1.  We have audited the attached Balance Sheet of Hindustan Oil
 Exploration Company Limited (''the Company'') as at March 31, 2011 and
 also the Profit and Loss Account and the Cash Flow Statement for the
 year ended on that date annexed thereto. Tese 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 auditing standards
 generally accepted in India. Tose 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.  Te attached financial statements and other financial information
 include Company''s share of net fixed assets, net current assets,
 expenses and cash flows aggregating to INR 588,294,910, INR (8,535,030),
 INR 297,162,129 and INR (19,049,219) respectively as at March 31, 2011
 in respect of one of its unincorporated joint venture (''UJV'') not
 operated by the Company, the accounts of which have been audited by the
 auditors of the respective UJV and relied upon by us.
 
 4.  Te attached financial statements and other financial information
 include Company''s share of total exploration/ development work in
 progress, net current assets, expenses and cash flows aggregating to INR
 200,452,559, INR 11,021,398, INR Nil and INR (13,163) respectively as
 at March 31, 2011 in respect of two of its UJV''s not operated by the
 Company, the accounts of which have not been audited by the auditors of
 the respective UJV''s. Te financial statements and other financial
 information have been incorporated based on un-audited financial
 statements as provided by the Operator of respective UJV''s and relied
 upon by us.
 
 5.  As required by the Companies (Auditor''s Report) Order, 2003 (as
 amended) (''the Order'') 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.  In respect of clauses (ii),
 (ix)(a), (ix)(b), (ix)(c) and (xxi), our comments are restricted to the
 standalone operations of the Company and operations related to UJVs
 where the Company is the operator and it does not cover the
 unincorporated joint ventures where any third party is the operator.
 
 6.  Further to our comments in the Annexure referred to 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. Te 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 the written representations received from the
 directors, as on March 31, 2011, and taken on record by the Board of
 Directors, we report that none of the directors is disqualified as on
 March 31, 2011 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 afairs of the
 Company as at March 31, 2011;
 
 (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 REFERRED TO IN PARAGRAH 5 OF OUR REPORT OF EVEN DATE
 Re: Hindustan Oil Exploration Company Limited (''the Company'')
 
 (i) (a) Te Company has maintained proper records showing full
 particulars, including quantitative details and situation of fixed
 assets.
 
 (b) All fixed assets have not been physically verified by the management
 during the year but there is a regular programme of verification which,
 in our opinion, is reasonable having regard to the size of the Company
 and the nature of its assets. As informed, no material discrepancies
 were noticed on such verification.
 
 (c) Tere was no substantial disposal of fixed assets during the year.
 
 (ii) (a) Te management has conducted physical verification of inventory
 at reasonable intervals during the year.
 
 (b) Te 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) Te Company is maintaining proper records of inventory and no
 material discrepancies were noticed on physical verification carried out
 at the end of the ye a r.
 
 (iii) (a-d) As informed, the Company has not granted any loans, secured
 or unsecured to companies, forms or other parties covered in the
 register maintained under section 301 of the Companies Act, 1956.
 Terefore the provisions of clause 4(iii) (b), (c) and (d) of the Order
 are not applicable to the Company.
 
 (e) Te Company had taken loan from one company covered in the register
 maintained under section 301 of the Companies Act, 1956. Te maximum
 amount involved during the year was Rs. 5,697,500,000 and the year-end
 balance of loans taken from that party was Rs. 5,307,475,000.
 
 (f ) In our opinion and according to the information and explanations
 given to us, the rate of interest and other terms and conditions for
 such loans are not prima facie prejudicial to the interest of the
 Company.
 
 (g) In respect of loans taken, repayment of the principal amount is as
 stipulated and payment of interest have been regular.
 
 (iv) In our opinion and according to the information and explanations
 given to us, as well as taking into consideration the management
 representation that certain items of fixed assets which are of special
 nature for which alternative quotations are not available, there is an
 adequate internal control system commensurate with the size of the
 Company and the nature of its business, for the purchase of fixed assets
 and inventory and sale of goods and services. During the course of our
 audit, no major weakness has been noticed in the internal control
 system in respect of these areas. During the course of our audit, we
 have not observed any continuing failure to correct major weakness in
 internal control system of the Company.
 
 (v) (a) According to the information and explanations provided by the
 management, we are of the opinion that the particulars of contracts or
 arrangements referred to in section 301 of the Act that need to be
 entered into the register maintained under section 301 of the Act have
 been so entered.
 
 (b) In respect of transactions made in pursuance of such contracts or
 arrangements exceeding the value of Rupees five lakhs entered into
 during the financial year, because of the unique and specialized nature
 of the items involved and absence of any comparable prices, we are
 unable to comment whether the transactions were made at prevailing
 market prices at the relevant time.
 
 (vi) Te Company has not accepted any deposits from the public.
 
 (vii) In our opinion, the Company has an internal audit system
 commensurate with the size and nature of its business.
 
 (viii) To the best of our knowledge and as explained, the Central
 Government has not prescribed maintenance of cost records under clause
 (d) of sub-section (1) of section 209 of the Companies Act, 1956 for
 the products of the Company.
 
 (ix) (a) Te Company is regular in depositing with appropriate
 authorities undisputed statutory dues including provident fund,
 investor education and protection fund, income-tax, sales-tax,
 wealth-tax, service tax, cess and other material statutory dues
 applicable to it. Te provisions relating to employees'' state insurance,
 customs duty and excise duty are not applicable to the Company.
 
 Further, since the Central Government has till date not prescribed the
 amount of cess payable under section 441 A of the Companies Act,1956,
 we are not in a position to comment upon the regularity or otherwise of
 the company in depositing the same.
 
 (b) According to the information and explanations given to us, no
 undisputed amounts payable in respect of provident fund, investor
 education and protection fund, income-tax, sales-tax, wealth-tax,
 service tax, cess and other undisputed statutory dues were outstanding,
 at the year end, for a period of more than six months from the date
 they became payable.
 
 (c) According to the records of the Company, the dues outstanding of
 income-tax, sales-tax, wealth-tax, service tax, and cess on account of
 any dispute, are as follows:
 
 Name of   Nature of the Amount (Rs.) Period to which 
                                      the              Forum where
 Statute   Dues                       amount relates   Dispute is Pending
 
 Income    Tax and         2,836,952  Assessment Year
 Tax Act,  Interest                   2003-2004
 1961
                           1,430,040  Assessment Year  Income Tax
                                      2006-2007        Appellate Tribunal
 
                         145,499,694  Assessment Year
                                      2007-2008
 
                          84,545,109  Assessment Year  Commissioner
                                      2008-2009        of Income Tax
                                                       (Appeals)
 
           Sub-total     234,311,795
 
           Less: 
           Refunds       (34,202,040)
           Adjusted *
 
           Net Amount    200,109,755
 
           Fringe 
           benefit            741,728                    Commissioner
           Tax                                          of Income Tax
                                                        (Appeals)
 
 * Refunds pertaining to other assessment years adjusted against
 disputed dues, based on intimations received from income tax
 department.
 
 (x) Te Company has no accumulated losses at the end of the financial
 year and it has not incurred cash losses in the current and immediately
 preceding financial year.
 
 (xi) Based on our audit procedures and as per the information and
 explanations given by the management, we are of the opinion that the
 Company has not defaulted in repayment of dues to banks. Te Company has
 no outstanding dues in respect of a financial institution and has not
 issued any debentures during the period.
 
 (xii) According to the information and explanations given to us and
 based on the documents and records produced 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, the Company is not a chit fund or a nidhi/
 mutual benefit fund/society. Terefore, the provisions of clause 4(xiii)
 of the Order are not applicable to the Company.
 
 (xiv) In our opinion, the Company is not dealing in or trading in
 shares, securities, debentures and other investments.  Accordingly, the
 provisions of clause 4(xiv) of the Order are not applicable to the
 Company.
 
 (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 institutions.
 
 (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.
 
 (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 no funds raised on short-term basis have been used for long-term
 investment.
 
 (xviii) Te Company has not made any preferential allotment of shares to
 parties or companies covered in the register maintained under section
 301 of the Act.
 
 (xix) Te Company did not have any outstanding debentures during the
 year.
 
 (xx) Te Company has not raised any money through public issues during
 the year.
 
 (xxi) Based upon the audit procedures performed for the purpose of
 reporting the true and fair view of the financial statements and as per
 the information and explanations given by the management, we report
 that no fraud on or by the Company has been noticed or reported during
 the course of our audit.
 
 
                                     For S. R. Batliboi & Associates
 
                                   Firm registration number: 101049W
 
                                               Chartered Accountants
 
                                              per Subramanian Suresh
 
 Place : New Delhi                                           Partner
 
 Date : May 9, 2011                            Membership No.: 83673