
                                       relates
 
 Central Excise Laws               2000-01 and                   CESTAT
 
                                   2002-2009
 
                                   2002-03 to              Commissioner
                                   2005-2006                  (Appeals)
 
                                   2003-04 to                    CESTAT
                                   2005-06
 
 Income tax Act, 1961              2005-06         Income Tax Appellate
                                                               Tribunal
                                   2004-05                 Commissioner
                                                              (Appeals)
 
 * Amount as per demand orders including interest and penalty wherever
 indicated in the order.  ** Balance of unpaid amount has been stayed.
 
 The following matters have been decided in favour of the Company but
 the department has preferred appeals at higher levels:
 
 Name of the 
 Statute          Nature of the 
                  Dues             Amount*      Period to 
                                                which the     Forum where 
                                                              dispute is
                              (Rs.in crores)    amount 
                                                relates       pending
 
 Central Excise
 Laws            Excise duty       2.57         1986-87 to 
                                                1990-91       Supreme 
                                                              Court
 
                                   0.03         2005-06 to 
                                                2008-09       CESTAT
 
                 Service Tax       0.03         2005          High Court
 
 Income-tax 
 Act, 1961       Income-Tax       22.98         1987-88,
                                                1989-90,
                                                1992-         High Court
                                                93,1993-94,
                                                1995-96 to
                                                1998-99,
                                                2001-02
 
                                  13.14         1999-00,
                                                2001-02       Income Tax
                                                              Appellate 
                                                              Tribunal
 
 (x) According tothe 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.
 
 (xi) 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.
 
 (xii) 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.
 
 (xiii) 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.
 
 (xiv) 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 obtained.
 
 (xv) 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.
 
 (xvi) The Company has not made any preferential allotment of shares
 during the year.
 
 (xvii) The Company has not issued any debentures during the year.
 
 (xviii) The Company has not raised any money by way of public issue
 during the year.
 
 (xix) To the best of our knowledge and according to the information and
 explanations given to us, no fraud by the Company and no material fraud
 on the Company has been noticed or reported during the year.
 
 For A. F. FERGUSONS CO.
 
 Chartered Accountants 
 Registration No. 112066W)
 
 Manjula Banerji
 Partner
 
 Membership No. 86423)
 
 New Delhi 
 May 4, 2011