1.  We have audited the attached balance sheet of Hindustan Zinc
 Limited (the Company) as at 31 March 2011, the profit and loss account
 and cash flow statement of the Company for the year ended on that date,
 both 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 generally accepted
 auditing standards 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.  We draw attention to Note 15 on Schedule 18, relating to long-term
 investment in equity shares of a power Company being classified as an
 intangible asset (Schedule 4) and amortised. This treatment is in
 preference to requirements of Accounting Standard 30 Financial
 Instruments: Recognition and Measurement, Accounting Standard 26
 Intangible Assets; and Schedule XIV of the Companies Act, 1956. This
 has resulted in profit after tax being lower by Rs. 3.49 Crores (2010: Rs.
 3.41 Crores), investments being lower by Rs. 98.41 Crores (2010: Rs. 98.41
 Crores), fixed assets being higher by Rs. 51.36 Crores (2010: Rs. 56.03
 Crores), deferred tax liability being lower by Rs. 15.27 Crores (2010: Rs.
 14.08 Crores) and reserves and surplus being lower by Rs. 31.78 Crores
 (2010: Rs. 28.30 Crores).
 
 5.  Further to our comments in the Annexure referred to in paragraph 3
 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 accounts 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 our opinion, the Balance Sheet, the Profit and Loss Account and
 the 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 for Paragraph 4 above. Additionally, the
 Company has chosen to early adopt Accounting Standard 30, Financial
 Instruments: Recognition and Measurement arising from the Announcement
 of the Institute of Chartered Accountants of India on 29 March 2008 as
 stated in Note 16 on Schedule 18.
 
 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 31 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; and
 
 iii. in the case of the Cash Flow Statement, of the cash flows of the
 Company for the year ended on that date.
 
 6. On the basis of written representations received from the directors
 as on 31 March 2011 and taken on record by the Board of Directors, we
 report that none of the directors is disqualified as on 31 March 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
 Auditors Report of even date)
 
 1.  In our opinion and according to the information and explanation
 given to us, the nature of the Companys business/activities during the
 year are such that clauses (iii), (v), (vi), (x), (xii), (xiii), (xv),
 (xvi), (xviii), (xix), and (xx) of Companies (Auditors Report) Order
 2003, are not applicable to the Company. In respect of the other
 clauses, we report as under:
 
 2.  In respect of its fixed Assets:
 
 i. The Company has maintained proper records showing full particulars,
 including quantitative details and situation of fixed assets.
 
 ii. The fixed assets were physically verifed during the year by the
 Management in accordance with a regular programme of verifcation which,
 in our opinion, provides for physical verifcation of all the fixed
 assets at reasonable intervals. According to the information and
 explanation given to us, no material discrepancies were noticed on such
 verifcation.
 
 iii. In our opinion and according to the information and explanations
 given to us, a substantial part of fixed assets has not been disposed of
 by the Company during the year.
 
 3.  In respect of its inventories:
 
 i. As explained to us, the inventories were physically verifed during
 the year by the management which is at reasonable intervals.
 
 ii. In our opinion and according to the information and explanations
 given to us, the procedures of physical verifcation of inventories
 followed by the management were reasonable and adequate in relation to
 the size of Company and the nature of its business.
 
 iii. In our opinion, and according to the information and explanations
 given to us, the Company has maintained proper records of its
 inventories and no material discrepancies were noticed on physical
 verifcation.
 
 4.  In our opinion and according to the information and explanations
 given to us, having regard to the explanations that some of the items
 purchased are of special nature and suitable alternative sources are
 not readily available for obtaining comparable quotations, there is an
 adequate internal control system commensurate with the size of the
 Company and nature of its business with regards to purchases of
 inventory and fixed assets and the sale of goods. There are no sale of
 services. During the course of our audit, we have not observed any
 major weakness in such internal control system.
 
 5.  In our opinion, the Company has an adequate internal audit system
 commensurate with the size of the Company and the nature of its
 business.
 
 6.  We have broadly reviewed the books of account and records
 maintained by the Company relating to the manufacture of Zinc, Lead,
 Sulphuric Acid and generation of electricity, pursuant to the order
 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
 maintained and being made up. We have, however, not made a detailed
 examination of the records with a view to determining whether they are
 accurate or complete.
 
 7.  According to the information and explanations given to us, and the
 records of the Company examined by us:
 
 i. The Company has been 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, Custom Duty, Excise Duty, Cess and any other material
 statutory dues.
 
 ii. Disputed sales tax, excise duty, and Income-tax dues aggregating Rs.
 21.24 Crores, Rs. 63.88 Crores and Rs. 561.08 Crores respectively, have not
 been deposited since the matters are pending with the relevant forum as
 per annexure A attached.
 
 8.  In our opinion and according to the information and explanations
 given to us, the Company has not defaulted in repayment of dues to
 banks and fnancial institutions.
 
 9.  In our opinion and according to the information and explanations
 given to us, the Company is not a dealer or trader in shares,
 securities, debentures and other investments. 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. All shares, securities, debentures and other
 investments have been held by the Company in its own name.
 
 10.  In our opinion and according to the information and explanations
 given to us and on an overall examination of the Balance Sheet, we
 report that funds raised on short- term basis have not been used during
 the year for long- term investment.
 
 11.  To the best of our knowledge and according to the information and
 explanations given to us, no fraud by the Company and no significant
 fraud on the Company has been noticed or reported during the year.
 
                                                       Amount
 Nature of statute        Nature of dues             (Rs. in Crores)
 
 Companys appeals:
 
 (a)  Sales Tax Claim  Disputes in respect of 
                       Sales Tax rate                   21.24
                       difference/classification and
                       stock transfers treated as 
                       sales for the financial
                       year 1980-81 to 2009-10
 
 (b)  Central Excise 
 Duty                  Admissibility of Modvat/Cenvat
                       credit on                        63.88
                       inputs, capital goods, alleged
                       duty demand on captive use of 
                       intermediate goods, reversal
                       of the amount on dispatch of 
                       by-products, duty on valuation 
                       and storage/handling losses,
                       for the FY 1985-86 to FY 2009-10
 
 (c)  Income Tax       Disputes in respect appeals 
                        pending                        124.40
                       before CIT(A) for AY 1996-97 and
                       AY 2008-09
 
                       Disputes in respect appeals
                       pending                           4.62
                       before Tribunal for AY 1998-99 to
                       AY 2003-04 and AY 2006-07
 
                       Disputes in respect appeals 
                       pending before                   25.00
                       High Court for AY 1992-93 to AY 1994-95,
                       AY 1996-97 AY 1997-98 and AY 2003-04
 
                        Sub Total (a):                 154.02
 
 Departments appeals:
 
 Income Tax            Relief granted by CIT (A) 
                       for AY 1989-90                  331.69
                       to AY 1991-92, AY 1996-97 to 
                       AY 2009-10 for differences in 
                       computation, allowances
                       of certain expenses and enhancement
                       of rebate, etc.
  
                       Relief granted by Tribunal
                       for AY 1990-91                   75.37
                       to AY 1994-95 & AY 1996-97 for
                       differences in computation, 
                       allowances of certain expenses
                       and enhancement of rebate, etc.
 
                       Sub Total (b):                  407.06
 
                       Sub Total (a) + (b):            561.08
 
 TOTAL                                                 646.21
 
 
 Name of statue             Forum pending at
 
 Companys appeals:
 
 (a)  Sales Tax Claim       Dy Commissioner,
                            Joint Commissioner,
                            CTO, Tribunal and High Court.
 
 (b)  Central Excise Duty   CESAT, Commissioner
                            (Appeals) and High Court/
                            Supreme Court
 
 (c)  Income Tax            CIT(A)
                            Tribunal
                            High Court
 
 Departments appeals:
 
 Income Tax                 Tribunal/Assessing Officer
                            High Court/Supreme Court
 
 
 TOTAL
 
 
 
 For Deloitte Haskins & Sells 
 Chartered Accountants 
 (Registration No. 117366W)
 
 Shyamak R. Tata
 
 Partner
 
 M. No. 38320
 
 Place : Mumbai
 Date  : April 21, 2011