Hindalco Industries

We have audited the attached Balance Sheet of HINDALCO INDUSTRIES
 LIMITED as at 31st March, 2009 and also the Profit and Loss Account and
 the Cash Flow Statement for the year ended on that date.  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.
 
 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.
 
 As required by the Companies (Auditor’s report) Order, 2003, as amended
 by the Companies (Auditor’s Report)(Amendment) Order, 2004 issued by
 the Central Government of India in terms of sub-section (4A) of section
 227 of the Companies Act, 1956, we enclose as Annexure, a statement on
 the matters specified in the paragraphs 4 and 5 of the said order.
 
 Further to our comments in the Annexure referred above, we report that:
 
 1) 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;
 
 2) 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;
 
 3) The Balance Sheet, Profit & Loss Account and Cash Flow Statement
 dealt with by this report are in agreement with the books of account;
 
 4) 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 , except as mentioned in Para 6 below.
 
 5) On the basis of the 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 31st March, 2009 from being
 appointed as a Director in terms of clause (g) of sub-section (1) of
 section 274 of the Companies Act, 1956;
 
 6) Without qualifying our opinion, attention is drawn to the following
 :- a) Regarding non provision of Mark to Market losses of Rs. 313.55
 Crores (net) on outstanding
 
 derivatives as on 31st March 2009 which is not in accordance with the
 Accounting Standard – 1 and announcement made by ICAI on 29th March
 2008. Refer Note No 29 (d) in Schedule 19.
 
 b) As per Scheme of Arrangement U/s 391 to 394 of the Companies Act
 1956 approved by the Honourable High Court of Mumbai vide its Order
 dated 29th June, 2009 the company has been allowed to create Business
 Reconstruction Reserve by transferring balance standing to the credit
 of Securities Premium Account for adjusting certain expenses as defined
 in the scheme. Accordingly, the management of the Company , during the
 year has identified and adjusted Impairment of Fixed Assets amounting
 to Rs. 66.80 Crores ( Net of Tax) and certain expenses amounting to Rs.
 0.18 Crores against Business Reconstruction Reserve. This has resulted
 in the profit before tax and profit after tax for the year being higher
 by Rs. 101.38 Crores and Rs 66.98 Crores respectively and deferred tax
 asset being lower by Rs. 34.40 Crores. Refer Note No 22 in Schedule 19.
 
 In our opinion and to the best of our information and according to the
 explanations given to us, the said accounts read with the Notes in
 Schedule 19 give the information required by the Companies Act, 1956
 (as amended) 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, 2009;
 
 (b) In the case of the Profit and Loss Account, of the Profit for the
 year ended on that date; and
 
 (c) In the case of Cash Flow Statement, of the Cash Flows for the year
 ended on that date.
 
 ANNEXURE TO THE AUDITORS’ REPORT
 
 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
 periodically in a phased manner and no material discrepancies have been
 noticed on physical verification as confirmed by the management.
 
 (c) No substantial part of Fixed Assets has been disposed of during the
 year, which has bearing on the going concern assumption.
 
 II (a) Physical verification of Inventory (except stocks in transit and
 stocks lying with third parties, confirmation for which has been
 obtained) have been conducted at reasonable intervals during the year
 by the management.
 
 (b) In our opinion, the procedures of physical verification of
 Inventory followed by the management are reasonable and adequate in
 relation to the size of the Company and nature of its business.
 
 (c) The Company has maintained proper records of inventory. No material
 discrepancies were noticed on physical verification.
 
 III (a) The Company has not granted any loans, secured or unsecured to
 companies, firms or other parties listed in the register maintained
 under Section 301 of the Companies Act, 1956. Accordingly, clause
 4(III)(b) to (d) of the Order are not applicable.
 
 (b) The Company has not taken any loans, secured or unsecured from
 companies, firms or other parties listed in the register maintained
 under Section 301 of the Companies Act, 1956. Accordingly, clause
 4(III)(f) to (g) of the Order are not applicable.
 
 IV On the basis of checks carried out during the course of audit and as
 per explanations given to us, we are of the opinion that there are
 adequate internal control procedures commensurate with the size of the
 Company and the nature of its business; for the purchase of inventory
 and fixed assets and for the sale of goods and services. During the
 course of our audit, no major weakness has been noticed in the internal
 controls except as mentioned in the paragraph XXI of this report.
 
 V (a) In our opinion and according to the information and explanation
 given to us, the transactions that need to be entered into register
 maintained under section 301 of the Companies Act, 1956 have been so
 entered.
 
 (b) In our opinion and according to the information and explanations
 given to us, the transactions made in pursuance of contract or
 arrangements entered in the register maintained under section 301 of
 the Companies Act,1956 have been made at prices which are reasonable
 having regard to the prevailing market price at the relevant time.
 
 VI The Directives issued by the Reserve Bank of India and the
 provisions of sections 58A and 58AA or any other relevant provisions of
 the Companies Act, 1956 and the rules framed there-under have been
 complied with in respect of deposits accepted from the public. We have
 been informed that, no order has been passed by Company Law Board or
 National Company Law Tribunal or Reserve Bank of India or any other
 Court or Tribunal in this regard.
 
 VII The Company has an Internal Audit System, which in our opinion is
 commensurate with the size and nature of the business.
 
 VIII The Company has maintained proper cost records as prescribed by
 Central Government under section 209 (1) (d) of the Companies Act, 1956
 for the products of the Company but no detailed examination of such
 records has been carried out by us.
 
 IX (a) According to the information and explanations given to us and on
 the basis of our examination
 
 of the books of accounts, the Company is generally regular in
 depositing undisputed statutory dues including Provident Fund, Investor
 Education and Protection Fund, Employees’ State Insurance, Income Tax,
 Sales Tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, Cess and
 other statutory dues with the appropriate authorities. According to the
 information and explanations given to us no undisputed statutory dues
 as above were outstanding as at 31st March, 2009 for a period of more
 than 6 months from the date they became payable.
 
 (b) According to the information and explanations given to us, the dues
 of Sales Tax, Income Tax, Customs Duty, Wealth Tax, Excise Duty,
 Service Tax and Cess which have not been deposited on account of any
 dispute and the forum where the dispute is pending as on 31st March,
 2009 are as under:
 
 Name of the           Nature of                     Amount
 Statute                  Dues                 (Rs. in Crores)
 
 Sales Tax Laws        Sales Tax                     1.13
                                                     5.17
                                                    54.53
 
 Central Excise       Excise Duty                  155.31
 Act ,1944
 
                                                    15.36
                                                   273.45
                                                     0.88
 Service Tax          Service Tax                   13.34
 Act , 1994
 
                                                     0.18
 Customs              Customs Act                   18.13
 Act, 1962
 
 Adhosanrachna        Chhattisgarh                   0.09
 Vikas Evam           Development
 Parayavaran             and
 Upkar Adhiniyam,     Environment Cess
 2005
 
 Shakti Nagar         Cess on Coal                   4.32
 Special Area
 Development
 Authority
 
 Period to which its Relates                  Forum where
                                              pending
 
 1986-1987, 1989-1990, 1990-1991,           The High Court
 1992-1993 , 1995-1996 , 2001 - 2002 ,
 2003-2004
 
 1998-1999, 1999 -2000, 2000-2001,          Tribunal
 2002- 2003 , 2003 -2004, 2004 - 2005
 1991- 1992, 1994- 1995,1996-1997,          Asst Commissioner/
 
 1997-1998, 1998- 1999, 1999-2000 ,         Commissioner/ Revisionery
 2000 -2001 , 2001- 2002 , 2002- 2003,     Authorities Level
 2003-2004, 2004-2005, 2005- 2006,
 2006-2007, 2007-2008
 
 2000-2001 and 2001-2002                    The Supreme Court
 1994 - 1995, 2000- 2001                    The High Court
 
 1998- 1999, 2000 -2001, 2001- 2002,        Tribunal
 2002 - 2003, 2003- 2004, 2004- 2005,
 2005- 2006, 2006- 2007, 2007-2008,
 2008-2009
 
 1985 - 1986, 1986 -1987, 1988- 1989,      Asst Commissioner/
 1989- 1990, 1991- 1992, 1992- 1993,       Commissioner/ Revisionery
 1993- 1994, 1994- 1995, 1995- 1996,       Authorities Level
 
 1996 -1997, 1997 - 1998, 1998- 1999,
 1999 - 2000, 2000 -2001, 2001 -2002,
 2002 -2003, 2003 - 2004, 2004- 2005,
 
 2005 -2006, 2006- 2007, 2007 -2008
 
 1997 - 2000 , 2000- 2001, 2004 -2008      Tribunal
 
 2006-2007, 2008-2009                      Asst Commissioner/
                                           Commissioner/ Revisionery
                                           Authorities Level
 2004- 2005 , 2005 -2006 and               Asst Commissioner/
 2006 - 2007                               Commissioner/ Revisionery
                                           Authorities Level
 2008- 2009                                The High Court
 1997 -1998                                The High Court
 
 X The Company does not have any accumulated losses and has not incurred
 cash losses in the current financial year and in the immediately
 preceding financial year.
 
 XI The Company has not defaulted in repayment of dues to Financial
 Institutions or Banks or Debenture holders.
 
 XII According to the information and explanations given to us, the
 Company has not granted any loans or advances on the basis of security
 by way of pledge of Shares, Debentures and other Securities.
 
 XIII The Company is not a chit fund or a nidhi/mutual benefit fund/
 society.
 
 XIV The Company is not in the business of dealing or trading in shares.
 The Company has maintained proper records of transactions and contracts
 in respect of Shares, Securities, Debentures and other Investments and
 timely entries have been made therein. The Shares, Securities,
 Debentures and other
 
 Investments have been held by the Company, in its own name except to
 the extent of exemption, granted under Section 49 of the Companies Act,
 1956.
 
 XV In our opinion and according to the information and explanations
 given to us, the terms and conditions on which the Company has given
 corporate guarantees for loans taken by its Subsidiaries and Joint
 Ventures from Banks and Financial Institutions (including foreign
 banks) are not prima facie prejudicial to the interest of the Company.
 
 XVI Based on information and explanations given to us by the
 management, term loans were applied for the purpose for which the loans
 were obtained though unutilized funds which were not required for
 immediate use for capital expenditure have been temporarily invested in
 securities/bank deposit.
 
 XVII According to the information and explanations given to us and on
 the basis of our overall examination of the Balance Sheet and Cash Flow
 Statement, we report that no funds raised on short term basis have been
 used for long term investment of the Company.
 
 XVIIIDuring the year under audit the Company has not made any
 preferential allotment of Shares to parties and Companies covered under
 register maintaining U/s 301 of the Companies Act 1956.
 
 XIX On the basis of records made available to us, the Company has
 created Securities in respect of Debenture issued/ outstanding during
 the year.
 
 XX The Company has made Rights Issue during the year and has disclosed
 the end use of money received from Rights Issue in Note No. 19 to
 Schedule 19 on notes to accounts and the same has been verified by us.
 
 XXI Based upon the audit procedures performed and on the basis of
 information and explanations given to us by the management, we report
 that the following two frauds on the company, have been detected during
 the year:- a) Suspected unauthorized access to Company’s computer
 network by an employee of the Company, resulting in certain
 unauthorized sales transactions having taken place at discounted prices
 and on extended credit terms. However, this is not expected to have any
 impact on the financial results of the Company going forward. The
 matter is under investigation and the materiality and the amount
 involved cannot be ascertained at this stage.
 
 b) Certain Customers falling under a group have purchased materials
 from Company by providing forged Letter of Credits and Bank Guarantees.
 However, the said Group of Customer has committed to liquidate the dues
 as per the terms of payment schedule as agreed with the management.
 Amount outstanding as on 31st March, 2009 is Rs. 14 crores out of the
 total dues of Rs. 29 Crores.
 
                                              For SINGHI & CO.,
                                          Chartered Accountants
 Camp: Mumbai
 Dated: The 30th day of June, 2009                 RAJIV SINGHI
 1-B, Old Post Office Street,                          Partner
 Kolkata-700 001                           Membership No. 53518